Do Firms Respond to Auditors’ Red Flags? Evidence from Goodwill Impairment Key Audit Matter Disclosures
研究英国上市公司发现，当审计师在审计报告中提及商誉减值作为关键审计事项时，企业会增加相关披露，并在后续更可能确认商誉减值损失。
ABSTRACT We investigate the link between the expanded audit report and firms’ financial disclosure decisions, focusing on auditors’ mentions of goodwill impairment as a key audit matter (KAM). Drawing from a sample of the United Kingdom Premium Listed companies with goodwill on their balance sheets during 2014–2019, we identify instances where goodwill impairment is flagged as a KAM and contrast firms’ disclosure levels on goodwill impairment using textual measures constructed from information in their annual reports. We find that firm disclosure on goodwill impairment increases (decreases) when auditors start (stop) mentioning goodwill impairment as a KAM. The increase in disclosure is more pronounced in the presence of stronger external information demand and better internal governance. Finally, firms are more likely to impair goodwill in the period following auditors’ mention of goodwill impairment as a KAM. Overall, this paper establishes the role of the expanded audit report for firm disclosure.