Informational Value in Critical Audit Matters—Evidence from Institutional Investors in Shanghai Stock Market

Abstract

A newly released audit principle required all public companies to include criti-cal audit matters (Cam) in financial reports, whose features and informationalvalue was empirically studied in this paper. Results showed that, current Camsare quantitatively small, accurately and specifically poor and they mostly comein statements rather than in forms, and institutional investors withdrew more investment as the number and accuracy of cams went up. Further studiesshowed that the informational value of Cams was more significant in compa-nies with high informational asymmetry and companies audited by relatively less professional audit firms (neither international big 4 nor national big10 audit firms).