Qianqun Ma, Jianan Zhou and Qi Wang
Using China’s key audit matters (KAMs) data, this study aims to examine whether negative press coverage alleviates boilerplate KAMs.
Abstract
Purpose
Using China’s key audit matters (KAMs) data, this study aims to examine whether negative press coverage alleviates boilerplate KAMs.
Design/methodology/approach
This study uses Levenshtein edit distance (LVD) to calculate the horizontal boilerplate of KAMs and investigates how boilerplate changes under different levels of the perceived legal risk.
Findings
The findings indicate that auditors of firms exposed to substantial negative press coverage will reduce the boilerplate of KAMs. This association is more significant for auditing firms with lower market share and client firms with higher financial distress. Additionally, the authors find that negative press coverage is more likely to alleviate the boilerplate disclosure of KAMs related to managers’ subjective estimation and material transactions and events. Furthermore, the association between negative press coverage and boilerplate KAMs varies with the source of negative news.
Originality/value
The findings suggest that upon exposure to negative press coverage, reducing the boilerplate of KAMs has a disclaimer effect for auditors.