Graduation Year

2017

Document Type

Dissertation

Degree

Ph.D.

Degree Name

Doctor of Philosophy (Ph.D.)

Degree Granting Department

Business Administration

Major Professor

Lisa Milici Gaynor, Ph.D.

Committee Member

Uday Murthy, Ph.D.

Committee Member

Dahlia Robinson, Ph.D.

Committee Member

Sandra Schneider, Ph.D.

Keywords

Critical Audit Matters, Standard Audit Report, Investor’s Perception, Audit Quality, Support Theory, PCAOB

Abstract

I investigate how nonprofessional investors’ confidence in the financial statements and the audit report is influenced by the firm specific details of a critical audit matter (CAM) disclosure in conjunction with the description of the audit procedures engaged to address the CAM in the audit report. Using participants recruited from Amazon Mechanical Turk as a proxy for nonprofessional investors in a 2x2 +1 (control) between-participants experiment manipulating CAM disclosure detail (Detailed/Generic) and the description of the audit procedures engaged to address the CAM (Detail/Generic) I find that greater detail in the description of the CAM results in higher confidence in the accuracy and reliability of the financial statements than a generic description of the CAM, consistent with boundary condition of Support Theory. Further, I find that greater detail in the description of the related audit procedures engaged to address the CAM increases nonprofessional investors’ perceptions of audit quality. Evidence of an effect of CAM and audit procedure disclosure language on investment judgments is also presented. These results have implications for researchers, practitioners, and regulators to carefully consider the language used to disclose CAMs in the auditor’s report.

Included in

Accounting Commons

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