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Cited by 19Auditing, Earnings Management, GovernanceCorporate Governance and Financial ManagementAccounting Theory and Financial Reporting

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Does Goodwill-Related Critical Audit Matters Disclosure Influence Firms’ Financial Reporting Decisions? Evidence from Goodwill Impairment

Jahan, Nusrat, Karim, M. Sydul·2024·Auditing: A Journal of Practice & Theory
DOI 10.2308/ajpt-2022-129
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Abstract

SUMMARY: We investigate whether the new critical audit matters (CAMs) disclosure requirement for auditors under the PCAOB Standard AS 3101 affects audited firms’ financial reporting decisions in the context of goodwill impairment recognition. We argue that an auditor's intense engagement with management and the audit committee in the CAMs determination and evaluation process improves management's information sets. Specifically, we report that the propensity to recognize goodwill impairment loss increases for firms with goodwill-related CAM disclosure relative to those without. This result is more pronounced when the likelihood of expected impairment is higher, suggesting that CAMs reporting lowers managers’ discretion in delaying impairment loss recognition. Additionally, we find that goodwill-related CAM disclosure increases the length and use of uncertain words in goodwill-related footnote disclosure by management but has no significant impact on audit costs. Overall, these findings suggest that adopting CAMs requirements can reduce management's discretion in financial reporting decisions. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M41; M42.

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Metadata

Authors
Jahan, N., & Karim, M. S.
Affiliations
  • Wayne State University (US)
  • Lawrence Technological University (US)
ORCID
Venue
Auditing: A Journal of Practice & Theory
Publisher
American Accounting Association
Published
2024-04-05
Volume
43
Issue
2
Pages
159-187
ISSN
  • 0278-0380 (ISSN-L)
  • 1558-7991
DOI
10.2308/ajpt-2022-129
OpenAlex
W4387784341
Cited by
19
References
43
Citations by year
2026: 6 · 2025: 11 · 2024: 1
FWCI
6.79
Type
journal article
Language
en
Open access
closed
Locations
Auditing A Journal of Practice & Theory (publishedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Auditing, Earnings Management, Governance
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Corporate Governance and Financial Management
  • Social Sciences › Business, Management and Accounting › Accounting › Accounting Theory and Financial Reporting
Keywords
critical audit matters, goodwill impairment, financial reporting discretion, audit committee, managerial discretion, audit costs, IFRS adoption

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CoChat. (2026). Citation check: Does Goodwill-Related Critical Audit Matters Disclosure Influence Firms’ Financial Reporting Decisions? Evidence from Goodwill Impairment. https://app.cochat.ai/papers/10.2308/ajpt-2022-129
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Jahan, N., & Karim, M. S. (2024). Does Goodwill-Related Critical Audit Matters Disclosure Influence Firms’ Financial Reporting Decisions? Evidence from Goodwill Impairment. Auditing: A Journal of Practice & Theory. https://doi.org/10.2308/ajpt-2022-129