Diclosure of Key Audit Matters and Liquidity of Stocks

• 1、School of Economy and Business Adiministration,Chongqing University,Chongqing 400030,China

Abstract：In December 2016, the Ministry of Finance of China approved and issued new auditing reporting standards. Disclosure of key auditing items is a newly formulated standard. Its purpose is to enhance the effectiveness of auditing reports to investors and other users of financial reports, and to provide useful information for the expected users of financial reports to analyze the status of enterprises and make investment decisions. Liquidity is the foundation of capital market and the key to the steady development of capital market. Many scholars at home and abroad have done a lot of research on the influencing factors of stock liquidity. This paper attempts to explore whether the disclosure of key audit items, an exogenous variable affecting the market microstructure, is effectively reflected in the capital market and in the changes of stock liquidity. Based on the empirical data of A+H-share listed companies and other A-share listed companies which have not implemented the new auditing reporting standards for the first time in Shanghai and Shenzhen Stock Exchanges from 2015 to 2016, this paper establishes a double-difference model using the samples matched by the industry\'s full sample and the tendency score, and uses the non-liquidity index and the effective flow rate of stock as the substitution of stock liquidity. Disclosure of key audit items will enhance the liquidity of listed companies. This study shows that the implementation of the new auditing reporting standards in China has a certain role in standardizing auditing business and maintaining the stability of capital market.

Keywords： Key Audit Matters Stock Liquidity Earnings Management