The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study

49 Pages Posted: 23 Jul 2014 Last revised: 28 Feb 2018

See all articles by Louis-Philippe Sirois

Louis-Philippe Sirois

Université Laval - École de comptabilité

Jean Bédard

Université Laval - École de comptabilité

Palash Bera

Saint Louis University - Richard A. Chaifetz School of Business

Date Written: November 29, 2017

Abstract

We study the effects of stock market volatility on risk-taking and financial crises by constructing a cross-country database spanning up to 211 years and 60 countries. Prolonged periods of low volatility have strong in-sample and out-of-sample predictive power over the incidence of banking crises and can be used as a reliable crisis indicator, whereas volatility itself does not predict crises. Low volatility leads to excessive credit build-ups and balance sheet leverage in the financial system, indicating that agents take more risk in periods of low risk, supporting the dictum that “stability is destabilizing.”

Keywords: Key audit matters, critical audit matters, eye-tracking, visual attention, information processing

JEL Classification: M41, M49

Suggested Citation

Sirois, Louis-Philippe and Bédard, Jean and Bera, Palash, The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study (November 29, 2017). Accounting Horizons, Forthcoming DOI 10.2308/acch-52047 . Available at SSRN: https://ssrn.com/abstract=2469905 or http://dx.doi.org/10.2139/ssrn.2469905

Louis-Philippe Sirois (Contact Author)

Université Laval - École de comptabilité ( email )

Quebec City
Canada

Jean Bédard

Université Laval - École de comptabilité ( email )

2325, rue de la Terrasse
Québec, Québec G1V 0A6
Canada
418-656-7055 (Phone)
418-656-2624 (Fax)

Palash Bera

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States

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