Auditors’ Experiences Implementing Critical Audit Matter Reporting: The Emergence of Pseudo-Transparency

51 Pages Posted: 1 Nov 2022 Last revised: 26 Apr 2024

See all articles by Emily E. Griffith

Emily E. Griffith

University of Wisconsin - Madison

Linette M. Rousseau

University of Houston, Bauer College of Business

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: August 24, 2022

Abstract

The PCAOB adopted Critical Audit Matters (CAMs) to meet investors’ demands for informative audit disclosure. These demands arose within broader societal demands for transparency in the information age. We examine the audit profession’s adaptation by interviewing audit partners about their CAM experiences and reviewing standard-setting documents. Drawing on institutional logics theory, we find auditors responded to transparency demands with strategic lobbying and unprecedented investments in dry-runs, client education, and national office infrastructures. We identify four rules of behavior through which individual auditors enact firm-level strategies, including (1) defer to the national office, (2) conform, (3) report the right number of CAMs, and (4) avoid surprises. These strategies result in pseudo-transparency: CAMs that comply with standards but do little to meet stakeholders’ demands. Our analysis enriches the CAM literature, speaks to the global issue of the profession’s engagement with the information age, and provides practical insights for resisting pseudo-transparency.

Keywords: Critical audit matters, expanded audit reporting, audit regulation, audit transparency, institutional logics theory, key audit matters.

JEL Classification: B52, M41, M42, M48

Suggested Citation

Griffith, Emily Elaine and Rousseau, Linette and Zehms, Karla M., Auditors’ Experiences Implementing Critical Audit Matter Reporting: The Emergence of Pseudo-Transparency (August 24, 2022). Available at SSRN: https://ssrn.com/abstract=4256853 or http://dx.doi.org/10.2139/ssrn.4256853

Emily Elaine Griffith (Contact Author)

University of Wisconsin - Madison ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

Linette Rousseau

University of Houston, Bauer College of Business ( email )

Bauer College of Business
4800 Calhoun Road
Houston, TX 77204
United States

Karla M. Zehms

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)

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