Changes in the Reporting of Critical Audit Matters

ABSTRACT We examine how critical audit matter (CAM) disclosures changed over the first 4 years of their adoption in the United States. Controlling for client firm and auditor characteristics, we find a significant decline in both the number of disclosed CAMs and the length of CAM reports. Even as CAM disclosures become less extensive over time, they remain significantly associated with client firm size, complexity, profitability, liquidity and uncertainty. Lastly, although audit fees are positively associated with CAMs in the first year, this relationship reverses in subsequent years, particularly for large accelerated filers. Our findings offer evidence of sustained informativeness of CAMs and improved efficiencies for auditors and their clients.