The impact of critical audit matters on audit report lag and audit fees: evidence from the United States

Purpose This paper aims to investigate the impact of the implementation of the critical audit matters (CAMs) disclosure requirement and the subsequent relationship between CAM disclosures and audit report lag, as well as audit fees in the USA. Design/methodology/approach This study used difference-in-differences analyses to investigate the impact that the implementation of the requirement for auditors to report CAMs on their audit report has on the audit process. It also used levels regression models to examine the relationship that CAM disclosures have with audit report lag and audit fees. Findings This study found that the implementation of the CAM disclosure requirement in the USA reduced audit report lag while not significantly affecting audit fees. This suggests that the CAM disclosure requirement may increase the cooperation between auditors and managers and improve the efficiency of the audit process. Practical implications This study’s results are informative for assessing the economic impact of requiring CAM disclosures, which should be of importance to regulators, auditors and accounting researchers. Originality/value This study used different approaches to investigate two aspects of the CAM disclosure requirement – the effect of the implementation of the disclosure requirement and the subsequent effects related to CAM reporting outcomes. Unlike many previous studies investigating CAM disclosures, which relied on experiments and questionnaires, this study used actual CAM disclosure data in the USA to investigate the impact on audit report lag and audit fees.