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ABSTRACT This study investigates the relationship between Critical Audit Matters (CAMs) and subsequent auditor changes. Using a comprehensive dataset of hand‐collected CAMs from 2019 to 2022, we find that a higher number of CAMs is associated with an increased likelihood of auditor–client realignment. This association is driven primarily by auditor resignations, rather than dismissals. In addition, firms disclosing multiple CAMs are more likely to experience downward auditor switches. Finally, among firms that disclose at least two CAMs and dismiss their auditors, the successor auditors tend to report fewer CAMs. Overall, our findings suggest that CAM disclosures are associated with economically meaningful outcomes in the audit market, rather than serving solely as a reporting requirement. Consistent with this view, CAMs may play a role in shaping auditor–client matching and the evolution of audit engagements over time.
Kim et al. (Tue,) studied this question.