SUMMARY
The addition of critical audit matters (CAMs) to the audit report is a significant change intended to provide investors greater information that is useful for decision making, however, there were also concerns about unintended consequences. This article summarizes Carver, Muriel, Trinkle (2023), who find that the disclosure of a CAM enhances perceived auditor credibility and in turn, perceived audit quality, which then leads to a decrease in perceived investment risk. However, a CAM also increases feelings of information overload, partially offsetting the positive effect on auditor credibility. Auditors should balance the volume and complexity of information in CAMs to lessen the potential negative effects of information overload. However, auditors can also view CAMs as an opportunity to enhance transparency and credibility. These findings are timely for auditors, audit committees, financial statement preparers, and regulators, who must consider the impact CAMs can have on the information environment.
Data Availability: Data are available from the authors upon request.
