Download or read book Do Critical Audit Matters Provide Decision-Relevant Information to Investors? Evidence from Merger and Acquisition Announcements written by Lawrence Abbott and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: PCAOB AS 3101 requires the auditor to communicate any critical audit matters (CAMs), identified during the planning or performance of the audit, in the audit report. Prior research has investigated the informativeness of CAM disclosures using short window, event study methodologies centered around the initial CAM disclosure in the 10-K and finds minimal evidence that CAMs alter investors' decisions. We depart from the extant research to investigate whether and to what extent a specific CAM - the business combination CAM - influences investors' perceptions of mergers and acquisition news. We predict and find that investors react more negatively to merger and acquisition announcements when the audit report preceding the announcement contains a business combination CAM. Our results suggest that CAMs provide decision-relevant information to investors about the risks involved in the acquisition, which is used to value subsequent transactions.