Tracing investors' minds: Investors’ inquiries and key audit matter reporting

Songsheng Chen; Chan Li; Lili Sun; Xiren Zhang

doi:10.1016/j.jacceco.2026.101907

Tracing investors' minds: Investors’ inquiries and key audit matter reporting

Songsheng Chen^1,2; Chan Li³; Lili Sun⁴; Xiren Zhang¹

¹ Beijing Institute of Technology · ² Zhuhai Institute of Advanced Technology · ³ University of Kansas · ⁴ University of North Texas

Journal of Accounting and Economics 2026 open access

ABSTRACT This study investigates whether auditors incorporate investor information demand when determining key audit matter (KAM) disclosures. We measure investor information demand using a unique dataset of investor inquiries submitted through investor interactive platforms (IIPs) established by the China Securities Regulatory Commission. At the topic level, we find that auditors are more likely to disclose a given topic as a KAM when investors raise more inquiries on that topic. At the aggregate level, a higher proportion of inquiries devoted to accounting issues is associated with both a greater number of KAMs and longer KAM disclosures. Importantly, following the introduction of KAM reporting, managers’ footnote disclosures become more aligned with heightened investor inquiries, reinforcing our interpretation that the documented effects reflect auditors’ responses to investor inquiries rather than merely mirroring managerial disclosure changes. Overall, our findings suggest that auditors incorporate investor information demand into KAM disclosures.

DOI: 10.1016/j.jacceco.2026.101907
Pages: 101907
Language: en
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