Variables

Definitions

Kam

Firm_level

Kam_num

Number of key audit matters issued by each company each year

Length_sum

Sum of character lengths for all key audit matters issued by each company each year

Length_unit

Length_sum/Kam_num

Specificity1_sum

Sum of figures of all key audit matters issued by each company each year

Specificity1_unit

Specificity1_sum/Kam_num

Specificity2_sum

Specificity1_sum/Length_sum

Specificity2_unit

Specificity1_unit/Length_unit

Ind_spec_sum

Each company is defined as the sum of the number of industry-specific key audit matters each year

Kam_level

Length

Sum of text length of each key audit matter description paragraph and response paragraph

Specificity1

The sum of the numbers in the description paragraph and the response paragraph of each key audit matter

Specificity2

Specificity1/Length

Ind_spec

When the key audit event is an industry-specific key audit matter, take 1; otherwise, take 0; In a certain industry in each year, the total number of occurrences of a key audit matter is divided by the total number of companies in the industry in that year. If the ratio is greater than 50%, the event is determined to be an industry-specific key audit matter

Audit_firm

Big 4

When the firm is among the four largest in the world, the variable is 1

Big 8

When the firm is the eight largest in China, the variable is 1

Audit_firm _spec

Firms with industry expertise, variable is 1

Variables are defined as follows:

${\text{IMS}}_{ik}={\displaystyle \sum _{j=1}^J{\text{REV}}_{ikj}}/{\displaystyle {\sum }_{i=1}^I{\displaystyle {\sum }_{j=1}^J{\text{REV}}_{ikj}}}$

The numerator is the audit fee charged by I accounting firm to the clients of industry K, and the denominator is the audit fee of all clients of industry K. when the IMS of the firm is more than the median of industry IMS, it is defined that the firm has industry expertise, and the variable is 1