Can auditing facilitate the effective implementation of goodwill accounting? A perspective based on key audit matters

This study investigates the role of auditing in facilitating the effective implementation of goodwill accounting through key audit matters (KAMs). The findings show that excess goodwill increases the likelihood of goodwill being considered as a KAM, and firms with goodwill as a KAM are more likely to recognize goodwill impairment. The positive relationship between excess goodwill and a goodwill KAM is more pronounced when firms have a clean audit opinion, small profits before goodwill impairment, or high information transparency. However, the impact of a goodwill KAM on impairment recognition is weaker for firms with small profits. Overall, the findings highlight the crucial role of auditing in identifying clients' excess goodwill and encouraging the recognition of goodwill impairment, aligning with the perspectives of the International Accounting Standards Board.