How Does the New Audit Report Affect Corporate R&amp;D Manipulation? Evidence from R&amp;D <scp>KAMS</scp> Disclosure in China

Taking advantage of the implementation of the new audit report standard and using a staggered difference‐in‐difference approach, this paper studies the effect of R&amp;D key audit matters (R&amp;D KAM) disclosure on corporate R&amp;D manipulation in China. The findings show that the disclosure of R&amp;D KAM reduces subsequent corporate R&amp;D manipulation. Mechanism analysis validates that R&amp;D KAMs decrease corporate R&amp;D manipulation by attracting more regulatory inquiries, as well as increased attention from investors and the media. Further analysis indicates that R&amp;D KAMs with higher readability and lower industry similarity have a more significant impact, and the effect is more pronounced in companies audited by Big 10 firms or audit firms with higher industry expertise, in non‐state‐owned enterprises, firms with lower analyst coverage, or companies located in regions with lower marketization and stricter tax enforcement, as well as those listed on the boards requiring higher R&amp;D or certified as high‐tech enterprises. Finally, the constraining effect of R&amp;D KAM disclosure on corporate R&amp;D manipulation leads to enhanced innovation efficiency, diminished real earnings management, and a greater tax burden.