Abstract:Using the text analysis method, we take China’s A-share non-financial listed companies from 2017 to 2020 as a research sample, to examine the impact of company litigation risk on the text similarity of key audit matters, which is disclosed by auditors. The study finds that when the litigation risk of listed companies is high, auditors will strengthen information communication with management to reduce the text similarity of key auditor matters, to avoid their own audit risks. Further analysis finds that in companies with settled litigation, lower quality of internal control, and better external legal environment, auditors are more likely to reduce the text similarity of key audit matters, while financial risk and operational risk are the mechanisms by which the company’s litigation risk reduces the text similarity of key audit matters. In addition, the reduction in the text similarity of key audit matters improves the information quality of financial reports and suppresses the risk of future stock price collapse caused by the risk of corporate litigation. The research provides new empirical evidence for audit decision-making, and also provides decision-making basis for listed company management, investors and regulators.