Abstract:Under the new audit report model, the disclosure of detailed information increases auditors’responsibilities and the conflict between auditors and companies (especially companies with earnings management motives). Auditors will face the test of audit independence: strict enforcement to reduce their own responsibilities or compromise and help companies reduce KAM disclosures to hide key information. We found that: First of all, theoretically, the severity of earnings management represents greater audit risk and the possibility of more KAM disclosures. However, we only found that earnings management is positively correlated with KAM when the clients are not important, while the relationship between the two variables is not significant when the clients are important. The more important the client is, the less obvious the positive correlation between serious earnings management and KAM. We attribute this to the manager’s lobbying auditors to reduce KAM to cover up earnings management under the motivation of earnings management. Secondly, Big 4’s reputation and the AICPA interview help to improve independence. Even if the auditors face important clients, they will not be persuaded by managers to reduce KAM, but will make equivalent KAM disclosures based on the severity of earnings management. Our research helps to remind the supervisory authorities: Although the KAM reform puts pressure on auditors, their independence status has not been changed. Instead, they have helped important clients reduce information disclosure within a limited policy space.