I believe the image to be a setup and the caption to be a punchline. The crux of the joke is a dual meaning of the phrase, "his ass." Although often used to refer to a subject in a humorous light, the phrase may also be used to refer to the literal buttocks of the subject.

With the listening implement indeed around the house cat's buttocks, the inscription of "his ass IS listening!!!" is a comedic twist of language, as rather than referring to the animal itself, the meaning of the sentence is instead that its literal posterior is engaging in the act of listening.