The Informative Value of Key Audit Matters in the Audit Report: Understanding the Impact of the Audit Firm and KAM Type

This paper examines whether the readability (and hence informative value) of key audit matters (KAM) varies according to the audit firm and the KAM type disclosed, a question of vital importance for stakeholders, whose effective decision‐making depends on the quality of information received. Our ana...

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Bibliographic Details
Published in:Australian accounting review 2023-06, Vol.33 (2), p.114-134
Main Authors: Gambetta, Nicolás, Sierra‐García, Laura, García‐Benau, María Antonia, Novejarque‐Civera, Josefina
Format: Article
Language:English
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Summary:This paper examines whether the readability (and hence informative value) of key audit matters (KAM) varies according to the audit firm and the KAM type disclosed, a question of vital importance for stakeholders, whose effective decision‐making depends on the quality of information received. Our analysis shows that the informative value of KAM matter and KAM audit procedures varies according to the audit firm responsible. This informative value also depends on whether the KAM is related to entity‐ or accounting‐level risks. This study contributes to the KAM and audit quality literature by showing how these factors impact on the informative value of the expanded audit report. Furthermore, in the context of the agency, institutional and self‐presentation theories and the real effects hypothesis, we discuss auditors’ incentives to increase or decrease the informative value of the expanded audit report.
ISSN:1035-6908
1835-2561
DOI:10.1111/auar.12396