Analysis of the relationship between company characteristics and key audit matters disclosed

Abstract

The general objective of this study is to analyze whether the particularities of audited companies influence the volume of key audit matters (KAMs). Its specific objectives are to identify the number of KAMs disclosed by Brazilian companies and analyze the main factors associated with their disclosure. The paper aims to contribute to an area of investigation still lacking in studies that analyze the factors affecting KAM disclosure, which makes audit reports more individualized. The study contributes to understanding the main auditing issues in Brazilian companies that auditors consider relevant, by providing evidence on factors associated with their disclosure. This research is relevant for agencies that issue auditing standards and for financial information users. For issuers of auditing standards, the study is relevant because it identifies the factors associated with KAM disclosure, enabling it to be confirmed that the new audit report model has contributed to its destandardization. For financial information users, the study demonstrates that KAM disclosure varies from company to company, thus contributing to greater transparency of the audit report. Data were collected from the Audit Reports and Consolidated Financial Statements of the 447 Brazilian companies listed on the São Paulo Securities, Commodities, and Futures Exchange (BM&FBovespa), on December 31st of 2016, and an ordinary least squares (OLS) regression was applied to the defined model. The results show a positive relationship between the number of KAMs disclosed and both the auditor being a Big 4 and the complexity of the audited company. The auditor’s fees and auditor’s opinion being modified show a negative relationship with the number of KAMs. The article is relevant for companies, auditors, and regulatory and supervisory bodies as it identifies company characteristics that influence KAM disclosure and are determinants for the non-standardization of the auditor’s report.

Ki̇li̇t Deneti̇m Konularinin Açiklanmasini Hangi̇ Faktörler Etki̇ler? İmalat Fi̇rmalarindan Kanitlar

“…The result of Poisson regression presents evidence that there is a positive and statistically significant relationship between firm complexity and the disclosure of KAMs. This results is in line with the findings of Ferreira & Morais (2020) and Suttipun (2020) who found that the high level of firm complexity leads to more disclosure of KAMs. In the auditing environment, the client with a high level of organizational complexity is riskier.…”

“…Correlation coefficients are computed to analyze the association between dependent variable and predictor variables in Table 4. Contrary to the findings of previous studies (Velte, 2018;Ferreira & Morais, 2020), KAM negatively correlated with the audit firm type (r= -0.317, p< 0.01). The type of audit opinion is not statistically related with KAM.…”

“…Pinto & Morais (2018) claim that a high level of firm complexity leads to higher audit risk. Ferreira & Morais (2020) and Suttipun (2020) support the assertion that firm complexity positively influences the disclosure of KAMs. Thus, auditors of firms that have a high level of organizational complexity may feel more pressure to reveal KAMs for the purpose of ensuring their independence and reducing audit risk.…”

“…It is worth noting that the disclosure of KAM does not mitigate the liability of auditors. Ferreira & Morais (2020) purported that audit reports present more detailed information regarding the audit risks via KAM. Whilst numerous studies have investigated factors affecting KAM for the developed economies, few studies have attempted to analyze this from emerging market perspective.…”

Impacto Do Novo Relatório Dos Auditores Independentes Nos Honorários Dos Auditores

“…Na literatura acadêmica, os estudos que abordam o novo relatório dos auditores concentram-se em discussões conceituais sobre as alterações propostas pelo normativo (Manoel & Quel, 2017;Mendes & Martins, 2014); a responsabilidade do auditor (Gimbar, Hasen & Ozlanski, 2016); o impacto dos Principais Assuntos de Auditoria na relevância informacional (Brasel et al, 2016;Cordoş & Fülöp, 2015;Sirois, Bédard, & Bera, 2018;Júnior, 2018) e na continuidade operacional (Marques & Souza, 2017); e sobre a relação entre o novo relatório e a as características das empresas (Ferreira, & Morais, 2020). Apenas estudos de autores estrangeiros analisam o novo relatório e sua relação com a qualidade da auditoria, audit delay e os honorários dos auditores independentes, destacando-se os de Almulla e Bradbury (2018), Bédard et al (2014), Bédard et al (2018), Gutierrez et.…”