Assessing the impact of the new auditor’s report

Li, Hong; Hay, David; Lau, David T.

doi:10.1108/par-02-2018-0011

Cited by 92 publications

(117 citation statements)

References 50 publications

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“…KAM disclosure is viewed positively by financial statement users (Cordos and Fülöp, 2015b;Sirois et al, 2018), creditors (Boolaky and Quick, 2016;Trpeska et al, 2017), general investors (Christensen et al, 2014) and other stakeholders (Velte and Issa, 2019), while auditors express concerns over the new report format (Cordos and Fülöp, 2015a). KAM disclosure also improves earnings quality as measured by a decline in absolute abnormal accruals (Li et al, 2019). In a mock trial (i.e.…”

Section: Introductionmentioning

confidence: 99%

Determining factors of key audit matter disclosure in Thailand

Wuttichindanon

Issarawornrawanich

2020

PAR

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Purpose In Southeast Asia, auditors play a crucial role in the quality of financial reports. With the introduction of a new format of auditors’ report that requires disclosure of key audit matters (KAM), the disclosure practice of auditors is, thus, of great interest. Specifically, this study aims to investigate the factors that auditors take into consideration when issuing KAMs. Design/methodology/approach The research design is quantitative, with a focus on the number of KAM disclosures issued by auditors. As existing studies rely on the number of KAM disclosures in the analysis, this current research, thus, uses the quantity of KAM disclosures for comparison purposes. The analysis relies on secondary data and multiple regression analysis is used to establish the association between the number of KAM disclosures and three groups of determining factors, namely, auditor characteristics, corporate governance mechanisms and firm characteristics. Findings The significant determining factors of KAM disclosure include auditor’s litigation risk, firm complexity, profitability and industry type. Firms using a Big 4 audit firm, firms with many subsidiaries and firms in the technology, property and construction and finance industries have higher numbers of KAMs, while highly profitable firms issue lower numbers of KAMs. As for corporate governance mechanisms, the number of KAMs is significantly positively correlated with the number of independent directors (p < 0.10). Originality/value This research includes key corporate governance parties in the examination, including external auditors, independent directors and audit committees. The finding affirms the influence of Big 4 on KAM disclosure in Southeast Asia, while their roles are not significant in Western samples. The result also unearths the monitoring role of independent directors in KAM disclosure. The role of the audit committee in KAM disclosure is insignificant in Thai samples, while the committee role is statistically significant in the Western samples. Variations in the findings between this study and previous research could be attributed to differences in institutional settings between both regions.

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Section: Introductionmentioning

confidence: 99%

Determining factors of key audit matter disclosure in Thailand

Wuttichindanon

Issarawornrawanich

2020

PAR

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“…‫تيرب(‬ ‫س‬ ‫األس‬ e.g. Reid et al, 2019;Li et al, 2019 ‫تاخب‬ ‫ص‬ ‫ترب‬ ‫يجبةجس‬ ‫ت‬ ‫بنف‬ ‫ب‬ ‫ت‬ ‫ت‬ ‫ب‬ ‫تي‬ ‫تابك‬ ‫)،بت‬ ‫ب‬ ‫ت‬ ‫س‬ ‫ترببيش‬ ‫بم‬ ‫خب‬ ‫تب‬ ‫ت‬ ‫بإ‬ ‫تا‬ ‫تاب‬ ‫باث‬ ‫ت‬ ‫اس‬ ‫باثاب‬ ‫ت‬ ‫ة‬ (e.g. Wei, et al, 2017 ( Humphrey, et al, 2009 ‫كلب‬ ‫بتبكباثسذ‬ ‫زابة‬ ‫).بإي‬ ‫ايمب‬ ‫ت‬ ‫ذًرباثس/‬ ‫ب‬ ‫ببثاخباثسدفخاةي‬ ‫تبمر‬ ‫إ‬ ‫ب‬ ‫ت‬ ‫تاباثحد‬ ‫ام‬ ‫تابةا‬ ‫اة‬ ‫خبأ‬ ‫ت‬ ‫تاباث‬ ‫خباثفًكي‬ ‫تف‬ ‫تربإةد‬ ‫ا‬ ‫ترباثسا‬ ‫سبي‬ ‫ترب‬ ‫ص‬ ‫اثخ‬ (Fadzly and Ahmad, 2004;Church, et al, 2008…”

Section: ‫البحث‬ ‫ملخص‬unclassified

أثر إفصاح مراقب الحسابات بتقریره عن تقدیرات القیمة العادلة کأحد أمور المراجعة الأساسیة على أحکامه وتصرفاته المهنیة التشککیة "دراسة تجریبیة"

العال¹

2020

مجلة الاسکندریة للبحوث المحاسبیة

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This research aimed to study the effect of reporting key audit matters (KAM) by auditors, according to requirements of the IAS no,(701) on auditors' Skeptical professional Judgments and Actions that releated to fair value acount.This research uses a 2×2 between subjects experiment, that includes two main variables KAM consideration (absent Vs. present), and client pressure (low vs. High) are manipulated. So, there are four practical cases, which were submitted to sample of auditors in the Egyptian auditing offices, and the experiment resulted in collecting 156 responses divided into four independent samples. The results of this research provided important scientific and practical evidence, which important of these results is: that auditors' professional Judgments and actions is more conservative when reporting fair value as a key audit matters, and this result appeared more significantly for the sample of Expert auditors and more qualified, so this result reflect an interaction effect between the KAM disclosures and both of auditor's experience and his professional qualification. The results of hypothesis testing and additional analysis also present important evidence indicating that client pressure only affects skeptical professional judgments by making them more conservative. Whereas the interaction effect between the client pressure and KAM, the auditors issue less conservative judgments.

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“…Altawalbeh and Alhajaya (2019) find investor reactions to KAM reporting in Jordan; Reid et al (2019) find that financial reporting quality in the UK increases after KAM reporting; and Li, Hay, and Lau (2019) find that KAM reporting in New Zealand is associated with increases in both audit fees and audit quality. Experimental studies indicate that auditor liability for subsequent restatements varies in the presence and subject area of KAMs (Kachelmeier et al 2020;Brasel, Doxey, Grenier, and Reffett 2016), changes in KAMs disclosed from year to year (Vinson, Robertson, and Cockrell 2019), the nature of the misstatement (Kachelmeier et al 2020), and the precision of accounting standards (Gimbar, Hansen, and Ozlanski 2016).…”

Section: Institutional Backgroundmentioning

confidence: 99%

Audit Partner Style in Key Audit Matter Reporting Decisions.

Zehms¹

2020

Preprint

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We examine whether partners have unique decision styles for key audit matters (KAMs), by which we mean stable within-partner similarities and between-partner differences in KAM reporting over time and across clients and industries. Using a sample of UK KAMs, we find unique partner styles in KAM reporting volume, topical diversity, and communication after controlling for client and audit firm variation. Partners with styles for greater KAM volume, topical diversity, and 'insight' verbiage (e.g., "think" or "consider") command higher fees. Further, partners who issue KAMs with more cognitively complex, causal (e.g., "because" or "effect"), or insight verbiage are more likely to be audit fee growth leaders, while partners who issue longer KAMs are less likely to be growth leaders. We find no association between partners' styles and either report delay or audit quality. Our results illustrate that partners make unique KAM reporting judgments, countering concerns about audit firms issuing 'boilerplate' KAMs.

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Assessing the impact of the new auditor’s report

Cited by 92 publications

References 50 publications

Determining factors of key audit matter disclosure in Thailand

Determining factors of key audit matter disclosure in Thailand

أثر إفصاح مراقب الحسابات بتقریره عن تقدیرات القیمة العادلة کأحد أمور المراجعة الأساسیة على أحکامه وتصرفاته المهنیة التشککیة "دراسة تجریبیة"

Audit Partner Style in Key Audit Matter Reporting Decisions.

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