Audit Partner Style in Key Audit Matter Reporting Decisions.

Abstract

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.