Consequences of adopting an expanded auditor’s report in the United Kingdom

Gutierrez, Elizabeth F.; Minutti‐Meza, Miguel; Tatum, Kay W.; Vulcheva, Maria

doi:10.1007/s11142-018-9464-0

Cited by 226 publications

(257 citation statements)

References 47 publications

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“…According to Sirois et al (2017), users relied on KAM to focus attention on particular parts of the financial statements. Gutierrez et al (2017) reported no effect on audit quality and the association between audit fees and the number of risks identified by the auditor. Kachelmeier et al (2017) stated that users perceived KAM as disclaimers, which is also consistent with Brasel et al (2016) and Brown et al (2016).…”

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 95%

“…Reid et al (2016) stated that the disclosures positively affected audit quality and increased audit fees marginally. Gutierrez et al (2017) reported no effect on audit quality and the association between audit fees and the number of risks identified by the auditor.…”

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 95%

“…In line with experimental studies, current archival models also concentrate on the consequences of KAM disclosures in the UK with diverse results (Gutierrez, Minutti-Meza, Tatum, & Vulcheva, 2017;Lennox, Schmidt, & Thompson, 2017;Reid, Carcello, Li, & Neal, 2016). Since no current study reflects possible corporate governance variables as determinants of KAM disclosures, we see a major gap in empirical gender diversity research.…”

Section: Introductionmentioning

confidence: 98%

See 2 more Smart Citations

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Velte

2018

Corp Soc Responsibility Env

108

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This paper investigates the relationship between the percentage of women on audit committees (WOAC) in UK firms and auditors' disclosures on key audit matters (KAM) from 2014 to 2015.The results show that firms with a higher percentage of WOAC have higher readability of KAM disclosures as measured by the Flesch reading ease index. By modifying our dependent and independent variables, sensitivity tests (Blau index and Fog readability index) also corroborate the expectation that WOAC will lead to greater readability of KAM disclosures, with stricter monitoring activities and greater risk avoidance in the audit committee. We provide a useful contribution to recent empirical sustainable corporate governance literature for practices, researchers, and regulators.

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Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 95%

Section: Prior Research On Gender Diversity In the Boardroom And Kamentioning

confidence: 95%

Section: Introductionmentioning

confidence: 98%

See 1 more Smart Citation

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Velte

2018

Corp Soc Responsibility Env

108

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“…Gutierrez et al () use firms with different fiscal year‐ends as a control group as well as firms listed on the Alternative Investment Market market, which is comprised of smaller, growing companies that are significantly different from the large, established companies with a Premium listing of equity.…”

mentioning

confidence: 99%

Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom

Reid

Carcello

et al. 2019

Contemporary Accting Res

194

182

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While substantial revisions to auditor reporting requirements are being implemented internationally, the impact of these reforms on financial reporting quality is unknown. We exploit the United Kingdom's recent auditor reporting changes and find that the United Kingdom's new reporting regime is associated with an improvement in financial reporting quality as proxied by significant decreases in absolute abnormal accruals and the propensity to just meet or beat analyst forecasts, and a significant increase in earnings response coefficients. As for audit costs, we do not find a significant change in audit fees or audit delay surrounding the implementation of the new reporting regime. Taken together, the results of this study suggest that new auditor reporting requirements are associated with a significant improvement in financial reporting quality without detecting a significant increase in audit costs.

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“…Whereas some archival and survey studies have investigated the impact of KAMs on the information content of expanded audit reports (Boolaky & Quick, 2016;Guttierez, Minutti-Meza, Tatum, & Vulcheva, 2018;Lennox, Schmidt, & Thompson, 2018;Reid, Carcello, Li, & Neal, 2018) and on auditor liability (for a review, see Gimbar, Hansen, & Ozlanski, 2016), only a few studies have analyzed the impact of the new auditor reporting requirement on the process of the audit itself -for exceptions, see Fuller (2015) and Cade and Hodge (2014); and for a comprehensive review of the current research, see Bédard, Coram, Espahbodi, and Mock (2016).…”

mentioning

confidence: 99%

Real effects of reporting key audit matters on auditors' judgment and choice of action

Asbahr

Ruhnke

2019

Int J Auditing

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This experimental study analyzes whether reporting an accounting estimate as a key audit matter (KAM) can influence auditor judgment about the accounting estimate and the corresponding action. We find that skeptical action in the form of proposed adjustment amounts is significantly lower when the accounting estimate is reported as a KAM. Thus, the disclosure of a KAM can serve as a moral license to waive an adjustment. Taking into account that the KAM disclosure does not affect auditors' skeptical judgments in the form of a reasonableness assessment of the accounting estimate, our results indicate the existence of a judgment–action gap. Furthermore, implicit client pressure does not enlarge the moral licensing effect of the KAM disclosure. We also find evidence that audit effort is not affected by reporting a KAM. Overall, our study contributes to the current debate about the audit reporting model by showing that reporting a KAM might have unintended “real effects” on auditors' actions.

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Consequences of adopting an expanded auditor’s report in the United Kingdom

Cited by 226 publications

References 47 publications

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Does gender diversity in the audit committee influence key audit matters' readability in the audit report? UK evidence

Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom

Real effects of reporting key audit matters on auditors' judgment and choice of action

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