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

Abstract

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.

The impact of key audit matter (KAM) disclosure in audit reports on stakeholders’ reactions: a literature review

“…A key goal of external audits is to lower audit risk to an appropriate level (5% on average) with reference to materiality and efficiency. KAM disclosure can lower the reasonableness gap as the stakeholders can be better informed about the range and limits of external audits (Velte, 2018). The performance gap, the second part of expectation gap, can be linked to deficient performance and standards (Porter, 1993; see Figure 1).…”

“…KAM disclosures include firm-specific information about an audit of financial statement (Bédard et al, 2016;Gimbar et al, 2016). They portray an individual picture of the main critical accounting topics or items in a company (Velte, 2018). According to stakeholder agency theory, KAM disclosures contribute to lowering information asymmetry and conflicts of interest between management and stakeholders and decreasing the expectation gap (Fuller, 2015 Figure 2).…”

“…It is also relevant to analyze the impact of audit committee composition (e.g. members with financial expertise or industry expertise) on KAM disclosure, as the audit committee and external auditor must discuss the audit focal points, which can be relevant for the external auditor's choice of KAM to disclose in the audit report (Velte, 2018).…”

Análisis de la Influencia de la Función de Auditoría Interna sobre las Cuotas de Auditoría

“…A positive relationship is expected, due to the fact that the auditor will increase their fees for those companies that have high indebtedness (Messier et al, 2011). The ROA variable is measured as profits before taxes divided by total assets, expecting a negative relationship with the fees (Velte, 2018). The LOSSES variable is a dichotomous variable that takes the value 1 if the company has incurred losses in the previous year, and zero otherwise (DeFond and Zang, 2014).…”

Prinsip “Jancukan” Dalam Akuntansi Dan Pelaporan Keuangan

“…Kepatuhan manajemen perusahaan untuk mematuhi prinsip "Jancukan" dalam pelaporan keuangan sebagaimana diuraikan di atas, merupakan bukti bahwa manajemen menyadari urgensi pengungkapan informasi yang memungkinkan meningkatkan keter bacaan dan keterpahaman laporan keuan gan, sehingga laporan keuangan memiliki nilai (value) bagi pengguna. Hal ini konsis ten dengan hasilhasil penelitian tentang dampak keterbacaan dan keterpahaman laporan keuangan pada perilaku pengguna (Barker & McGeachin, 2013;Drago, Ginesti, Pongelli, & Sciascia, 2018;Haller & Staden, 2014;Jones & Smith, 2014;Lim, Chalm ers, & Hanlon, 2018;Velte, 2018). Feng, Cummings, & Tweedie (2017) menemukan bukti bahwa integrated reports mengan dung kompleksitas informasi, baik informasi keuangan maupun nonkeuangan, sehing ga keterbacaan dan keterpahaman sangat diperlukan agar kebermanfaatan integrated reports bagi pengguna makin meningkat.…”