Article2019

Key audit matters: insight from audit experts

75 citations0/0 files storedMeditari Accountancy Research

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Corporate Governance and Financial Management

Abstract

Purpose Key audit matters (KAM) and their impact on the auditor is a relatively understudied area. The purpose of this study is to analyse whether auditors perceive that the recent requirement for auditors of listed companies to report KAMs has enhanced the transparency of audit reports or not, what additional risks they now face, how the risk is being managed and its impact on the relationship with their clients. Design/methodology/approach The paper uses an interpretive approach for detailed interviews with some of South Africa’s leading audit experts to highlight their perspective of the impact of KAM on audit reporting and the audit environment. Findings The experts have various perceptions of what makes a matter “key”. These vary from materiality, to subjectivity and difficulty, as well as incorporating a time-based consideration. Concerns identified include a significant increase in cost and an increase in potential liability, triggering the need for thorough internal risk management policies. The audit experts conclude that KAM has ultimately failed to achieve its goal of greater transparency, with clients virtually ignoring KAM reports. Research limitations/implications The research relies on a relatively small sample of subject experts and may not provide a complete account of the view of all audit professionals and KAM reports issued. It analyses the impact of KAM from the preparers’ perspective. Originality/value This study contributes to the research conducted in this topical area. Although there has been research on KAM focusing on pre-implementation consequences, there is virtually no formal academic research on the impact KAM has had on audit partners and firms in South Africa post implementation. It may also serve as a basis for the IAASB to consider going forward.

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References

2006The qualitative research interview 2011The qualitative research interview 1995Emerging Criteria for Quality in Qualitative and Interpretive Research 2003Beyond Neopositivists, Romantics, and Localists: A Reflexive Approach to Interviews in Organizational Research 2004What do we know about audit quality?2008The Use of Qualitative Content Analysis in Case Study Research 2012Conducting research interviews 2014Integrated Reporting: Insights, gaps and an agenda for future research

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