Factors Affecting the Level of Key Audit Matters Disclosure: Evidence from Jordan

Khalid Ali Alduneibat

11 citations0/0 files storedJordan Journal of Business Administration

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Auditing, Earnings Management, Governance Corporate Governance and Financial Management Financial Reporting and XBRL

Abstract

The current study aimed at investigating the level of disclosure of Key Audit Matters (KAMs) in the audit reports of Jordanian companies listed in the Amman Stock Exchange (ASE) as required by the International Standard on Auditing 701 (ISA 701). The study also aimed at examining the factors affecting the level of KAM disclosure. In order to accomplish the objectives of the current study, 324 annual audit reports from 2017 through 2019 of 108 companies are examined. Potential KAM issues are recognized through companies' audit reports, while corporate characteristics are gathered from companies' annual reports. Three major analytical methods are applied to analyze the defined model and the recruited data, including descriptive statistics, correlation and ordinary least squares (OLS) regression analysis. The results of the study demonstrate that the mean of KAM-disclosure level is 1.58, which is considered to be relatively low. Positive relationships are attested between the number of KAMs disclosed and the independent variables: size, leverage, indebtedness, auditors’ fees and big-four (audit firm size). However, the results suggest that there are negative relationships between the level of KAMs disclosed and two independent factors: profitability and modified opinions. Additionally, the results of the study revealed that accounts’ receivables and provisions represent the highest level of KAM reporting ratio. This study significantly contributes to the body of literature addressing the awareness of KAM-disclosure level and its determinant factors in Jordan. The study recommends that KAM disclosure in Jordan should receive more attention from preparers and users of financial statements.

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References

2000Does size matter? The influence of large clients on office-level auditor reporting decisions 2013Attention and choice: A review on eye movements in decision making 2015Rule of Law and Constitutional Democracy 2018Consequences of adopting an expanded auditor’s report in the United Kingdom 2019Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom 2018The Informational Value of Key Audit Matters in the Auditor's Report: Evidence from an Eye-Tracking Study 2014Do Critical Audit Matter Paragraphs in the Audit Report Change Nonprofessional Investors' Decision to Invest?2022Why are expanded audit reports not informative to investors? Evidence from the United Kingdom

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