Journal of Applied Finance & Banking

Does Industry Specialist Auditor Provide More Insights in Their audit report? An Empirical Study of Key Audit Matters Section

  • Pdf Icon [ Download ]
  • Times downloaded: 309
  • Abstract

     

    In 2015, International Auditing and Assurance Standards Board (IAASB) released new International Standards on Auditing 701 and required auditors to disclose key audit matters (KAM) in the audit report. Similar standards were also released in the United States in 2017 and the United Kingdom and Ireland Financial Reporting Council (FRC) in 2014. As KAM are expected to inform on matters of the greatest significance during an audit, before exploring the question regarding whether investors will obtain useful information from additional matter disclosures, the anterior consideration may be in regard to how audit quality affects the disclosure quality of KAM. This study use hand-collected data of the KAM disclosed in the audit reports of Taiwanese listed companies in 2016 to explore the association between auditor industry specialization and audit quality by the disclosure of KAM in new audit reports. The empirical results show that the association between the industrial specialist audit partner and the measurement of KAM quality is significantly positively related. The findings support our hypothesis that specialist auditorsí KAM are more informative than those issued by non-specialist auditors, and provide new evidence supporting prior studies about the superior auditing ability and disclosure quality of auditor industry specialist.

     

    Keywords: Key Audit Matters, KAM, International Standards on Auditing 701,

    International Auditing and Assurance Standards Board.