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,
and Assurance Standards Board.