Do Auditors Tell Us Something through Key Audit Matters

• In Event: Fraud and Audit

Abstract

The disclosure of key audit matters (KAMs) is expected to increase the information content of the audit report for investors; however, prior studies provide mixed results regarding the incremental informativeness of KAMs. This study uses hand-collected data of Taiwanese companies in 2016 to explore the association between accounts mentioned within KAMs and the intention of a certain type of earnings manipulation. By using earnings manipulation intent as the foreseeable significance risk in the audit, the empirical results of our study demonstrate that the items mentioned in the KAMs can provide information about the items in the auditor’s professional judgment that are of most significance and challenging in the audit of the financial statements. In addition, the results of an additional test reveal that the specific knowledge and experience of clients affected auditors’ recognition on their KAMs.

Authors

• Li Jen He, National Yunlin University of Science and Technology

• Hsiang Tsai Chiang, Feng Chia University

• Chao-Jung Chen, National Pingtung university