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Key audit matters: insight from audit experts

Key audit matters: insight from audit experts 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/approachThe 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.FindingsThe 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/implicationsThe 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/valueThis 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Meditari Accountancy Research Emerald Publishing

Key audit matters: insight from audit experts

Segal, Milton
Meditari Accountancy Research , Volume 27 (3): 23 – Jun 11, 2019
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References (64)

Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
2049-372X
DOI
10.1108/medar-06-2018-0355
Publisher site
See Article on Publisher Site

Abstract

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/approachThe 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.FindingsThe 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/implicationsThe 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/valueThis 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.

Journal

Meditari Accountancy Research – Emerald Publishing

Published: Jun 11, 2019

Keywords: Transparency; Audit; Risks; Impact; Key audit matters; Auditor liability

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