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The homogeneity of BIG4 audit reports after the implementation of key audit matters in the context of fair value accounting

The homogeneity of BIG4 audit reports after the implementation of key audit matters in the... This study examines the homogeneity of BIG4 audit reports after implementing key audit matters (KAMs) in the context of fair value accounting. We focus on reported KAMs and the procedures related to the fair values of investment properties, particularly those related to challenging management's estimations and valuation specialists' use. Our data consist of 235 individual audit reports from the real estate sector from 2017 to 2018 and cover 60% of the listed real estate companies in the EU, Switzerland, and Norway. We found that the BIG4 audit firms are not homogenous in their audit reports. There is a statistically significant difference among the BIG4 audit firms in reporting the challenge of management estimates and in the number of audit procedures. We also found that a country's legal origin plays a significant role when auditors report KAMs. Our findings contribute to the current audit quality and reporting literature. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

The homogeneity of BIG4 audit reports after the implementation of key audit matters in the context of fair value accounting

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Publisher
Wiley
Copyright
© 2022 John Wiley & Sons Ltd
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/ijau.12285
Publisher site
See Article on Publisher Site

Abstract

This study examines the homogeneity of BIG4 audit reports after implementing key audit matters (KAMs) in the context of fair value accounting. We focus on reported KAMs and the procedures related to the fair values of investment properties, particularly those related to challenging management's estimations and valuation specialists' use. Our data consist of 235 individual audit reports from the real estate sector from 2017 to 2018 and cover 60% of the listed real estate companies in the EU, Switzerland, and Norway. We found that the BIG4 audit firms are not homogenous in their audit reports. There is a statistically significant difference among the BIG4 audit firms in reporting the challenge of management estimates and in the number of audit procedures. We also found that a country's legal origin plays a significant role when auditors report KAMs. Our findings contribute to the current audit quality and reporting literature.

Journal

International Journal of AuditingWiley

Published: Jul 1, 2022

Keywords: audit quality; BIG4; fair value; IFRS; investment properties; key audit matter; the challenge of management estimation; use of specialists

References