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What underlies key audit matters? Evidence from Taiwan

Author

Listed:
  • Shao-Huai Liang

    (National Cheng Kung University)

  • Yu-Ting Hsieh

    (National Cheng Kung University)

  • Hsuan-Chu Lin

    (National Cheng Kung University)

  • Hui-Yu Hsiao

    (National Cheng Kung University)

Abstract

This study investigates what specific information underlies key audit matters (KAMs). Investigating Taiwan listed companies from 2016 to 2020 in which the audit market is highly price-competitive and has a relatively low litigation risk, we find that companies’ accounting performance is relatively poor when more KAMs are disclosed by auditors. The negative association between accounting performance measures and the number of KAMs is enhanced when auditors’ perceived risk increases. When auditors perceive increased risk, they convey negative accounting performance-related information through the number of KAMs disclosed to fulfill their professional due diligence. We also find a negative association between changes in the types of KAMs disclosed and accounting performance in the current and next years. This finding suggests that changes in the types of KAMs disclosed by auditors reflect that companies are subject to major changes in business strategies or operating conditions and may have poor accounting performance in the near future.

Suggested Citation

  • Shao-Huai Liang & Yu-Ting Hsieh & Hsuan-Chu Lin & Hui-Yu Hsiao, 2023. "What underlies key audit matters? Evidence from Taiwan," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 1243-1258, April.
    • Handle: RePEc:kap:rqfnac:v:60:y:2023:i:3:d:10.1007_s11156-023-01128-5
    DOI: 10.1007/s11156-023-01128-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Extended audit report; Key audit matters; Accounting performance; Audit risks;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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