Determinants of Key Audit Matters (KAMs) Disclosure: Empirical Evidence from an Emerging Economy
DOI:
https://doi.org/10.69728/jst.v12.142Keywords:
Key Audit Matters, Audit Characteristics, Corporate Governance, Women Empowerment, Emerging EconomyAbstract
The introduction of new audit requirements regarding the disclosure of KAMs enhances the communicational value of audit reports. Therefore, the objectives of this study are to examine the impact of auditors’ characteristics and corporate governance characteristics on key audit matters (KAMs) disclosure in auditors’ report in an emerging economy like Bangladesh. Herein, DS30 companies listed in DSE from 2018 to 2023 are taken as a sample because it starts after the mandatory implementation of ISA 701 and KAM reporting requirements in Bangladesh and provides enough time to observe meaningful changes in KAM disclosure practices. Using a multivariate pooled OLS regression analysis, this study finds significant positive association of auditors’ attributes (BIG4, FEMA, AFEE and ATENURE) on disclosure of KAMs. Additionally, among the corporate governance characteristics BIND and ACIND have significant positive impacts on the disclosure of KAMs whereas ACEXP has significant negative effect on the disclosure of KAMs. This study additionally reinforces the significance of women’s involvement in the growth of emerging economies and emphasizes the value of women’s engagement and ongoing professional development. Thus, the findings of the study contribute to Agency Theory, Resource Dependence Theory and Upper Echelons Theory by showing how auditor and governance characteristics influence KAM disclosure through monitoring, resource, and judgement-based mechanisms. The study’s findings also assist standard-setters, regulators, and those who produce financial statements by giving them a better knowledge of the factors that could influence a decision to report KAMs by an auditor. However, new areas for future research could include the perception of new regulations by auditors, the strength of auditors’ resources, the presence of women in senior management, the interaction between female auditors and female audit committee members, as well as family ownership.
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