Ecim, D., Maroun, W. orcid.org/0000-0001-7448-1220 and Duboisee De Ricquebourg, A. orcid.org/0000-0002-5268-2109 (2023) An analysis of key audit matter disclosures in South African audit reports from 2017 to 2020. South African Journal of Business Management, 54 (1). a3669. ISSN 2078-5585
Abstract
Purpose: The aim of this study was to analyse the key audit matters (KAMs) being reported in South Africa by assessing 356 Johannesburg Stock Exchange (JSE)–listed entities’ audit reports from 2017 to 2020, which entailed 1424 audit reports and 2903 KAM disclosures.
Design/methodology/approach: The study assessed the impact and inter-relationship of three determinants (financial year, audit firm type and industry category) on the type of KAMs disclosed, total KAMs disclosed, the number of entity- and account-level KAMs and the readability of KAM disclosures. Qualitative content analysis was used to identify the core KAM themes and classifications.
Findings/results: The findings suggest the most common KAM disclosures are related to business combinations and impairments of goodwill, followed by measurement and impairment considerations for nonfinancial assets. Key audit matters disclosed predominantly have a micro-level focus on core account-level issues. Differences in KAM disclosures between Big 4 and non-Big 4 firms are not that pronounced, which signals an increased market credibility perception for second-tier firms. The Flesch average reading score indicates that KAM disclosures are complex and difficult to read. This is concerning because the KAM disclosures are in place to facilitate greater transparency for stakeholders. However, the technical nature of financial statements may mean that only users with an understanding of accounting, finance and economics will derive value from KAM disclosures.
Practical implications: This research will be relevant for standard-setters, regulators and users of audit reports interested in how ISA 701 is being implemented and the state of KAM disclosures in an emerging economy.
Originality/value: Barring only some exceptions, relatively little is known about the auditors’ expanded reporting requirements in a South African context.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2023 Dusan Ecim, Warren Maroun, Alan Duboisee de Ricquebourg | This work is licensed under CC Attribution 4.0. |
Keywords: | Key audit matters (KAMs); audit firms; expectation gap; information asymmetry; audit reports |
Dates: |
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Institution: | The University of Leeds |
Academic Units: | The University of Leeds > Faculty of Business (Leeds) > Accounting & Finance Division (LUBS) (Leeds) |
Depositing User: | Symplectic Publications |
Date Deposited: | 06 Feb 2024 13:29 |
Last Modified: | 06 Feb 2024 13:29 |
Published Version: | https://sajbm.org/index.php/sajbm/article/view/366... |
Status: | Published |
Publisher: | AOSIS |
Identification Number: | 10.4102/sajbm.v54i1.3669 |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:208769 |