Has it become more readable? Empirical evidence of key matters in independent audit reports,

Abstract

The aim of this study was to analyze the effect of the adoption of Brazilian Accounting Standard - Auditing Technique 701 (NBC TA 701, in its Portuguese initialism) over the readability of audit reports. The study fills a gap in the literature by obtaining empirical evidence regarding the effect of NBC TA 701 on the readability and comprehensibility of audit reports. The study is important for verifying whether the disclosure of key audit matters (KAMs) improves the ease of reading and understanding audit reports after the adoption of NBC TA 701. Unlike in the previous literature, it was observed that the effect of KAMs has a non-linear, U-shaped relationship, which suggests additional benefits to readability based on a certain quantity of key matters reported. The data from a sample of 240 listed companies on the B3 S.A. -Brasil,Bolsa,Balcão (B3), in the period from 2013 to 2018, were assessed using content analysis, descriptive statistics, difference of means tests, and panel data correlation and regression analyses. The results showed that the adoption of NBC TA 701 significantly affected the Flesch readability index (FRI) of the independent audit reports. They also confirmed that the quantity of KAMs reported increases the FRI in a non-linear way, and that the types of key matters affect readability differently according to their complexity. The results provide evidence that the new audit report improves the level of readability in a non-linear way, thus contributing to the informational content of the audit report used by the various users for decision making.

Mapeando os Fatores Associados à Similaridade dos Principais Assuntos de Auditoria em Empresas Brasileiras Listadas

“…As Marques et al (2021) highlighted, NBC-TA 701 mandates auditors to report the matters they consider most relevant throughout their work. The disclosure of key audit matters (KAM) presents challenges while impacting the perception of independent auditors' accountability, as indicated by Brasel et al (2016) and Gimbar et al (2016).…”

Relatório dos auditores independentes das cooperativas de crédito do sul do Brasil

“…Em relação aos principais assuntos de auditoria, as pesquisas enfocam sobre a relevância informacional dos PAAs aos investidores (Alves Júnior & Galdi, 2020), a associação dos PAAs com o gerenciamento de resultados (Santos et al, 2020), a relação entre as características das empresas e os PAAs divulgados (Ferreira & Morais, 2020), a influência da divulgação dos PAAs na remuneração dos auditores (Colares et al, 2021), a divulgação dos PAAs e a legibilidade do relatório dos auditores (Marques et al, 2021), o conteúdo informacional dos PAA e sua utilidade nas previsões dos analistas (Vargas et al, 2022).…”

“…Apesar do avanço, é essencial que os esforços dos reguladores não cessem. Conforme Marques et al (2021), é importante um monitoramento forte e constante sobre o conteúdo divulgado nos relatórios de auditoria, para a adoção dos PAAs não ser apenas "proforma".…”

The Mediating Effects of Key Audit Matters on the Relationship Between Audit Quality and Earnings Management: Evidence from Jordan

“…Many studies have indicated that disclosure of key audit matters (KAMs) improves perceived value and data reliability only when the disclosures are made by the Big Four audit firms. On the other hand, they also found that listing KAMs draws investors' attention to new and broader information, which may distract them from the core information in the audit report (Marques, Pereira, Aquino, & Freitag, 2021;Moroney, Phang, & Xiao, 2021;Shakhatreh, Alsmadi, & Alkhataybeh, 2020).…”