Matters may matter: The disclosure of key audit matters in the Middle East

Mah'd, Osama; Mardini, Ghassan H.

doi:10.1080/23322039.2022.2111787

Cited by 11 publications

(9 citation statements)

References 40 publications

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“…Ittonen and Peni (2012) and Velte and Issa (2019) cite prior auditing literature stating that ISA-701 required KAM disclosure to enhance audit quality in line with stakeholder interests. Agency theory (Mah'd and Mardini, 2022;Elmarzouky et al, 2023b) states that the major objective of an audit is to instill confidence in the financial statements among users. According to agency literature (Schrader and Sun, 2019), a better-quality audit can be achieved when external auditors exercise more control and demand better audit coverage.…”

Section: 23mentioning

confidence: 99%

“…Measuring key audit matter. The data was collected and analysed using qualitative content analysis (Mah'd and Mardini, 2022). We examine each organization's audit report multiple times, paying special attention to the KAM sections.…”

Section: 24mentioning

confidence: 99%

Section: Theoretical Background and The Development Of Hypothesesmentioning

confidence: 99%

“…Furthermore, audit report literature suggests that disclosing KAM should enhance the integrity of the audit process in line with the interests of stakeholders (Ittonen and Peni, 2012; Mah’d and Mardini, 2022). The basic objective of an audit is to instill confidence in the financial accounts among users, as described by agency theory (Mah’d and Mardini, 2022). Official documents say that a better auditing standard can be achieved if the audit committee performs more monitoring and requires more comprehensive audit coverage (Schrader and Sun, 2019; Velte and Issa, 2019).…”

Section: Theoretical Background and The Development Of Hypothesesmentioning

confidence: 99%

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Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Alharasis,

Alkhwaldi,

Hussainey

2024

IJLMA

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Purpose This study aims to investigate the moderating effect of the COVID-19 epidemic on the relationship between key audit matter (KAM) and auditing quality. Design/methodology/approach The authors use the ordinary least squares regression on data from 942 firm-year observations of Jordanian non-financial institutions across the period (2017–2022) to test the hypotheses. The authors use content analysis method to measure levels of KAM disclosure. Findings The investigation’s findings highlight the importance of KAM disclosure in achieving audit quality in line with international standard on auditing no. 701 (ISA-701) requirements. COVID-19 is also found to have a positive relationship with audit quality, further confirming the crisis’s devastating impact on audit complexity and risks and providing evidence for the need for supplementary, high-quality audit services. Due to the correlation between KAM disclosure and increased auditor workload and responsibility, the analysis reveals that the COVID-19 factor strengthens the link between KAM disclosure and audit quality. Practical implications This study has the potential to be used as a basis for the creation of a new regulation or standard regarding the reporting of unfavourable events in financial filings. This study’s findings provide standard-setters, regulators and policymakers with current empirical data on the effects of implementing ISA-701’s mandate for external auditors to provide more information on KAM. The COVID-19 crisis offers a suitable setting in which to examine the value of precautionary disclosures in times of economic uncertainty, as well as the significance of confidence interval disclosures and the role of external auditing in calming investor fears. This analysis is helpful for stakeholders, regulatory agencies, standard-setters and readers of audit reports who are curious about the current state of KAM disclosures and the implementation of ISA-701. The results may have ramifications for academia in the form of a call for more evidence expanding this data to other burgeoning fields to have a clear explanation of the real impact of reporting KAM on audit practices. Originality/value To the authors’ awareness, this research is one of the few empirical studies on the effect of the COVID-19 crisis on auditing procedures, and more specifically, the effect of disclosures on KAM by external auditors on audit quality. This study’s findings represent preliminary scientific evidence linking the pandemic to business performance. Minimal research has been done on how auditors in developing nations react to pandemic investor protection and how auditors’ enlarged reporting responsibilities affect them. The vast majority of auditing studies have been conducted in a highly regulated system, so this research contributes by examining audit behaviour in a weak legal context.

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Section: 23mentioning

confidence: 99%

Section: 24mentioning

confidence: 99%

Section: Theoretical Background and The Development Of Hypothesesmentioning

confidence: 99%

Section: Theoretical Background and The Development Of Hypothesesmentioning

confidence: 99%

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Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Alharasis,

Alkhwaldi,

Hussainey

2024

IJLMA

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“…Jordan seems to be an appropriate setting for this investigation for many reasons. First, unlike in industrialised economies, businesses in the Middle East (ME), and Jordan in particular, are characterised by ownership concentration and family-run businesses to a greater extent, unlike the United States and Western Europe (Mah'd and Mardini, 2022;Saidat et al, 2022) (Alharasis et al, 2022a(Alharasis et al, , 2023a. Fourth, Jordan is the only Arab country to mandate the disclosure of audit fees by public companies (Alharasis et al, 2023b).…”

Section: Introductionmentioning

confidence: 99%

The effect of the Covid-19 epidemic on auditing quality and the reaction of family vs non-family businesses to Covid-19: the case of Jordan

Alharasis,

Mustafa

2023

JFBM

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PurposeThe purpose of this paper is to provide new scientific knowledge concerning the impact of the Covid-19 pandemic on auditing quality as determined by audit fees for both family- and non-family-owned firms in Jordan.Design/methodology/approachThe authors use an ordinary least squares (OLS) regression firm-clustered standard error employing data from 200 Jordanian enterprises between 2005 and 2020 to validate this study's hypotheses.FindingsThe regression findings suggest that enterprises run by families are better able to handle crises and spend less on audits. Companies that are not family-owned have to spend the most on monitoring tasks since they need to take extra steps to prevent the agency problem and make their financial statements stand out from their peers in order to attract more investors. Additional analysis that stretched out throughout 2005–2022 came to the same findings.Practical implicationsThe findings can be beneficial for authorities to better regulate and supervise the auditing sector. Political leaders, legislators, regulators and the auditing industry can all learn important lessons from the findings as they assess the growing concerns in a turbulent economic situation. The results of this research can, therefore, be utilised to reassure investors and assist policymakers in crafting workable responses to Covid-19's creation of financial problems. After the devastation caused by the coronavirus, these findings may be used to strengthen the laws that oversee Jordan's auditing sector.Originality/valueIn emerging nations like Jordan, where there is a clear concentration of ownership and a predominance of high levels of family ownership, and to the best of the authors' knowledge, this is the first empirical study to compare the auditing quality of family-owned versus non-family-owned enterprises. Preliminary insights into the crisis management tactics of family and non-family organisations are provided by this first empirical investigation of the consequences of the Covid-19 crisis on family-owned firms.

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The direct effect of the international standard on auditing – 701 requirements on audit profession concerning the reimbursement costs: case study of Jordanian finance industry

Alharasis

2024

AJAR

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PurposeThe objective of this study is to present novel evidence regarding the impact of the Key Audit Matters (KAM) disclosure requirements of International Standard on Auditing – 701 (ISA) on the auditing profession concerning reimbursement costs in underdeveloped nations, Jordan.Design/methodology/approachA year-industry fixed-effects OLS regression model has been employed to test the developed hypotheses. The regression analysis of the period from 2005 to 2022 tests the presence of KAM disclosures in Jordanian finance business, while the regression analysis of the period from 2017 to 2022 tests the actual impact of KAM disclosure following the first implementation of ISA-701 in Jordan.FindingsThe analysis has verified that the presence and the proportions of KAM disclosures outlined in ISA-701 resulted to significant auditing compensatory expenses. The findings confirmed that KAM disclosures increase auditor workload, responsibility, complexity, and risk, consequently resulting in higher reimbursement expenses.Practical implicationsThe findings of this study have the potential to serve as a basis for the development of a novel financial regulatory legislation or a regulated framework for disclosing significant occurrences. This paper provides new empirical evidence to standard-setters and policymakers regarding the requirement of ISA-701 for external auditors to disclose KAM. This study is advantageous for stakeholders, regulatory agencies, standard-setters, and audit report readers who are interested in KAM disclosures and the implementation of ISA-701. The results could inspire the academic community to obtain fresh data from emerging markets to ascertain the impact of KAM disclosure on audit practices.Originality/valueTo the author's knowledge, this study is one of the few empirical investigations into the impact of current additional disclosure rules on the audit profession concerning reimbursement costs. It provides preliminary evidence linking ISA regulations to corporate productivity in Jordan, a developing nation. Little is known about how developing nation auditors react to KAM disclosures' role in stakeholder protection and how their expanded reporting obligations influence them. This study examines audit behaviour in a weak legal setting, unlike most prior studies, which have been done in highly regulated systems.

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Matters may matter: The disclosure of key audit matters in the Middle East

Cited by 11 publications

References 40 publications

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

The effect of the Covid-19 epidemic on auditing quality and the reaction of family vs non-family businesses to Covid-19: the case of Jordan

The direct effect of the international standard on auditing – 701 requirements on audit profession concerning the reimbursement costs: case study of Jordanian finance industry

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