Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom

García, Laura Sierra; Gambetta, Nicolás; Benau, María Antonia García; Orta-Pérez, Manuel

doi:10.1016/j.bar.2019.02.004

Cited by 130 publications

(172 citation statements)

References 49 publications

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“…Specifically, it offers empirical evidence for gender influences on audit processes, communications, and reports. Our study extends the work of Breesch and Branson (2009) and Sierra-Garcia et al (2019) by investigating gender differences using a large sample of real audit reports from the UK audit market. It thus responds to calls for more research on how auditor characteristics influence audit reporting decisions (Church et al 2008) and on whether gender differences exist within highly professionalized auditor groups (Hardies et al 2015;Bédard et al 2019).…”

Section: Introductionmentioning

confidence: 60%

“…Consistent with recent EAR studies (Bédard et al 2019;Lennox et al 2019;Sierra-Garcia et al 2019), the dependent variable in Model 1, KAM, is the natural log of the total number of risks disclosed in the KAM section of the audit report for firm i during year t. 3 The main independent variable of interest is GENDER, a dummy variable that equals 1 if a female audit partner audits the company and 0 otherwise.…”

Section: Research Model Specification For H1mentioning

confidence: 99%

“…Given the substantial auditing regulatory change, a number of concurrent emerging studies has investigated the determinants and consequences of the EAR. Specifically, a small strand of literature has grown that investigates how EAR could affect audit quality, audit fees and financial reporting quality (Gutierrez et al 2018;Lennox et al 2019;Reid et al 2019;Sierra-Garcia et al 2019). Sierra-Garcia et al (2019) find that the auditor's attributes are among the factors that affect the number and type of the disclosed KAMs.…”

Section: Introductionmentioning

confidence: 99%

“…Specifically, a small strand of literature has grown that investigates how EAR could affect audit quality, audit fees and financial reporting quality (Gutierrez et al 2018;Lennox et al 2019;Reid et al 2019;Sierra-Garcia et al 2019). Sierra-Garcia et al (2019) find that the auditor's attributes are among the factors that affect the number and type of the disclosed KAMs. This is supported by a strand of literature that shifts the focus from audit firm level to partner level as partners have different behavioural characteristics (Lennox and Wu 2018).…”

Section: Introductionmentioning

confidence: 99%

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Female Audit Partners and Extended Audit Reporting: UK Evidence

2020

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This study investigates whether audit partner gender is associated with the extent of auditor disclosure and the communication style regarding risks of material misstatements that are classified as key audit matters (KAMs). Using a sample of UK firms during the 2013–2017 period, our results suggest that female audit partners are more likely than male audit partners to disclose more KAMs with more details after controlling for both client and audit firm attributes. Furthermore, female audit partners are found to use a less optimistic tone and provide less readable audit reports, compared to their male counterparts, suggesting that behavioural variances between female and male audit partners may have significant implications on their writing style. Therefore, this study offers new insights on the role of audit partner gender in extended audit reporting. Our findings have important implications for audit firms, investors, policymakers and governments in relation to the development, implementation and enforcement of gender diversity.

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Section: Introductionmentioning

confidence: 60%

Section: Research Model Specification For H1mentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Female Audit Partners and Extended Audit Reporting: UK Evidence

2020

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“…Aunque no existen todavía muchos trabajos en el ámbito internacional, en los últimos años se ha incrementado notoriamente la publicación de estudios sobre las CCA y de acuerdo con Köhler et al, (2016) es necesario realizar estudios que ayuden a entender el verdadero valor de esta información para los usuarios de la información contable. Los estudios, hasta la fecha, giran en torno al posible cierre del gap de expectativas (Vanstraelen et al, 2012;Okafor y Otabor, 2013;Simnett y Huggins, 2014;Maseko, 2016), al estudio de las cartas de comentarios recibidos por el IAASB en 2013 a los borradores previos (Cordos y Fülop, 2015), a los efectos de incluir juicios del auditor en el informe (Carcello y Li, 2013;Sirois et al, 2014;Wright y Wright, 2014;Boolaky y Quick, 2016;Bédard et al, 2016;Carver y Trinkle, 2017), a las reacciones del mercado de capitales (Bèdard et al, 2014) y al estudio de la naturaleza de las CCA (Köhler et al, 2016;Sierra et al, 2017).…”

Section: Introductionunclassified

The key audit questions expected in Spain: are the auditors predictable?

Gambetta

Pérez

García

et al. 2019

RC-SAR

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La modificación del contenido del informe de auditoria responde a la aplicación de la exigencia impuesta por el art. 5 de la Ley de Auditoria y concretada por la NIA-ES 701 “Cuestiones clave de auditoria” (CCA) (ICAC, 2016). Como novedad se exige al auditor que, atendiendo a su juicio profesional, muestre en el informe los riesgos más significativos de la auditoría de la empresa y las respuestas a esos riesgos. Debido a que dentro del entorno europeo, el Reino Unido ya viene informando de dichos riesgos desde 2013 y que en España todavía no disponemos de los mismos, hemos planteado esta investigación. El objetivo es pronosticar el nivel de CCA que previsiblemente nos encontraremos en España y además, distinguiendo entre si dichas CCA se deben a riesgos de la entidad o a riesgos contables. Para alcanzarlo hemos utilizado como muestra de análisis (144 observaciones de empresas no financieras y cotizadas en el FTSE100) para los años 2013 y 2016. Nuestros resultados muestran que, puesto que la estructura del mercado de auditoría es bastante similar en España y en el Reino Unido, las diferencias en el número de CCA serán muy poco relevantes. Este trabajo contribuye a profundizar el entendimiento de los nuevos informes de auditoría lo cual será útil por contribuir, por un lado, a académicos en el desarrollo de una línea de investigación emergente y, por otro, a profesionales que se encentrarán en breve con la difícil tesitura de emitir los primeros informes de acuerdo a la nueva normativa. The modification of the content of the audit report responds to the application of the requirement imposed by the NIA-ES 701 "Key Audit Matter" (KAM) (ICAC, 2016). The new standard requires the auditor to disclose in the audit report, based on the professional judgment, the most significant risks of the company identified during the audit and how they addressed those risks. Within the European environment, the United Kingdom has been including such risks in the audit reports since 2013. As in Spain the effects of the new audit standard are not evident yet, we propose this research with the objective of forecasting the level of KAMs to be seen in the audit reports in Spain, distinguishing if these KAMs are entity-level or account-level risks. In order to achieve this, the sample includes 144 observations of non - financial companies listed in the FTSE100 for the years 2013 and 2016). The results show that since the structure of the audit market is quite similar in Spain and in the United Kingdom, the differences in the number of KAM will not be relevant. This paper is timely to contribute, on the one hand, to academics in the development of an emerging research area and, on the other hand, to professionals who will face soon the difficult task of issuing audit reports in accordance with the new European regulation.

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Audit report information improvement and earnings management

Qian

Zhao

et al. 2022

Int. J Fin Econ

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Increasing the disclosure of key audit matters (KAMs) has been an important change in audit reports in recent years. After the implementation of this policy, what changes have taken place in the behaviour of auditors after the implementation of this policy? What impact has it had on the audit report? A series of problems deserve systematic analysis and empirical testing. This paper examines the relationship between the communication of KAMs and earnings management. We examined quasi‐natural experimental data shaped by new auditing standards issued by the Ministry of Finance of China on 23 December 2016. The new auditing standards have been implemented in phases for the listed companies. We find that (1) communicating KAMs in audit reports restrains the auditor's motivational reasoning behaviour by triggering rationality constraints and improves the auditor's professional scepticism, thus improving audit quality and significantly reducing the company's accrued earnings management level. (2) The influence of communicating KAMs on earnings management is more significant for sampled firms with high external financing dependence and low marketization, revealing its supplementary role in the existing corporate governance mechanism. The findings of this paper enrich existing research on KAMs and supplement important empirical evidence from the Chinese market for assessing the effects of audit reporting reforms worldwide.

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Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom

Cited by 130 publications

References 49 publications

Female Audit Partners and Extended Audit Reporting: UK Evidence

Female Audit Partners and Extended Audit Reporting: UK Evidence

The key audit questions expected in Spain: are the auditors predictable?

Audit report information improvement and earnings management

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