Corporate Accounting Report Writing.pdf

Corporate Accounting - Report Writing
accounting report and need a sample draft to help me learn.
In this assignment I only need help with a well researched Introduction and Conclusion (2
pages only, 1page for introduction and 1 Page for Conclusion). I have done most of the work
including Literature review, data collection, analysis and reporting. All these are attached
herein for your review to understand what's all about.
The excel file is data I collected from various companies assigned,and the word documents
are sections I have completed which includes Literature review, analysis of Impact of Covid-
19 on KAM (Key Audit Matters) and the general analysis. I would like you to read through,
beginning with literature review and the analyzed results as reported in the attached word
documents for you to get the right picture of how the introduction should be and make a
conclusion based on those analyzed results.
The attached PDF file will give you the details of the all assignment. In the PDF file, your
focus will be on part 2.1 Question 4 (just to write up Introduction and Conclusion)) as
Questions 1-3 have already been done as shown in the attached word files attached.
Conclusion is to be drawn from the results reported in the word documents attached,
entitled: (Complete) Impact of Covid on KAM and complete general analysis.
Format: Include document page number in ALL in-text-citations (e.g. Smith and Jones, 1997
p.16). You must cite/reference all original work, articles, authors, etc. Citation and
referencing should conform to APA format both in the body and attached reference section.
Don't bother compiling it into one document. All I need is Introduction and conclusion and
will put them all into one report. If you have any questions don't hesitate to ask me.
Best regards,
Hesbon
Requirements: | .doc file
Assessment 2: COVID-19 and Auditors Reporting on Key Audit Matters – An Analysis
Overview There are two parts to this assessment item: Part 2.1 is an analysis of COVID-19
and Auditors’ Reporting on Key Audit Matters, while Part 2.2 is a reflection on group work.
Details of these two components are provided below. Due dates for each part are as
follows: Part 2.1: 4pm on Monday 23rd January 2023. Part 2.2: 4pm on Friday 27th January
2023. PART 2.1 (25 Marks) Background Following the various major audit failures and the
limited disclosure about audit risks in standard audit reports, the International Auditing
Assurance Standards Board (IAASB) issued a set of new and revised auditing standards in

2015, requiring auditors to provide more information about the client and the audit process
in their reports. Likewise, in Australia the AUASB issued a similar set of updated audit
reporting standards. The most significant change in the auditor reporting standard is the
introduction of ‘key audit matters’ (KAM), which includes a list of areas which the auditor
believes involves the most risk and provides an explanation on the audit approach to those
areas. Required You are required to research on the reporting of key audit matters in
Australia. In carrying out this task you need to do the following: 1. Do a literature review
using at least 15 articles (of which at least five (5) must be published in scholarly journals)
on the topic and provide a 2 to 3-page write-up on prior research carried out on this topic.
Do not use any textbook or lecture slides as a source (scholarly or otherwise). Only use
published research articles, professional outputs (from industry e.g. KPMG, AAUSB etc.) and
conference papers.
2 2. For the 15-20 companies that are assigned to your group (5 per person), you are
required to: • Go to Connect4 Annual Report (via Griffith University Library link to Connect
4 ) and download 5 years of Annual Reports for years 2017 – 2021. • For each company’s
annual report, go to the Independent Auditors Report and collect specific information
pertaining to the audit and the section relating to key audit matters. • In the ‘Resources’
section of the Assessment 2 details you will find an excel file template titled “Data to be
collected”. It has four (4) sheets: o Sheet 1 (List of Companies) provides a list of companies
that each of you are assigned to. o Sheet 2 (Variable definition) provide the definition of
each variable /data to be collected. o Sheet 3 (Data Part 1) provides a template of
data/variables to be collected. o Sheet 4 (Data KAM Text) provides a template of KAM text
to be inserted. • The data of one example company, Adelaide Brighton Limited, has been
collected and is displayed in Sheets 3 and 4. • You must use the prescribed template (do not
change the sequence of the columns). • You can add / insert more sheets for your findings –
tables and charts. For each year, insert the: • Nature and extent of key audit matters
disclosed (select from a list provided; if not within list, then indicate what it is); • Key Audit
Matters Text (copy from the entire section text and paste into the excel sheet) to
understand the similarity of text used from year to year. • Type of audit opinion rendered
(unmodified (unqualified), qualified, adverse, disclaimer, unmodified - uncertainty
paragraph on going concern, modified – going concern) • Name of the signing auditor
(Engagement Partner) • Name of Audit Firm and Audit Firm Location • Date of Auditors’
Report • Month of the Financial Year End
3 3. For the financial years 2017 to 2021, analyse the data collected in 2 and report your
findings on: • The frequency, nature and extent of key audit matters reported in the
auditors’ report. How many KAMs are reported each year and what is the average number
of KAMs reported across the 15-20 companies and over the 5 years. Are some types of
KAMs more frequently disclosed? What is the length of these KAMs in terms of number of
words for each KAM? How does the nature and extent of KAMs vary across audit firms? Are
some types of KAMs more associated with the nature of the industry in which the company
operates? • KAMs text similarity over the period; (how similar are the type and description
of KAMs? Has the text changed over the period or is it quite similar from one year to
another? Is there evidence of use of boilerplate template? In your opinion how informative

is such disclosure? • Over the period of analysis, what is the type of audit opinion rendered?
• Over the period of analysis, how timely are audit reports issued (number of days from
financial year-end to date of auditor’s report? Are some audits longer? Does it vary across
years and the busy/non-busy period? In Australia, the busy audit period tends to be related
to the June financial year end). 4. The Coronavirus (COVID-19) outbreak has potential
effects on the economy as well as firm outcomes. Various corporate regulators have
published guidance for financial report preparers and auditors on items to consider in the
reporting and audits of interim and annual financial reports arising from this major global
risk. With reference to some of these documents, and from your observations from the
2020 and 2021 audit reports for your nominated firms, how do you think COVID-19 has
impacted audits and audit reports (i.e. audit opinion and KAMs). Discuss. 5. Format of
Report • Introduction • Literature Review • Tasks, Analysis and Findings • Conclusion •
References (APA) Note 1: Be creative - use charts, tables, etc. to illustrate your findings
Note 2: Be creative - consider audit firm, audit firm location and audit partner, year,
industry etc.
4 Note 3: Refer to Griffith University Library on writing an assignment and doing a
literature review guide: https://www.griffith.edu.au/library/study/writing-your-
assignment/assignment-writing Note 4: Refer to Griffith University Library referencing
guide: https://www.griffith.edu.au/library/study/referencing Note 5: For groups of 4 you
will be working with: • 20 companies and • 20 articles for the lit review In your
submission, the following must be submitted: 1) Project Report, with a cover page that lists
all group members. You can zip the following 3 files to add to the electronic submission
point. 2) Excel sheet template with completed data and analyses 3) Annual Reports folder
containing annual report or Independent Auditor Report 4) Articles folder containing all
articles referred to in the assignment. Marks Distribution Section Marks 1.
Introduction (and presentation) 2 2. Literature Review (Task 1) 5 3. Tasks, Analysis and
Findings a) Task 2 – Data Collection b) Task 3 – Analysis and Findings (parts a to d) c)
Task 4 – COVID-19 Audit Implications 5 6 4 4. Conclusion 2 5. References and Writing
Communication 1 Total Marks 25
PART 2.2 (10 Marks) Description For this part of the assignment you are asked to reflect
on how the group communication process did, or did not, support the completion of
Assessment 2.1 (Audit Research Application). You will be recording weekly reflections, as
you work in your group to complete Assessment 2.2, in a workbook we have provided.
Please refer to the ‘Assessment 2.2: Reflection on working in a group’ page in the
Assessments tab for more information about this component of the Assignment.
Literature review
The introduction of KAM
For decades, quality and value of audit report has been a big concern for stakeholders. This
culminated in 2000s, led by several auditing scandals such as Enron and WorldCom as well
as the financial crisis in 2008-2009 (Cordoş & Fülöp, 2015). As a result, a huge gap was
created between the demand from stakeholders and the information in auditor’s reports
(Gold et al., 2012). Audit firms were blamed by investors for just going along with
standardized format and failing to disclose sufficient useful information for the users of the

reports (Cordoş & Fülöp, 2015).
To address this issue, the regulators of audit practice around the world had introduced
extended requirement for audit reporting (Velte & Issa, 2019). For example, the
Justifications of assessments (JOA) was instituted in France in 2006, followed by the Risks
of material misstatement (RMM) of the UK in 2013. The International Auditing and
Assurance Standards Board (IAASB) and the US Public Company Accounting Oversight
Board (PCAOB) also introduced the Key audit matters (KAM) in 2015 and the Critical audit
matters (CAM) in 2017 respectively. Though they have different names, all of them
specifically require auditors to disclose information regarding material issues of the client
companies to improve the transparency of their reports (Auditing and Assurance Standards
Board, 2015, PCAOB, 2017, Velte & Issa, 2019). In this literature review, all these extended
requirements will be mentioned and analysed as KAM for convenience. By the disclosure of
KAM, the users of auditor’s report may obtain the information more specific to the company
(Gold & Heilmann, 2019, Bédard et al., 2016), thus the expectation gap might be reduced as
the value of the information in audit reports for stakeholders would be improved
(International Auditing and Assurance Standards Board (IAASB), 2015).
Since the establishment of KAM, numerous researches have been conducted for assessing
the practice and effect of it. This literature review will integrate them from four
perspectives, namely the effect of KAM on the stakeholders, on the auditors, on the client
companies and the impact of Covid-19 on the KAM disclosure.
KAM’s impact on stakeholders
The primary purpose of KAM is to improve the value of audit reports for investors and
other stakeholders. Several researches have been conducted on this topic since the
introduction of KAM, however, the results of them are heterogenous. Positive effect of KAM
was reported by the research in Taiwan, where KAM regarding company-specific risks
attracted more investors and improved the usefulness of the audit reports (Chang et al.,
2022). On the other hand, Gold & Heilmann (2019) stated that initial archival researches
could not find the evidence that the behaviour of the users of the auditor’s report had
changed due to the disclosure of KAM, and Velte & Issa (2019) indicated that KAM
disclosure may lead to adverse reactions of investors as increase in the disclosure of risk
factors would create negative attitudes of investors toward the client companies.
To explain these diverse results from previous researches, more detailed studies would be
required. For example, the effect of the disclosure on stakeholder’s reaction diminished
when the information was already disclosed in the annual report or other announcements
from the firm (Ittonen, 2012). The knowledge and skills of stakeholders also must be
considered as KAM disclosure negatively affected the readability of the report for
nonprofessional investors (Carver & Trinkle, 2017). Another research showed that hen
KAM is disclosed, stakeholders put major focus on it, which may cause a poor-decision
making by paying less attention on the other part of the annual report (Sirois et al., 2018).
These factors need to be considered and integrated to gain comprehensive understandings
of the effects of KAM disclosure on stakeholders.
KAM’s impact on auditors
As the introduction of KAM greatly increased the requirement to auditors, it is expected that

it affected the performance, behaviour and responsibilities of auditors significantly. Sor far,
several researches are conducted on the audit report quality, audit fee, auditing lag time,
scepticism of auditors and their responsibilities.
Regarding the quality and fees of auditing, results were very inconsistent. They are
summarized in Table 1, and it shows that the result differed even when the researches were
conducted in the same country. For example, Gutierrez et al. (2018) atated that KAM had no
effect on audit quality while Reid et al. (2019) found the positive effect of KAM on audit
quality, even though both had examined companies in the UK. Kitiwong & Sarapaivanich
(2020) and Zeng et al. (2021) argued that this inconsistency may be due to the usage of
accruals as a measurement of audit quality, because accruals are not strong indicator of the
quality of audit report. They found the association of audit quality and KAM by using
financial restatements and textual analysis as measurements respectively. The results
regarding audit fees were also homogenous, and the KAM disclosure affected in some
research while it didn’t in others. One explanation might be provided by Bradbury &
Almulla (2018), who found that the audit fees were affected by the contents of KAM rather
than the presence or numbers of KAMs. As in the lag time of audit report, no research in
Table 1 found the association with the KAM disclosure.
Table 1. Summary of papers regarding KAM’s effect on audit quality, fees and lag time
Negative effect of KAM disclosure was reported by two researches on the scepticism of
auditors in Germany. By disclosing KAM, auditor’s opinions were more prone to be
favourable for the clients (Ratzinger-Sakel & Theis, 2017) and the number of the request for
the adjustment of the annual report decreased (Asbahr & Ruhnke, 2019). These researches
indicate that auditors are using KAM for justifying their less-sceptic approach to the client,
which may result in the loss of professional decisions. Lastly, the research of auditor’s
responsibilities found both positive and negative effect of KAM on it. While the disclosure of
KAM reduced the litigation risk regarding misstatements (Kachelmeier et al., 2020), once a
misstatement was found in KAM, the auditor may be found more negligent than when there
was no disclosure of KAM (Backof et al., 2022).
KAM’s impact on client companies
KAM disclosure is a requirement on auditors to improve the value of auditor reports for
stakeholders. However, since the disclosure of risk factors is also a significant managerial
issue, the introduction of KAM may affect the behaviour and decision making of the client
company as well. There are several studies investigated on this topic, and both positive and
negative effect of KAM on the client companies’ management were found.
One positive aspect was that when KAM is disclosed, there were more disclosure of relevant
information by the managers of the client firms, which may improve the value of the annual
report for the investors (Fuller, 2015). It might be because the managers recognize that
KAM could be taken as negative indicators of their performance, thus they feel obliged to
send signals to the investors that they are dealing with the issues disclosed in KAM. Another
positive effect of KAM was reported by Klueber et al. (2018) that the KAM disclosure
regarding firm-specific matters reduced earning management activities. This research
indicates that KAM may improve the reporting quality of the client companies indirectly by
putting more pressures on the managers, as they feel more monitored by the auditors.

On the other hand, some negative effect of KAM disclosure on management were also
reported. For example, according to Cade and Hodge (2014), KAM made managers less
willing to share information with auditors, because they fear that negative information
might be disclosed by auditors as KAM. Bentley et al. (2020) analysed the decision making
of the managers and found that the disclosure of KAM made managers more willing to take
high-risk decisions. This might be because they think they can get more support from
auditors for the disclosure of company’s risk factors due to the CAM disclosure. Making a
high-risk decision is not necessarily an adverse behaviour, but this effect must be noted by
the regulators and the investors.
As mentioned above, the goal of KAM is to improve the auditing for the sake of the
stakeholders, and its impacts on the management of client companies are rather “side
effects”. However, since those effects could be significant, researchers, regulators and
stakeholders must be aware of them to understand and evaluate the KAM disclosure
comprehensively.
Impact of Covid-19 on KAM disclosure
To analyse the recent trend of KAM disclosure, considering the impact of the Covid
pandemic is essential, as it may have significantly affected the numbers and contents of
KAM, audit processes, fees and reporting lag. Many companies suffered from significant
downfall in business, which would increase KAMs regarding inventories, impairment of
assets and provision for employee retirement benefits (Hategan et al., 2022). Since the face-
to-face meeting was regulated in many countries, auditors had to go conduct investigations
and enquiries remotely (Fisher, 2020), which might have resulted in longer audit processes
and reporting lag.
As the pandemic affected companies in variety of ways, wide-range of KAM topics may
include information regarding Covid-19. Hategan et al. (2022) reported that the references
to Covid were observed in 70% of KAM topics in Europe. However, the disclosure of Covid-
related KAM deferred depending on the countries. While 60% of KAM mentioned Covid and
the length of KAM increased by 80% compared to pre-Covid period in New Zealand
(Rainsbury et al., 2022), only 17% of KAM disclosure and 3% of audit procedure were
related to the pandemic in Australia (Kend & Nguyen, 2022). The small impact was also
observed in Turkey, where merely 18% of KAM contained information regarding Covid
(ŞENGÜL ÇELİKAY, 2022). Another finding is that the larger audit companies (such as “Big
4” auditors) referred to the impact of pandemic in KAM more than the smaller auditors
(Hategan et al., 2022, Kend & Nguyen, 2022, ŞENGÜL ÇELİKAY, 2022), which might be
because larger auditors tend to prefer risk aversion (ŞENGÜL ÇELİKAY, 2022).
As in the impact of the pandemic on audit fees and reporting lag, Harjoto and Laksmana
(2022) found that both fees and lag increased in accordance with the length of lockdown.
Under lockdown, auditors had no choice but implementing remote-working system, which
resulted in higher audit fees and larger audit delays.
Overall, the number of studies regarding the relationship of KAM and Covid-19 was
relatively small. Since the impact of and the reaction to the pandemic greatly differed from
country to country, more researches in various regions are required for better
understanding.

References
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 701
Communicating Key Audit Matters in the Independent Auditor’s Report , ASA 701. Auditing
and Assurance Standards Board. Available at:
https://www.auasb.gov.au/admin/file/content102/c3/ASA_701_2015.pdf (Accessed:
December 18, 2022).
Asbahr, K. and Ruhnke, K. (2019) “Real effects of reporting key audit matters on auditors'
judgment and choice of action,” International Journal of Auditing, 23(2), pp. 165–180.
Available at: .
Backof, A.G., Bowlin, K. and Goodson, B.M. (2022) “The importance of clarification of
auditors' responsibilities under the New Audit Reporting Standards*,” Contemporary
Accounting Research, 39(4), pp. 2284–2304. Available at: https://doi.org/10.1111/1911-
3846.12802.
Bédard, J., Gonthier-Besacier, N. and Schatt, A. (2018) “Consequences of expanded audit
reports: Evidence from the justifications of assessments in France,” AUDITING: A Journal of
Practice & Theory, 38(3), pp. 23–45. Available at: https://doi.org/10.2308/ajpt-52339.
Bentley, J.W., Lambert, T.A. and Wang, E.(Y. (2020) “The effect of increased audit disclosure
on managers' real operating decisions: Evidence from disclosing critical audit matters,” The
Accounting Review, 96(1), pp. 23–40. Available at: https://doi.org/10.2308/tar-2017-0486.
Bradbury, M.E. and Almulla, M. (2018) “Auditor, client, and investor consequences of the
Enhanced Auditor's report,” SSRN Electronic Journal [Preprint]. Available at:
https://doi.org/10.2139/ssrn.3165267.
Cade, N. and Hodge, F.D. (2014) “The effect of expanding the audit report on Managerss
communication openness,” SSRN Electronic Journal [Preprint]. Available at:
Carver, B.T. and Trinkle, B.S. (2017) “Nonprofessional investorss reactions to the PCAOB's
proposed changes to the Standard Audit Report,” SSRN Electronic Journal [Preprint].
Available at: https://doi.org/10.2139/ssrn.2930375.
Cordoş, G.-S. and Fülöp, M.-T. (2015) “Understanding audit reporting changes: introduction
of Key Audit Matters,” Accounting and Management Information Systems, 14(1), pp. 128–
152. Available at:
Chang, Y.-T., Chi, W. and Stone, D.N. (2022) “Is client-specific information useful to
investors? evidence from key audit matter reports,” Journal of Accounting, Auditing &
Finance [Preprint]. Available at: https://doi.org/10.1177/0148558x221091804.
Fisher, C. (2020) Auditing in a crisis some issues to consider, CAANZ. Available at:
https://www.charteredaccountantsanz.com/news-and-analysis/insights/perspective-
articles/auditing-in-a-crisis-some-issues-to-consider (Accessed: January 4, 2023).
Fuller, Stephen, "The Effect of Auditor Reporting Choice and Audit Committee Oversight
Strength on Management Financial Disclosure Decisions." Dissertation, Georgia State
University, 2015. doi:
Gutierrez, E. et al. (2018) “Consequences of adopting an expanded auditor’s report in the
United Kingdom,” Review of Accounting Studies, 23(4), pp. 1543–1587. Available at:
https://doi.org/10.1007/s11142-018-9464-0.

Gold, A., Gronewold, U. and Pott, C. (2012) “The ISA 700 auditor's report and the audit
expectation gap - do explanations matter?,” International Journal of Auditing, 16(3), pp.
286–307. Available at: .
Gold, A. and Heilmann, M. (2019) “The consequences of disclosing key audit matters (kams):
A review of the academic literature,” Maandblad Voor Accountancy en Bedrijfseconomie,
93(1/2), pp. 5–14. Available at: .
Harjoto, M.A. and Laksmana, I. (2022) “The impact of covid-19 lockdown on audit fees and
audit delay: International evidence,” International Journal of Accounting & Information
Management, 30(4), pp. 526–545. Available at: https://doi.org/10.1108/ijaim-02-2022-
0030.
Hategan, C.-D., Pitorac, R.-I. and Crucean, A.C. (2022) “Impact of covid-19 pandemic on
auditors’ responsibility: Evidence from European listed companies on Key Audit Matters,”
Managerial Auditing Journal, 37(7), pp. 886–907. Available at:
https://doi.org/10.1108/maj-07-2021-3261.
International Auditing and Assurance Standards Board (IAASB) (2015) The new auditor's
report: Greater transparency into the Financial Statement Audit - IFAC, International
Federation of Accountants. IFAC. Available at:
https://www.ifac.org/system/files/uploads/IAASB/Auditor-Reporting-Fact-Sheet.pdf
(Accessed: December 31, 2022).
Ittonen, K. (2012) “Market reactions to qualified audit reports: Research approaches,” SSRN
Electronic Journal [Preprint]. Available at: https://doi.org/10.2139/ssrn.1978759.
Kachelmeier, S.J. et al. (2020) “The forewarning effect of critical audit matter disclosures
involving measurement uncertainty*,” Contemporary Accounting Research, 37(4), pp.
Kend, M. and Nguyen, L.A. (2022) “Key audit risks and audit procedures during the initial
year of the COVID-19 pandemic: An Analysis of Audit Reports 2019-2020,” Managerial
Auditing Journal, 37(7), pp. 798–818. Available at: https://doi.org/10.1108/maj-07-2021-
3225.
Kitiwong, W. and Sarapaivanich, N. (2020) “Consequences of the implementation of
expanded audit reports with key audit matters (kams) on Audit Quality,” Managerial
Auditing Journal, 35(8), pp. 1095–1119. Available at: .
Klueber, J., Gold, A. and Pott, C. (2018) “Do key audit matters impact financial reporting
behavior?,” SSRN Electronic Journal [Preprint]. Available at:
Li, H., Hay, D. and Lau, D. (2019) “Assessing the impact of the new auditor’s report,” Pacific
Accounting Review, 31(1), pp. 110–132. Available at: https://doi.org/10.1108/par-02-
2018-0011.
PCAOB (2017) THE AUDITOR'S REPORT ON AN AUDIT OF FINANCIAL STATEMENTS WHEN
THE AUDITOR EXPRESSES AN UNQUALIFIED OPINION AND RELATED AMENDMENTS TO
PCAOB STANDARDS, PCAOB. Available at:
https://pcaobus.org/Rulemaking/Docket034/2017-001-auditors-report-final-rule.pdf
(Accessed: January 2, 2023).
Ratzinger-Sakel, N.V.S. and Theis, J.C. (2017) “Does considering key audit matters affect

auditor judgment performance?,” SSRN Electronic Journal [Preprint]. Available at:
Reid, L.C. et al. (2019) “Impact of auditor report changes on Financial Reporting Quality and
audit costs: Evidence from the United Kingdom,” Contemporary Accounting Research,
36(3), pp. 1501–1539. Available at: .
ŞENGÜL ÇELİKAY, D. (2022) “Covid-19 in audit reports: A study on the effects of Business
and Auditor Characteristics,” Muhasebe Bilim Dünyası Dergisi [Preprint]. Available at:
https://doi.org/10.31460/mbdd.971511.
Sirois, L.-P., Bédard, J. and Bera, P. (2018) “The informational value of key audit matters in
the Auditor's report: Evidence from an eye-tracking study,” Accounting Horizons, 32(2), pp.
Velte, P. and Issa, J. (2019) “The impact of key audit matter (KAM) disclosure in audit
reports on stakeholders’ reactions: A literature review,” Problems and Perspectives in
Management, 17(3), pp. 323–341. Available at:
https://doi.org/10.21511/ppm.17(3).2019.26.
Zeng, Y. et al. (2021) “Key audit matters reports in China: Their descriptions and
implications of Audit Quality,” Accounting Horizons, 35(2), pp. 167–192. Available at:
https://doi.org/10.2308/horizons-19-189.
For the financial years 2017 to 2021, analyse the data collected in 2 and report.
Partner or auditor and KAM
Changes in how auditors report comments on financial statements can be a factor that
drives auditors to disclose more or less Key Audit Meters, which is related to changes in
auditors or auditors. It was proposed that the number of KAMs is about the characteristics
of the audited company and audit corporation, and one of them is to include the change of
auditors (Sierra-Garcia et al., 2019). It is because the accuracy of the auditor-customer
relationship and accounting standards is expected to affect the number of disclosures in the
KAM. There is a positive relationship between the number of business segments, audit fees,
accuracy and scale of accounting standards, and evidence that cultural and institutional
factors can influence auditors' judgment and decision on KAM disclosure (Magli et al.,
2018). Moreover, the change of partners did not affect the number or duration of KAMs, but
the change of the audit firm has a significant impact on KAMs (Duboisée de Ricquebourg &
Maroun, 2022).
Figure XXX. Changed KAM number after changing Auditor
Table XXX. Changed KAM Number after changing Auditor’s firms
The graph and table above show the relationship between the changes in auditors or
auditors of 20 companies and the corresponding numerical changes in KAM. According to
the above chart, there were changes that the number of KAM NUMBER will change by about
42% in the auditor changes, and the number of KAM will change by 100% in the auditor's
firms changes. In addition, if the auditor or audit company has stayed the same, only about
15% to 20% of the number of KAM can be confirmed to have changed. Therefore, changes in
audit companies and auditors affect the number of customer companies of KAM. However,

this study has limitations in terms of sample volume, the relationship between audit
companies and customers, and the impact on auditor disclosure behaviour according to
cultural and institutional factors of audit companies. Nevertheless, changes in auditors and
companies affect the number of KAM disclosures by customers.
KAM and boilerplate
The disclosure of Key audit data positively impacts the quality of external audits. It
significantly contributes to financial reporting, auditing, and corporate governance
literature. On the other hand, KAM has the adverse effect of boilerplate disclosure,
increasing the expectation gap as stakeholder expectations increase (Velte & Issa, 2019).
Still, KAM's commercial district disclosure will become less beneficial and valuable over
time (Kitiwang & Sarapaivanich, 2020).
Table XXX. 2021-2020 KAM overlapping rate
The high text similarity may lower information value, affecting KAM's influence. The above-
average similarity ratio is approximately 0.812 and 100% consistent for some KAMs.
However, auditor changes significantly negatively impact financial status, resulting in
higher text similarity rates using more phrases. Still, other customer and auditor
characteristics are unrelated to text similarity (Carle et al., 2023). Therefore, it can expect
high text similarity within the auditor's customer relationship if the same auditor
continuously reports KAM on the same issue at the customer level. In this analysis, small
samples, size and focus on Australian companies combine the generalizability of the results,
but simply changing the KAM or using synonyms can be misinterpreted and negatively
impact the impact and value of the KAM. In particular, the year used in this analysis has high
text similarity due to confusion, such as the COVID-19 pandemic and the Ukrainian war. As a
result, over 60% of companies show 100% text similarity. Therefore, high text similarity
does not mean lower information value.
Audit Firms and KAM disclosure
Figure XXX. Audit firms and the average number of KAM
The five audit firms showed between two or three KAMs each year. Deloitte and PWC have
the highest standard of 3, and BDO has the lowest number of 2. From 2017 to 2021, 20
companies were audited, and five companies showed an average of 2-3 KAM numbers per
company. Deloitte and PWC have the highest bar of 3, and BDO has the lowest bar of 2. In
the previous data analysis, the number of KAMs is related to the characteristics of audited
and audited companies.
Figure XXX. Average auditor’s remuneration and number of KAM
The graph above shows that Auditor's Remuneration amount positively correlates with the
KAM number but does not significantly affect it.
Table XXX. Audit firms with the highest revenue in Australia in the financial year 2022
Note. Top 100 Accounting Firms 2022. From Australian Financial Review’s Top 100
Accounting Firms 2022, by Chadwick, H. 2022 (https://www.hallchadwickqld.com.au/afr-
top-100-accounting-firms/).
Figure XXX. Average auditor’s remuneration
The quantities between the number of KAMs and the number of audit fees, company size,
the loss incurred, revenue, goodwill and other intangible assets show a statistically

significant relationship in multivariate analysis (Brilakis & Demirakos, 2022). According to
this, the company's revenue size and the number of average KAM seem related. Still, the
auditor's remuneration and the number of KAM are not connected.
The industries of client and KAM disclosure
Client's business and industry are expected to affect KAM's public numbers and quality.
Furthermore, the length and number of KAMs or delays in reporting will increase
transparency in how audits are carried out, affecting the value of audit reports.
Table XXX. Industry of Clients and Average of reporting Lag of Kam and Average number of
KAM
Figure XXX. Relationship between Number of KAM and Lag of KAM
The average KAM and its number show a negative relationship, and a more significant
number of KAMs produce a smaller average Lag. Therefore, it does not indicate that the
larger the number of KAMs, the more information and information quality.
Table XXX. Industry and Average of reporting Lag of Kam and Average of number of KAM
KAM's average reporting lag shows a similar KAM number level regardless of the client's
industry, while KAM's average writing lag shows a difference of about 10 to 20. Research by
professional auditors shows that KAM-related efficiency positively correlates with the
quality of KAM. At the same time, KAM is not very important to audit quality and needs to
be selected based on audit risk (Zeng et al., 2021). Therefore, while the customer's industry
affects the lag of KAM, it does not contribute significantly to the audit quality of the KAM.
Therefore, it is only sometimes perceived as adding value to the user.
Summary of the analysis
As a result, the size of the audit firm, the relationship with the customer, the length of work,
and the change in the audit firm have a significant impact on the number of KAMs, and the
customer's industry has an impact on the Average of reporting lag of KAM. In addition,
while redundant reporting of information, such as text duplication, is expected to reduce the
value of the audit, experts say KAM needs to be more confident in improving audit efficiency
and quality. Therefore, the analysis of audit companies and customers does not affect audit
quality. However, audit quality is affected by the firm's focus on culture and audit quality,
expert scepticism and consultation, and the risks affecting auditors' understanding of the
business and financial reports.
References
Brilakis, C., & Demirakos, E. (2022). Does Audit Firm Change Affect Key audit Matters
(KAM)?. SSRN, http://dx.doi.org/10.2139/ssrn.4283710
Carle, T,, Pappert, N., & Quick, Reiner. (2023). Text Similarity, Boilerplates and their
Determinants in Key Audit Matters Disclosure. SSRN, 20(2), 49-62.
https://doi.org/10.22495/cocv20i2art4
Magli, F.,Nobolo, A., & Ogliari, M. (2018). The effects on financial leverage and performance:
The IFRS 16. International Business Research, 11(8), 76-89. https://doi.org/
10.1111/jifm.12095
Sierra-García, L., Gambetta, N., García-Benau, M. A., & Orta-Pérez, M. (2019). Understanding
the determinants of the magnitude of entity-level risk and account-level risk key audit

matters: The case of the United Kingdom. The British Accounting Review, 51(3), 227-240.
https://doi.org/10.1016/j.bar.2019.02.004
Zeng, Y., Zheng, J. H., Zhang, J., & Zhang, M. (2021). Key audit mattes reports in China: Their
descriptions and implications of audit quality. Accounting Horizons, 35(2), 167-192.
https://doi.org/10.2308/HORIZONS-19-189
Literature review
The introduction of KAM
For decades, quality and value of audit report has been a big concern for stakeholders. This
culminated in 2000s, led by several auditing scandals such as Enron and WorldCom as well
as the financial crisis in 2008-2009 (Cordoş & Fülöp, 2015). As a result, a huge gap was
created between the demand from stakeholders and the information in auditor’s reports
(Gold et al., 2012). Audit firms were blamed by investors for just going along with
standardized format and failing to disclose sufficient useful information for the users of the
reports (Cordoş & Fülöp, 2015).
To address this issue, the regulators of audit practice around the world had introduced
extended requirement for audit reporting (Velte & Issa, 2019). For example, the
Justifications of assessments (JOA) was instituted in France in 2006, followed by the Risks
of material misstatement (RMM) of the UK in 2013. The International Auditing and
Assurance Standards Board (IAASB) and the US Public Company Accounting Oversight
Board (PCAOB) also introduced the Key audit matters (KAM) in 2015 and the Critical audit
matters (CAM) in 2017 respectively. Though they have different names, all of them
specifically require auditors to disclose information regarding material issues of the client
companies to improve the transparency of their reports (Auditing and Assurance Standards
Board, 2015, PCAOB, 2017, Velte & Issa, 2019). In this literature review, all these extended
requirements will be mentioned and analysed as KAM for convenience. By the disclosure of
KAM, the users of auditor’s report may obtain the information more specific to the company
(Gold & Heilmann, 2019, Bédard et al., 2016), thus the expectation gap might be reduced as
the value of the information in audit reports for stakeholders would be improved
(International Auditing and Assurance Standards Board (IAASB), 2015).
Since the establishment of KAM, numerous researches have been conducted for assessing
the practice and effect of it. This literature review will integrate them from four
perspectives, namely the effect of KAM on the stakeholders, on the auditors, on the client
companies and the impact of Covid-19 on the KAM disclosure.
KAM’s impact on stakeholders
The primary purpose of KAM is to improve the value of audit reports for investors and
other stakeholders. Several researches have been conducted on this topic since the
introduction of KAM, however, the results of them are heterogenous. Positive effect of KAM
was reported by the research in Taiwan, where KAM regarding company-specific risks
attracted more investors and improved the usefulness of the audit reports (Chang et al.,
2022). On the other hand, Gold & Heilmann (2019) stated that initial archival researches
could not find the evidence that the behaviour of the users of the auditor’s report had
changed due to the disclosure of KAM, and Velte & Issa (2019) indicated that KAM
disclosure may lead to adverse reactions of investors as increase in the disclosure of risk

factors would create negative attitudes of investors toward the client companies.
To explain these diverse results from previous researches, more detailed studies would be
required. For example, the effect of the disclosure on stakeholder’s reaction diminished
when the information was already disclosed in the annual report or other announcements
from the firm (Ittonen, 2012). The knowledge and skills of stakeholders also must be
considered as KAM disclosure negatively affected the readability of the report for
nonprofessional investors (Carver & Trinkle, 2017). Another research showed that hen
KAM is disclosed, stakeholders put major focus on it, which may cause a poor-decision
making by paying less attention on the other part of the annual report (Sirois et al., 2018).
These factors need to be considered and integrated to gain comprehensive understandings
of the effects of KAM disclosure on stakeholders.
KAM’s impact on auditors
As the introduction of KAM greatly increased the requirement to auditors, it is expected that
it affected the performance, behaviour and responsibilities of auditors significantly. Sor far,
several researches are conducted on the audit report quality, audit fee, auditing lag time,
scepticism of auditors and their responsibilities.
Regarding the quality and fees of auditing, results were very inconsistent. They are
summarized in Table 1, and it shows that the result differed even when the researches were
conducted in the same country. For example, Gutierrez et al. (2018) atated that KAM had no
effect on audit quality while Reid et al. (2019) found the positive effect of KAM on audit
quality, even though both had examined companies in the UK. Kitiwong & Sarapaivanich
(2020) and Zeng et al. (2021) argued that this inconsistency may be due to the usage of
accruals as a measurement of audit quality, because accruals are not strong indicator of the
quality of audit report. They found the association of audit quality and KAM by using
financial restatements and textual analysis as measurements respectively. The results
regarding audit fees were also homogenous, and the KAM disclosure affected in some
research while it didn’t in others. One explanation might be provided by Bradbury &
Almulla (2018), who found that the audit fees were affected by the contents of KAM rather
than the presence or numbers of KAMs. As in the lag time of audit report, no research in
Table 1 found the association with the KAM disclosure.
Table 1. Summary of papers regarding KAM’s effect on audit quality, fees and lag time
Negative effect of KAM disclosure was reported by two researches on the scepticism of
auditors in Germany. By disclosing KAM, auditor’s opinions were more prone to be
favourable for the clients (Ratzinger-Sakel & Theis, 2017) and the number of the request for
the adjustment of the annual report decreased (Asbahr & Ruhnke, 2019). These researches
indicate that auditors are using KAM for justifying their less-sceptic approach to the client,
which may result in the loss of professional decisions. Lastly, the research of auditor’s
responsibilities found both positive and negative effect of KAM on it. While the disclosure of
KAM reduced the litigation risk regarding misstatements (Kachelmeier et al., 2020), once a
misstatement was found in KAM, the auditor may be found more negligent than when there
was no disclosure of KAM (Backof et al., 2022).
KAM’s impact on client companies
KAM disclosure is a requirement on auditors to improve the value of auditor reports for

stakeholders. However, since the disclosure of risk factors is also a significant managerial
issue, the introduction of KAM may affect the behaviour and decision making of the client
company as well. There are several studies investigated on this topic, and both positive and
negative effect of KAM on the client companies’ management were found.
One positive aspect was that when KAM is disclosed, there were more disclosure of relevant
information by the managers of the client firms, which may improve the value of the annual
report for the investors (Fuller, 2015). It might be because the managers recognize that
KAM could be taken as negative indicators of their performance, thus they feel obliged to
send signals to the investors that they are dealing with the issues disclosed in KAM. Another
positive effect of KAM was reported by Klueber et al. (2018) that the KAM disclosure
regarding firm-specific matters reduced earning management activities. This research
indicates that KAM may improve the reporting quality of the client companies indirectly by
putting more pressures on the managers, as they feel more monitored by the auditors.
On the other hand, some negative effect of KAM disclosure on management were also
reported. For example, according to Cade and Hodge (2014), KAM made managers less
willing to share information with auditors, because they fear that negative information
might be disclosed by auditors as KAM. Bentley et al. (2020) analysed the decision making
of the managers and found that the disclosure of KAM made managers more willing to take
high-risk decisions. This might be because they think they can get more support from
auditors for the disclosure of company’s risk factors due to the CAM disclosure. Making a
high-risk decision is not necessarily an adverse behaviour, but this effect must be noted by
the regulators and the investors.
As mentioned above, the goal of KAM is to improve the auditing for the sake of the
stakeholders, and its impacts on the management of client companies are rather “side
effects”. However, since those effects could be significant, researchers, regulators and
stakeholders must be aware of them to understand and evaluate the KAM disclosure
comprehensively.
Impact of Covid-19 on KAM disclosure
To analyse the recent trend of KAM disclosure, considering the impact of the Covid
pandemic is essential, as it may have significantly affected the numbers and contents of
KAM, audit processes, fees and reporting lag. Many companies suffered from significant
downfall in business, which would increase KAMs regarding inventories, impairment of
assets and provision for employee retirement benefits (Hategan et al., 2022). Since the face-
to-face meeting was regulated in many countries, auditors had to go conduct investigations
and enquiries remotely (Fisher, 2020), which might have resulted in longer audit processes
and reporting lag.
As the pandemic affected companies in variety of ways, wide-range of KAM topics may
include information regarding Covid-19. Hategan et al. (2022) reported that the references
to Covid were observed in 70% of KAM topics in Europe. However, the disclosure of Covid-
related KAM deferred depending on the countries. While 60% of KAM mentioned Covid and
the length of KAM increased by 80% compared to pre-Covid period in New Zealand
(Rainsbury et al., 2022), only 17% of KAM disclosure and 3% of audit procedure were
related to the pandemic in Australia (Kend & Nguyen, 2022). The small impact was also

observed in Turkey, where merely 18% of KAM contained information regarding Covid
(ŞENGÜL ÇELİKAY, 2022). Another finding is that the larger audit companies (such as “Big
4” auditors) referred to the impact of pandemic in KAM more than the smaller auditors
(Hategan et al., 2022, Kend & Nguyen, 2022, ŞENGÜL ÇELİKAY, 2022), which might be
because larger auditors tend to prefer risk aversion (ŞENGÜL ÇELİKAY, 2022).
As in the impact of the pandemic on audit fees and reporting lag, Harjoto and Laksmana
(2022) found that both fees and lag increased in accordance with the length of lockdown.
Under lockdown, auditors had no choice but implementing remote-working system, which
resulted in higher audit fees and larger audit delays.
Overall, the number of studies regarding the relationship of KAM and Covid-19 was
relatively small. Since the impact of and the reaction to the pandemic greatly differed from
country to country, more researches in various regions are required for better
understanding.
References
Auditing and Assurance Standards Board (2015) Auditing Standard ASA 701
Communicating Key Audit Matters in the Independent Auditor’s Report , ASA 701. Auditing
and Assurance Standards Board. Available at:
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December 18, 2022).
Asbahr, K. and Ruhnke, K. (2019) “Real effects of reporting key audit matters on auditors'
judgment and choice of action,” International Journal of Auditing, 23(2), pp. 165–180.
Available at: .
Backof, A.G., Bowlin, K. and Goodson, B.M. (2022) “The importance of clarification of
auditors' responsibilities under the New Audit Reporting Standards*,” Contemporary
Accounting Research, 39(4), pp. 2284–2304. Available at: https://doi.org/10.1111/1911-
3846.12802.
Bédard, J., Gonthier-Besacier, N. and Schatt, A. (2018) “Consequences of expanded audit
reports: Evidence from the justifications of assessments in France,” AUDITING: A Journal of
Practice & Theory, 38(3), pp. 23–45. Available at: https://doi.org/10.2308/ajpt-52339.
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on managers' real operating decisions: Evidence from disclosing critical audit matters,” The
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Enhanced Auditor's report,” SSRN Electronic Journal [Preprint]. Available at:
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communication openness,” SSRN Electronic Journal [Preprint]. Available at:
Carver, B.T. and Trinkle, B.S. (2017) “Nonprofessional investorss reactions to the PCAOB's
proposed changes to the Standard Audit Report,” SSRN Electronic Journal [Preprint].
Available at: https://doi.org/10.2139/ssrn.2930375.
Cordoş, G.-S. and Fülöp, M.-T. (2015) “Understanding audit reporting changes: introduction
of Key Audit Matters,” Accounting and Management Information Systems, 14(1), pp. 128–

152. Available at:
Chang, Y.-T., Chi, W. and Stone, D.N. (2022) “Is client-specific information useful to
investors? evidence from key audit matter reports,” Journal of Accounting, Auditing &
Finance [Preprint]. Available at: https://doi.org/10.1177/0148558x221091804.
Fisher, C. (2020) Auditing in a crisis some issues to consider, CAANZ. Available at:
https://www.charteredaccountantsanz.com/news-and-analysis/insights/perspective-
articles/auditing-in-a-crisis-some-issues-to-consider (Accessed: January 4, 2023).
Fuller, Stephen, "The Effect of Auditor Reporting Choice and Audit Committee Oversight
Strength on Management Financial Disclosure Decisions." Dissertation, Georgia State
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Gutierrez, E. et al. (2018) “Consequences of adopting an expanded auditor’s report in the
United Kingdom,” Review of Accounting Studies, 23(4), pp. 1543–1587. Available at:
https://doi.org/10.1007/s11142-018-9464-0.
Gold, A., Gronewold, U. and Pott, C. (2012) “The ISA 700 auditor's report and the audit
expectation gap - do explanations matter?,” International Journal of Auditing, 16(3), pp.
Gold, A. and Heilmann, M. (2019) “The consequences of disclosing key audit matters (kams):
A review of the academic literature,” Maandblad Voor Accountancy en Bedrijfseconomie,
93(1/2), pp. 5–14. Available at: .
Harjoto, M.A. and Laksmana, I. (2022) “The impact of covid-19 lockdown on audit fees and
audit delay: International evidence,” International Journal of Accounting & Information
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https://doi.org/10.1108/maj-07-2021-3261.
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report: Greater transparency into the Financial Statement Audit - IFAC, International
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https://www.ifac.org/system/files/uploads/IAASB/Auditor-Reporting-Fact-Sheet.pdf
(Accessed: December 31, 2022).
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THE AUDITOR EXPRESSES AN UNQUALIFIED OPINION AND RELATED AMENDMENTS TO
PCAOB STANDARDS, PCAOB. Available at:
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(Accessed: January 2, 2023).
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Impact of Covid-19 on KAM disclosure of Australian public companies
KAM and Covid-19
For understanding the current trend of KAM disclosure, the effect of Covid-19 cannot be
ignored. Many industries and companies suffered devastating losses due to the decreased
demand and legislative regulation, thus it is predictable that large concern for companies’
businesses would cause increase in the amount of KAM disclosures. The audit processes had
also been affected by the requirement for social distance or lockdown, which would likely
increase the lag in audit reporting. In addition, both longer procedure in auditing and higher
risk in clients’ businesses might resulted in higher remuneration of auditors.
As to the KAM disclosure regarding Covid-19 in Australia, Kend and Nguyen (2022) found
that 17% of KAMs contained the information about Covid-19 and 3% of overall audit
processes was allocated to the tasks related to Covid-19. However, the impacts of the

pandemic on other factors such as the number and length of KAM, the reporting lag and the
auditor’s remuneration in Australia were still unknown. In this report, these factors would
be examined with respect to 20 Australian public companies, which was chosen from the
Australian Stock Exchange (ASX) list.
Amount of KAM, audit fees and delays regarding Covid-19
Figure xxx shows the average number of KAM disclosures in each auditor report and the
average numbers of words in each KAM. In Australia, the Covid pandemic started affection
the society in 2020, and as predicted, both the number of KAMs and the word numbers in
KAM increased in 2020 compared to the previous year, to 2.65 KAMs and 1,062 words
respectively. However, those numbers dropped in 2021 to the level in 2018 or below. One
possible explanation of this is that the uncertainty regarding the pandemic in 2020 made
auditors make excessive disclosures as risk aversion and this effect diminished in 2021
when companies had adjusted the pandemic to some extent.
Figure XXX. The trend in number of KAMs and numbers of words in KAM
On the other hand, the remuneration of auditors has kept increasing after the pandemic had
started, which is shown in Figure xxx. The average remuneration grew to $2.8 million in
2021, which was $2.3 million in 2019. This result is in accordance with the prediction that
the longer audit processes and the higher business risks of the client companies would
increase the fees for auditing. Interestingly, the reporting lag had not increased significantly
during the pandemic period, contrary to the prediction (Figure xxx). The average lag was 51
in 2019 and 53 in 2021. This might be because the samples were from listed companies and
most of them had been audited by large audit firms as known as “Big 4”. It is probable that
these large audit firms had enough capacities and capabilities to adjust the audit processes
accordingly and allocate additional personnel when necessary so that the audit reports
would not be delayed.
Figure XXX. The trend in auditor’s remuneration
Figure XXX. The trend in auditor’s remuneration
The effects of Lockdown
For further analysis, the effect of the duration of lockdown on audit fees and delays was
examined. During 2020-2021, the total durations of lockdown in Melbourne, Sydney and
Perth were 263, 107 and 12 days respectively (Knowlton, 2022). If the auditors are
prevented from conducting on-site investigations at client companies due to the lockdown,
establishing audit evidences would take more time (Hay et al., 2021). The increased burden
on audit firms by altering the procedure may result in higher fees charged to the clients
(Harjoto & Laksmana, 2022). Therefore, it is predicted that the reporting lag and audit fees
would be larger in Melbourne than the other cities.
The results of the analysis are displayed in Figure xxx. Unlike the prediction, no relationship
was observed between the lockdown and reporting lag as well as audit fees. The delays of
reporting were almost the same between the cities, and regarding the fee, Melbourne had
the lowest average remuneration among the three cities. This result is inconsistent with the
previous research conducted by Harjoto and Laksmana (2022), who reported that reporting
lag became longer corresponding to the length of lockdown. As to the reporting lag, this

inconsistency may come from the data pool from which the samples were chosen. As
discussed above, the most of audit report samples in this analysis were made by large audit
firms, thus the audit procedures were less affected than those of smaller auditors.
Regarding the auditor’s remuneration, Chen et al. (2018) may shed light on it, which argued
that audit firms would reduce the audit fees during a financial crisis to avoid putting too
much financial pressure on the clients. It is possible that the audit firms in Melbourne were
hesitant to charge too much fees on the clients who had been suffering due to the long
lockdown.
Figure xxx. Lockdown duration, audit fees and report lag in Melbourne, Sydney and Perth
The rate of KAM referencing Covid-19
Lastly, the rate of KAM which included the information about Covid-19 was analysed. Figure
xxx shows the rates in 2020 and 2021 were 37% and 31% respectively, which were higher
than the 17% in the previous study in Australia (Kend & Nguyen, 2022). These high rates
might be explained by other studies such as Hategan et al. (2022) and ŞENGÜL ÇELİKAY
(2022) which found that larger audit firms disclosed more information regarding Covid-19
compared to the smaller firms, probably for avoiding getting criticized by stakeholders for
not making enough risk disclosures. Since this analysis was mostly based on “Big 4” audit
firms, it is understandable the rates of disclosures ware higher than the aforementioned
previous study which included more non-big 4 audit firms.
Figure xxx. The rate of KAMs referencing Covid-19 in 2020 and 2021
Additionally, the difference between the audit firms and between the industries are also
examined regarding the rate of KAMs referencing the pandemic. Figure xxx shows that the
rates were higher in the big 4 (Deloitte, E&Y, KMPG and PwC) than non-big 4 auditor (BDO),
and this result is consistent with the previous studies (Hategan et al., 2022, ŞENGÜL
ÇELİKAY, 2022). At the same time, there was a big difference between the big 4 firms as
well, from the PwC’s 16% to the EY’s 63%. With respect to the difference between
industries, the result is shown in Figure xxx. The companies are categorized into Mining,
Manufacture or Service industry for the analysis (as the sample size was small, more
detailed categorization was inappropriate). The rate in mining industry was only 8%, which
was significantly lower than the other two. It is probable that since the restrictions on
business was easier on mining companies as they were considered an “essential business”
(Jowitt, 2020), the audit firms recognized less risks in them than other industries.
Figure xxx. Rate of KAMs referring to Covid for each audit firm in 2020-2021
Figure xxx. Rate of KAMs referring to Covid for each industry in 2020-2021
The amount of KAM and auditor’s remuneration increased after the pandemic had started,
while the reporting lag was not strongly affected. The further analysis revealed that the
auditor firm and the industry affected the rate of KAMs referencing Covid-19, but the effect
of lockdown on reporting lag or auditor’s remuneration was not observed. There is a
limitation in this analysis as the sample size was only 20, thus further investigation is
required for acquiring better and comprehensive understanding regarding the impact of
Covid-19 on KAM disclosures in Australia.
References

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Hay, D., Shires, K. and Van Dyk, D. (2021) “Auditing in the time of COVID – the impact of
covid-19 on Auditing in New Zealand and subsequent reforms,” Pacific Accounting Review,
33(2), pp. 179–188. Available at: https://doi.org/10.1108/par-09-2020-0155.
Jowitt, S.M. (2020) “Covid-19 and the global mining industry,” SEG Discovery, (122), pp. 33–
41. Available at: https://doi.org/10.5382/segnews.2020-122.fea-02.
Knowlton, C. (2022) A timeline of covid-19 in Australia in wake of Grim Milestone, Time Out
Melbourne. Time Out. Available at: https://www.timeout.com/melbourne/things-to-do/a-
timeline-of-covid-19-in-australia-two-years-on (Accessed: January 13, 2023).
For the financial years 2017 to 2021, analyse the data collected in 2 and report.
Partner or auditor and KAM
Changes in how auditors report comments on financial statements can be a factor that
drives auditors to disclose more or less Key Audit Meters, which is related to changes in
auditors or auditors. It was proposed that the number of KAMs is about the characteristics
of the audited company and audit corporation, and one of them is to include the change of
auditors (Sierra-Garcia et al., 2019). It is because the accuracy of the auditor-customer
relationship and accounting standards is expected to affect the number of disclosures in the
KAM. There is a positive relationship between the number of business segments, audit fees,
accuracy and scale of accounting standards, and evidence that cultural and institutional
factors can influence auditors' judgment and decision on KAM disclosure (Magli et al.,
2018). Moreover, the change of partners did not affect the number or duration of KAMs, but
the change of the audit firm has a significant impact on KAMs (Duboisée de Ricquebourg &
Maroun, 2022).
Figure XXX. Changed KAM number after changing Auditor
Table XXX. Changed KAM Number after changing Auditor’s firms
The graph and table above show the relationship between the changes in auditors or
auditors of 20 companies and the corresponding numerical changes in KAM. According to
the above chart, there were changes that the number of KAM NUMBER will change by about
42% in the auditor changes, and the number of KAM will change by 100% in the auditor's
firms changes. In addition, if the auditor or audit company has stayed the same, only about
15% to 20% of the number of KAM can be confirmed to have changed. Therefore, changes in
audit companies and auditors affect the number of customer companies of KAM. However,
this study has limitations in terms of sample volume, the relationship between audit
companies and customers, and the impact on auditor disclosure behaviour according to
cultural and institutional factors of audit companies. Nevertheless, changes in auditors and
companies affect the number of KAM disclosures by customers.
KAM and boilerplate
The disclosure of Key audit data positively impacts the quality of external audits. It
significantly contributes to financial reporting, auditing, and corporate governance

literature. On the other hand, KAM has the adverse effect of boilerplate disclosure,
increasing the expectation gap as stakeholder expectations increase (Velte & Issa, 2019).
Still, KAM's commercial district disclosure will become less beneficial and valuable over
time (Kitiwang & Sarapaivanich, 2020).
Table XXX. 2021-2020 KAM overlapping rate
The high text similarity may lower information value, affecting KAM's influence. The above-
average similarity ratio is approximately 0.812 and 100% consistent for some KAMs.
However, auditor changes significantly negatively impact financial status, resulting in
higher text similarity rates using more phrases. Still, other customer and auditor
characteristics are unrelated to text similarity (Carle et al., 2023). Therefore, it can expect
high text similarity within the auditor's customer relationship if the same auditor
continuously reports KAM on the same issue at the customer level. In this analysis, small
samples, size and focus on Australian companies combine the generalizability of the results,
but simply changing the KAM or using synonyms can be misinterpreted and negatively
impact the impact and value of the KAM. In particular, the year used in this analysis has high
text similarity due to confusion, such as the COVID-19 pandemic and the Ukrainian war. As a
result, over 60% of companies show 100% text similarity. Therefore, high text similarity
does not mean lower information value.
Audit Firms and KAM disclosure
Figure XXX. Audit firms and the average number of KAM
The five audit firms showed between two or three KAMs each year. Deloitte and PWC have
the highest standard of 3, and BDO has the lowest number of 2. From 2017 to 2021, 20
companies were audited, and five companies showed an average of 2-3 KAM numbers per
company. Deloitte and PWC have the highest bar of 3, and BDO has the lowest bar of 2. In
the previous data analysis, the number of KAMs is related to the characteristics of audited
and audited companies.
Figure XXX. Average auditor’s remuneration and number of KAM
The graph above shows that Auditor's Remuneration amount positively correlates with the
KAM number but does not significantly affect it.
Table XXX. Audit firms with the highest revenue in Australia in the financial year 2022
Note. Top 100 Accounting Firms 2022. From Australian Financial Review’s Top 100
Accounting Firms 2022, by Chadwick, H. 2022 (https://www.hallchadwickqld.com.au/afr-
top-100-accounting-firms/).
Figure XXX. Average auditor’s remuneration
The quantities between the number of KAMs and the number of audit fees, company size,
the loss incurred, revenue, goodwill and other intangible assets show a statistically
significant relationship in multivariate analysis (Brilakis & Demirakos, 2022). According to
this, the company's revenue size and the number of average KAM seem related. Still, the
auditor's remuneration and the number of KAM are not connected.
The industries of client and KAM disclosure
Client's business and industry are expected to affect KAM's public numbers and quality.
Furthermore, the length and number of KAMs or delays in reporting will increase
transparency in how audits are carried out, affecting the value of audit reports.

Table XXX. Industry of Clients and Average of reporting Lag of Kam and Average number of
KAM
Figure XXX. Relationship between Number of KAM and Lag of KAM
The average KAM and its number show a negative relationship, and a more significant
number of KAMs produce a smaller average Lag. Therefore, it does not indicate that the
larger the number of KAMs, the more information and information quality.
Table XXX. Industry and Average of reporting Lag of Kam and Average of number of KAM
KAM's average reporting lag shows a similar KAM number level regardless of the client's
industry, while KAM's average writing lag shows a difference of about 10 to 20. Research by
professional auditors shows that KAM-related efficiency positively correlates with the
quality of KAM. At the same time, KAM is not very important to audit quality and needs to
be selected based on audit risk (Zeng et al., 2021). Therefore, while the customer's industry
affects the lag of KAM, it does not contribute significantly to the audit quality of the KAM.
Therefore, it is only sometimes perceived as adding value to the user.
As a result, the size of the audit firm, the relationship with the customer, the length of work,
and the change in the audit firm have a significant impact on the number of KAMs, and the
customer's industry has an impact on the Average of reporting lag of KAM. In addition,
while redundant reporting of information, such as text duplication, is expected to reduce the
value of the audit, experts say KAM needs to be more confident in improving audit efficiency
and quality. Therefore, the analysis of audit companies and customers does not affect audit
quality. However, audit quality is affected by the firm's focus on culture and audit quality,
expert scepticism and consultation, and the risks affecting auditors' understanding of the
business and financial reports.
References
Brilakis, C., & Demirakos, E. (2022). Does Audit Firm Change Affect Key audit Matters
(KAM)?. SSRN, http://dx.doi.org/10.2139/ssrn.4283710
Carle, T,, Pappert, N., & Quick, Reiner. (2023). Text Similarity, Boilerplates and their
Determinants in Key Audit Matters Disclosure. SSRN, 20(2), 49-62.
https://doi.org/10.22495/cocv20i2art4
Magli, F.,Nobolo, A., & Ogliari, M. (2018). The effects on financial leverage and performance:
The IFRS 16. International Business Research, 11(8), 76-89. https://doi.org/
10.1111/jifm.12095
Sierra-García, L., Gambetta, N., García-Benau, M. A., & Orta-Pérez, M. (2019). Understanding
the determinants of the magnitude of entity-level risk and account-level risk key audit
matters: The case of the United Kingdom. The British Accounting Review, 51(3), 227-240.
https://doi.org/10.1016/j.bar.2019.02.004
Zeng, Y., Zheng, J. H., Zhang, J., & Zhang, M. (2021). Key audit mattes reports in China: Their
descriptions and implications of audit quality. Accounting Horizons, 35(2), 167-192.
https://doi.org/10.2308/HORIZONS-19-189

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