Do audit firm and audit committee characteristics influence the reporting of key audit matters? Evidence from Palestine

Noor Joudeh and Saher Aqel

Cogent Business & Management, 2024, vol. 11, issue 1, 2396537

Abstract: This study explores the influence of audit firm and audit committee (AC) characteristics on the extent of reporting of key audit matters (KAMs) in the audit report of firms listed on the Palestine Exchange (PEX). The study employs a content analysis approach to measure the extent of KAMs reporting based on the number of KAMs and the word count of KAMs as disclosed in the audit report. Based on 154 firm-year observations between 2016 and 2022, we use the fixed effects model to determine the connection between the four explanatory variables and the extent of KAMs reporting. The findings indicate that audit firm does not have a significant impact on the number of KAMs, while it is positively and significantly related to the word count of KAMs. The results also show that the number and word count of KAMs are not related to the attributes of the AC. Furthermore, the results show that auditors of firms receiving modified audit reports tend to reduce the level of KAMs disclosure. Therefore, reporting KAMs should reduce information asymmetry and improve audit quality in line with the interests of stakeholders. This paper is one of the very limited studies that examines the determinants of KAMs reporting in the Palestinian context. The results have significant practical implications for stakeholders, policymakers, professional associations, and regulators in Palestine to reinforce the quality of KAMs reporting.

Date: 2024
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DOI: 10.1080/23311975.2024.2396537

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