Key audit matter and auditor liability: evidence from auditor evaluators in Thailand

Thanyawee Pratoomsuwan and Orapan Yolrabil

Journal of Applied Accounting Research, 2020, vol. 21, issue 4, 741-762

Abstract: Purpose - This study examines the effects of key audit matter (KAM) disclosures in auditors' reports on auditor liability in cases of fraud and error misstatements using evaluators with audit experience. Design/methodology/approach - The experiment is conducted using 174 professional auditors as participants. Findings - The participating auditors assess higher auditor liability when misstatements are related to errors rather than when they are related to fraud. In addition, the results also demonstrate that KAM disclosures reduce auditor liability only in cases of fraud and not in cases of errors. Together, the results support the view that KAM reduces the negative affective reactions of evaluators, which in turn, reduce the assessed auditor liability. Research limitations/implications - This study did not analyze the setting in which auditors who act as peer evaluators had an opportunity to discuss the case among their peers, which may have affected their judgments. Practical implications - The results of KAM disclosures on auditor liability in cases of error and fraud misstatements inform auditors that, different from the auditors' concern that disclosing KAM may increase auditors' legal risk, it tends to decrease or at least have no impact on the liability judgment. Originality/value - This study contributes to the accounting literature by adding findings on another aspect of KAM in different audit settings, particularly, in the Thai legal environment with different types of undetected misstatements. The current conflicting results on how KAM disclosures affect auditor liability warrant further investigation of this issue in other audit contexts in different countries.

Keywords: Disclosure; Thailand; Auditor liability; Counterfactual theory; Key audit matter; Misstatements (search for similar items in EconPapers)
Date: 2020
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:jaarpp:jaar-10-2019-0147

DOI: 10.1108/JAAR-10-2019-0147

Access Statistics for this article

Journal of Applied Accounting Research is currently edited by Associate Professor Orthodoxia Kyriacou

More articles in Journal of Applied Accounting Research from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().