Disclosure of Key Audit Matters: European Listed Companies’ Evidence on Related Parties Transactions

Lioara-Veronica Pasc and Camelia-Daniela Hategan ()
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Lioara-Veronica Pasc: Doctoral School of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania
Camelia-Daniela Hategan: Department of Accounting and Audit, ECREB—East European Center for Research in Economics and Business, Faculty of Economics and Business Administration, West University of Timisoara, 16 Pestalozzi Street, 300115 Timisoara, Romania

IJFS, 2023, vol. 11, issue 3, 1-12

Abstract: The growing expenses, dependence on IT for business operations, and growing requirements regarding related party transaction (RPT) reporting impose the need for increased attention to this area. The paper’s objective is to examine the nature of RPTs, identified by auditors as a key audit matter (KAMs), challenges and solutions to problems related to risk management, and the detection of factors affecting audit quality. The research methodology is qualitative, with an analysis of the level of disclosure of KAMs reported by auditors from the Related Parties category, grouped by type of auditors, their opinion, year, country, and fields of activity. Data were collected from the Audit Analytics database and filtered by category KAM: Related parties, period 2013–2021. The selection resulted in 111 companies reporting 248 KAMs related to RPTs, from which most were reported in 2017–2019. Of these, nearly two-thirds were reported by auditors from the Big4 category. Most KAMs were reported by companies in the U.K., Germany, and France, and the industries with the most KAMs were finance, insurance, and real estate. In conclusion, there are factors that can affect audit quality due to the reporting of RPTs, but by identifying them, the audit process can be better managed, thus increasing its efficiency.

Keywords: key audit matters; disclosure; transactions; related parties; auditor; risk (search for similar items in EconPapers)
JEL-codes: F2 F3 F41 F42 G1 G2 G3 (search for similar items in EconPapers)
Date: 2023
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