Md Khokan Bepari, Shamsun Nahar, A. Mollik, Mohammad Istiaq Azim
{"title":"Content characteristics of key audit matters reported by auditors in Bangladesh and their implications for audit quality","authors":"Md Khokan Bepari, Shamsun Nahar, A. Mollik, Mohammad Istiaq Azim","doi":"10.1108/jaee-12-2022-0344","DOIUrl":null,"url":null,"abstract":"PurposeIn this study the authors examine the nature and contents of key audit matters (KAMs), and the consequences of KAMs reporting on audit quality in the context of a developing country, Bangladesh. The authors’ proxies of audit qualities are discretionary accruals, small positive earnings surprise, audit report lag, earnings management via below the line items and audit fees.Design/methodology/approachThe authors use content analysis of the KAMs for the period 2018–2021 to understand the nature and extent of KAMs reported by auditors in Bangladesh. The authors then use multivariate regression analysis to examine the effect of the number and content characteristics of KAMs on audit quality by using multivariate regression analysis.FindingsAuditors in Bangladesh disclose a higher number of KAMs compared to other countries, disclose short descriptions of KAMs and industry generic KAMs. The authors document significant cross-sectional variations in the number and content characteristics of KAMs reported by auditors in Bangladesh. The authors’ pre-post analysis suggest that audit quality has improved after the adoption of KAMs. Cross-sectional analysis suggests that KAMs number and content characteristics are related to audit quality.Practical implicationsThe authors’ findings imply that the KAMs reporting has the potential to play significant monitoring role in reducing the opportunistic behavior of managers. Hence, KAMs reporting can play a significant role in reducing the agency problem. For regulators, shareholders and corporate managers, the authors’ findings imply that if the audit quality is to be increased, the audit effort should be supported by an appropriate amount of audit fee.Social implicationsThe content characteristics of KAMs significantly influence managerial reporting behavior and affect the level of audit efforts.Originality/valueUnlike developed countries (Gutierrez et al., 2018; Lennox et al. 2022), this study supports that KAMs reporting improves audit quality and control opportunistic behavior of managers in developing countries. The authors show that even though the KAMs disclosure quality is poor, it has the potential to improve financial reporting quality.","PeriodicalId":45702,"journal":{"name":"Journal of Accounting in Emerging Economies","volume":null,"pages":null},"PeriodicalIF":3.2000,"publicationDate":"2023-09-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting in Emerging Economies","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.1108/jaee-12-2022-0344","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
PurposeIn this study the authors examine the nature and contents of key audit matters (KAMs), and the consequences of KAMs reporting on audit quality in the context of a developing country, Bangladesh. The authors’ proxies of audit qualities are discretionary accruals, small positive earnings surprise, audit report lag, earnings management via below the line items and audit fees.Design/methodology/approachThe authors use content analysis of the KAMs for the period 2018–2021 to understand the nature and extent of KAMs reported by auditors in Bangladesh. The authors then use multivariate regression analysis to examine the effect of the number and content characteristics of KAMs on audit quality by using multivariate regression analysis.FindingsAuditors in Bangladesh disclose a higher number of KAMs compared to other countries, disclose short descriptions of KAMs and industry generic KAMs. The authors document significant cross-sectional variations in the number and content characteristics of KAMs reported by auditors in Bangladesh. The authors’ pre-post analysis suggest that audit quality has improved after the adoption of KAMs. Cross-sectional analysis suggests that KAMs number and content characteristics are related to audit quality.Practical implicationsThe authors’ findings imply that the KAMs reporting has the potential to play significant monitoring role in reducing the opportunistic behavior of managers. Hence, KAMs reporting can play a significant role in reducing the agency problem. For regulators, shareholders and corporate managers, the authors’ findings imply that if the audit quality is to be increased, the audit effort should be supported by an appropriate amount of audit fee.Social implicationsThe content characteristics of KAMs significantly influence managerial reporting behavior and affect the level of audit efforts.Originality/valueUnlike developed countries (Gutierrez et al., 2018; Lennox et al. 2022), this study supports that KAMs reporting improves audit quality and control opportunistic behavior of managers in developing countries. The authors show that even though the KAMs disclosure quality is poor, it has the potential to improve financial reporting quality.
在本研究中,作者考察了关键审计事项(kam)的性质和内容,以及kam报告对发展中国家孟加拉国审计质量的影响。审计质量的代表是可自由支配的应计利润、小的正盈余意外、审计报告滞后、通过以下项目进行盈余管理和审计费用。设计/方法/方法作者使用2018-2021年期间kam的内容分析来了解孟加拉国审计师报告的kam的性质和范围。运用多元回归分析方法,考察了审计对象数量特征和内容特征对审计质量的影响。与其他国家相比,孟加拉国的审计师披露了更多的kam,披露了kam的简短描述和行业通用kam。作者记录了孟加拉国审计员报告的kam的数量和内容特征的显著横截面变化。本文作者的事前事后分析表明,采用知识管理模式后,审计质量有所提高。横断面分析表明,KAMs的数量和内容特征与审计质量有关。实践启示:作者的研究结果表明,KAMs报告在减少管理者机会主义行为方面具有重要的监测作用。因此,KAMs的报告可以在减少代理问题方面发挥重要作用。对于监管者、股东和公司管理者来说,作者的研究结果表明,如果要提高审计质量,审计工作应该得到适当数量的审计费用的支持。社会意义kanm的内容特征显著影响管理报告行为和审计工作水平。与发达国家不同(Gutierrez et al., 2018;Lennox et al. 2022),本研究支持KAMs报告提高了审计质量,并控制了发展中国家管理者的机会主义行为。研究表明,尽管资产管理公司的信息披露质量较差,但它具有提高财务报告质量的潜力。