Impact of key audit matters (KAMs) reporting on audit quality: evidence from Thailand

Abstract

Purpose

The study aims to examine the relationship between key audit matters (KAMs) reporting and audit quality of companies listed on the Stock Exchange of Thailand (SET).

Design/methodology/approach

Corporate annual reports from 2016 to 2019 were used as samples, with 100 companies and their 400 annual reports. The word count from KAMs paragraph in the audit report was used to assess KAMs reporting, while the Modified Jones Model was used to assess audit quality. In addition, external audit characteristics were used as variables in this study. The data were analyzed using descriptive analysis, correlation matrix and panel multiple analysis.

Findings

As the results, there was a positive significant relationship between KAMs reporting and audit quality. Moreover, the study found the impact of audit tenure, auditor firm size, audit independence, corporate size and corporate risk on audit quality.

Research limitations/implications

The number of samples as well as the proxies of KAMs reporting and audit quality are listed as limitations of this study.

Practical implications

Investors can use KAMs reporting as important information to their decision-making because KAMs information is associated with a high audit quality.

Originality/value

The study demonstrates that communication theory can be used to describe the positive impact of the new audit reporting on audit quality in an emerging country like Thailand as well as in developed countries.

Citation

Suttipun, M. (2021), "Impact of key audit matters (KAMs) reporting on audit quality: evidence from Thailand", Journal of Applied Accounting Research, Vol. 22 No. 5, pp. 869-882. https://doi.org/10.1108/JAAR-10-2020-0210