This study aims to examine the determinants of disclosing repetitive year-to-year key audit matters (KAMs) content by auditors for a client and whether repetitive KAMs content is indicative of lower audit effort.
The authors use a sample of publicly listed firms from New Zealand between 2016 and 2020. Multivariate regression models are used to test the determinants of the extent of repetitive content in the KAMs section of the audit report. The authors compare the KAMs disclosed in the current period to those disclosed in prior period(s) to determine the level of recurring items and repetitive textual content.
The authors find evidence of repetitive KAMs content being disclosed at the client level since the reporting requirement was introduced. In multivariate analyses, the authors find that client business risk and auditor reputation are negatively associated with auditors’ reporting of repetitive KAMs. Furthermore, the authors find that auditors exert lower effort on audits for which they report a higher level of repetitive content in KAMs.
The study provides novel findings that contribute to the literature on auditors’ voluntary reporting of KAMs and provide important practical implications for investors and regulators.
