The Role of Key Audit Matters in Assessing Auditor Liability: Evidence from Auditor and Non-auditor Evaluators

IF 0.8 Q4 BUSINESS, FINANCE

Asian Journal of Business and Accounting Pub Date : 2020-06-26 DOI:10.22452/ajba.vol13no1.2

T. Pratoomsuwan, O. Yolrabil

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引用次数: 1

Abstract

Abstract Manuscript type: Research paper Research aims: This study examines the effects of key audit matter (KAM) disclosures in the auditor’s report on auditor legal exposure in cases of fraud and error misstatements. Design/Methodology/Approach: The experiment is conducted with the 133 professional auditors from Big 4 audit firms and 134 MBA students as the participants. Research findings: This KAM effect manifests in different ways for different groups. Specifically, auditor participants assess higher auditor liability when misstatement relates to error than when it is connected to fraud. KAM reduces assessed auditor liability only in cases of fraud but not of error. For nonprofessional investor participants, the auditor liability is rated higher in the case of fraud than for error misstatement. Unfortunately, KAM appears to have a nonsignificant impact on auditor liability. Together, the results support the view that instead of increasing legal exposure, as audit practitioners fear, KAM disclosures could actually mitigate and at least do not change auditors’ risk of legal exposure. Theoretical contribution/originality: This study contributes to accounting literature by adding the findings another aspect of KAM in different audit settings: fraud and error misstatements. Moreover, the conflicting evidence on how KAM affect auditor liability warrants further investigation of other audit settings that could alter the impact of KAM disclosures on the assessment of auditor liability. Practitioner/Policy implications: The findings of this study, especially, the nonsignificance of KAM disclosures as evaluated by nonprofessional investors should inform policymakers and related parties that investors need to be educated and better informed about the KAM disclosure and its objectives. Research limitations/Implications: The design of this study did not accommodate setting where the auditors had the opportunity to communicate with peers, which could affect their judgment. This is a general limitation of the experiment, which could be considered somewhat unrealistic because discussions are encouraged among committee members or in a courtroom when making judgments.

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关键审计事项在评估审计师责任中的作用:来自审计师和非审计师评价员的证据

摘要手稿类型：研究论文研究目的：本研究考察了审计师报告中关键审计事项（KAM）披露对舞弊和错误错报情况下审计师法律风险的影响。设计/方法/方法：实验由四大会计师事务所的133名专业审计师和134名MBA学生作为参与者进行。研究发现：这种KAM效应在不同的群体中以不同的方式表现出来。具体而言，当错报与错误有关时，审计师参与者评估的审计师责任高于与欺诈有关时。KAM准则只在欺诈而非错误的情况下降低评估审计师的责任。对于非专业投资者参与者，在存在欺诈的情况下，审计师的责任评级高于错误陈述。不幸的是，KAM准则似乎对审计师责任没有显著影响。总之，研究结果支持了这样一种观点，即KAM准则的披露实际上可以减轻——至少不会改变审计师的法律风险，而不是像审计从业人员担心的那样增加法律风险。理论贡献/独创性：本研究为会计文献做出了贡献，增加了KAM准则在不同审计环境下的另一个方面的发现：欺诈和错误错报。此外，关于KAM准则如何影响审计师责任的相互矛盾的证据值得对其他审计环境进行进一步调查，这些审计环境可能会改变KAM准则披露对审计师责任评估的影响。从业者/政策含义：本研究的发现，特别是非专业投资者评估的KAM准则披露的不重要性，应告知决策者和相关方，投资者需要接受教育，更好地了解KAM准则披露及其目标。研究局限性/影响：本研究的设计不适合审计师有机会与同行沟通的环境，这可能会影响他们的判断。这是实验的一个普遍局限性，这可能被认为有些不切实际，因为在做出判断时，鼓励委员会成员之间或法庭上进行讨论。

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来源期刊

Asian Journal of Business and Accounting BUSINESS, FINANCE-

CiteScore

2.00

自引率

11.10%

发文量

期刊介绍： An academic journal that aims to advance knowledge in the business and accounting disciplines, to narrow the gap between theory and practice, and to set direction for policy initiatives in Asia. Welcome to the Asian Journal of Business and Accounting (AJBA). AJBA is an international refereed journal, published biannually (30th June and 30th December) by the Faculty of Business and Accountancy, University of Malaya, Malaysia. AJBA aims to publish scholarly business researches that are relevant to Malaysia and the Asian region. It intends to highlight the practical implications in promoting better business decision making process and the formulation of public policy in Asia. This journal publishes theoretical, conceptual, and empirical papers within the broad areas of business and accounting in Asia. The AJBA covers a broad spectrum of the business and accounting disciplines. A suggestive (though not necessarily comprehensive) list of areas that would be included in this journal are: general management, strategic management, human resource management, organizational behaviour, labour and industrial relations, international business management, business communication, entrepreneurship, leadership, management science, operations management, production management, supply chain management, marketing management, brand management, consumer behaviour, information management, e-marketing, e-commerce, quality management, retailing, service marketing, hospitality management, hotel and tourism management, asset pricing, capital and money markets, corporate finance, derivatives markets, finance and banking, financial economics, etc.