The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study
49 Pages Posted: 23 Jul 2014 Last revised: 19 Sep 2019
Date Written: November 29, 2017
We examine whether and how the addition of mandatory paragraphs that highlight Key/Critical audit matters (KAMs) in the auditor's report affects users' information acquisition process using eye-tracking technology. We experimentally manipulate the presence of KAMs, their number (one or three KAMs), and their format with the inclusion of an overview of audit procedures performed to address each KAM. We find that KAMs have attention directing impact, in that participants access KAM-related disclosures more rapidly and pay relatively more attention to them when KAMs are communicated in the auditor's report. However, when exposed to an auditor's report with several KAMs, participants devote less attention to the remaining parts of the financial statements. Depending on the relevance of the information for the decision task users are less attentive to, our results have direct policy implications as they underline the potential costs and benefits associated with KAMs.
Keywords: key audit matters, critical audit matters, eye-tracking, visual attention, information processing
JEL Classification: M41, M49
Suggested Citation: Suggested Citation