Does expanded disclosure in the audit report involve unintended consequences? Evidence from tax avoidance

Saeed Rabea Baatwah, Khaled Hussainey

Research output: Contribution to journalArticlepeer-review

90 Downloads (Pure)


Purpose: This study examines how new regulation changes for the auditor’s report, so-called key audit matters (KAMs), influence tax avoidance.

Design/methodology/approach: This study employs data from firms listed on the Omani capital market over the period 2012–2019 and analyzes these data using pooled panel data regression with a robust standard error. It uses two common proxies for tax avoidance and two measures for the KAMs disclosure requirement.

Findings: This study finds a sharp decrease in the effective tax rate (ETR) following the introduction of KAMs disclosure and the issuance of more KAMs in audit reports. This result is supported by several robustness checks. In an additional analysis, we observe interesting results, indicating that real earnings management mediates this association, while the audit committee plays a moderating role. We do not find a moderating effect of Big4 on this association, but we find discrepancies within the Big4 firms in relation to this moderating effect.

Originality: The results of this study indicate that although the introduction of the KAMs disclosure requirement may have positive consequences, it may also lead to unintended negative consequences. This conclusion has not been comprehensively reported in literature.
Original languageEnglish
Number of pages28
JournalInternational Journal of Accounting & Information Management
Early online date25 Jan 2024
Publication statusEarly online - 25 Jan 2024


  • KAMs
  • tax avoidance
  • earnings management
  • audit committee
  • Big4 audit firms

Cite this