Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

Esraa Alharasis, Abeer Alkhwaldi, Khaled Hussainey

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Purpose – This testimony aims to investigate the moderating effect of the Covid-19 epidemic on the relationship between key audit matter (KAM) and auditing quality.

Design/methodology/approach – We utilize the Ordinary Least Squares regression on data from 942 firm-year observations of Jordanian non-financial institutions across the period (2017–2022) to test our hypotheses. We use content analysis method to measure levels of KAM disclosure.

Findings – The investigation's findings highlight the importance of KAM disclosure in achieving audit quality in line with international standard on auditing no.701 (ISA-701) requirements. Covid-19 is also found to have a positive relationship with audit quality, further confirming the crisis's devastating impact on audit complexity and risks and providing evidence for the need for supplementary, high-quality audit services. Due to the correlation between KAM disclosure and increased auditor workload and responsibility, the analysis reveals that the Covid-19 factor strengthens the link between KAM disclosure and audit quality.

Implication – This study has the potential to be used as a basis for the creation of a new regulation or standard regarding the reporting of unfavourable events in financial filings. This study's findings provide standard-setters, regulators and policymakers with current empirical data on the effects of implementing ISA-701's mandate for external auditors to provide more information on KAM. The Covid-19 crisis offers a suitable setting in which to examine the value of precautionary disclosures in times of economic uncertainty, as well as the significance of confidence interval disclosures and the role of external auditing in calming investor fears. This analysis is helpful for stakeholders, regulatory agencies, standard-setters, and readers of audit reports who are curious about the current state of KAM disclosures and the implementation of ISA-701. The results may have ramifications for academia in the form of a call for more evidence expanding this data to other burgeoning fields to have a clear explanation of the real impact of reporting KAM on audit practices.

Originality/value – To the authors' awareness, this research is one of the few empirical studies on the effect of the Covid-19 crisis on auditing procedures, and more specifically, the effect of disclosures on KAM by external auditors on audit quality. This study's findings represent preliminary scientific evidence linking the pandemic to business performance. Minimal research has been done on how auditors in developing nations react to pandemic investor protection and how auditors' enlarged reporting responsibilities affect them. The vast majority of auditing studies have been conducted in a highly regulated system, so this research contributes by examining audit behavior in a weak legal context.
Original languageEnglish
Number of pages30
JournalInternational Journal of Law and Management
Early online date1 Feb 2024
Publication statusEarly online - 1 Feb 2024


  • Covid-19
  • audit quality
  • Key audit matters
  • IAS-701
  • Middle East
  • Jordan

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