Essays on the Key Audit Matters
: UK Evidence

  • Mahmoud Elmarzouky

    Student thesis: Doctoral Thesis


    This thesis is a compilation thesis with a collection of inter-related articles on the Key Audit Matters (KAMs). The thesis comprises four primary empirical studies that investigate the unintended consequences of the ISA 701 KAMs.
    The first study presents a framework and a critical literature review and identifies research gaps related to the KAMs practice. This article benefits the academics to better understand the pillars of the new audit regime, factors, and framework to reinforce the reporting quality. It provides researchers in the field with insights and new perspectives. The paper emphasises the KAMs effectiveness. It also presents opportunities to both researchers and professional bodies for potential future research.
    The second empirical study provides empirical evidence on audit risk disclosure
    impact on management risk disclosure suggested by the egocentric theory. We
    explore how a unique regulatory audit disclosure change in the UK affected
    corporate management risk disclosure. We use automated textual analysis to
    evaluate the level of risk disclosure. We investigate the effects of auditor risk
    disclosure (KAMs) on corporate risk disclosure among all the UK non-financial FTSE all-share firms listed on the London Stock Exchange between 2013 and 2018. Then we examine the relationship when considering different sub-samples of different market capitalization. Our results suggest that KAMs serve as a beneficial mechanism for enhancing corporate risk reporting quality by sagacious risk reporting behaviour due to the pressure employed by auditors.
    The third empirical study examines the effects KAMs on the audit cost. We find a
    significant change in audit fees surrounding implementing the new auditing regime (KAMs). We also find that the association between KAMs and audit fees is higher for firms that report more KAMs. We further use board size and board
    independence variables to examine their moderating effect on the relationship
    between KAMs and audit cost. We find that independent board plays an essential
    role in improving the relationship between KAMs and audit cost. We did not find
    the same results for board size.
    The fourth empirical study provides a case study to describe the role of KAMs in
    predicting corporate bankruptcy. We applied our case study on Thomas Cook plc.
    We find that KAMs did not represent a fundamental change to stakeholders. Our
    finding suggests that more need to be done to provide a more precise guideline for KAMs to help stakeholders make a better decision. Our unique finding helps
    professional bodies to improve the current auditing standards guidelines.
    Overall, the thesis provides a review and empirical evidence on the benefit and
    consequences of the new audit regulations in the UK context. The thesis's findings benefit regulators, professional bodies, and stakeholders better to understand the unintended consequences of the new audit regime.
    Date of Award2 Feb 2021
    Original languageEnglish
    Awarding Institution
    • University of Portsmouth
    SupervisorKhaled Hussainey (Supervisor)

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