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

See all articles by Louis-Philippe Sirois

Louis-Philippe Sirois

Université Laval - École de comptabilité

Jean Bédard

Université Laval - École de comptabilité

Palash Bera

Saint Louis University - Richard A. Chaifetz School of Business

Date Written: November 29, 2017

Abstract

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

Sirois, Louis-Philippe and Bédard, Jean and Bera, Palash, The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study (November 29, 2017). Accounting Horizons, Forthcoming DOI 10.2308/acch-52047 , Available at SSRN: https://ssrn.com/abstract=2469905 or http://dx.doi.org/10.2139/ssrn.2469905

Louis-Philippe Sirois (Contact Author)

Université Laval - École de comptabilité ( email )

Quebec City
Canada

Jean Bédard

Université Laval - École de comptabilité ( email )

2325, rue de la Terrasse
Québec, Québec G1V 0A6
Canada
418-656-7055 (Phone)
418-656-2624 (Fax)

Palash Bera

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States

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