Auditor, Client, and Investor Consequences of the Enhanced Auditor's Report

38 Pages Posted: 5 May 2018

Date Written: April 19, 2018


The International Auditing and Assurance Standards Board has issued a standard requiring an enhanced auditor’s report. The most notable feature of the report is a section termed Key Audit Matters (KAMs). The purpose of KAMs is to disclose financial reporting risks, thereby enhancing the communication value of the audit report. This study examines the impact of the enhanced auditor’s reporting requirements in New Zealand on audit effort (audit fees and audit delay); on audit quality (absolute abnormal accruals); on client firm disclosures and on investors (value relevance). We find no incremental affect related to the introduction of KAM disclosures. We find that both auditors and investors price KAMs into audit fees and share prices, both in the first year of KAM and in the prior year. We note that client disclosures related to KAMs characteristics are greater than non-KAMs disclosures in both the year of KAM reporting and in the prior year.

Keywords: Key Audit Matters, Enhanced Auditor’s Report, Audit Fees, Audit Delay, Audit Quality, Disclosures, Value Relevance

JEL Classification: M41, M42, M48

Suggested Citation

Bradbury, Michael E. and Almulla, Mazen, Auditor, Client, and Investor Consequences of the Enhanced Auditor's Report (April 19, 2018). Available at SSRN: or

Michael E. Bradbury (Contact Author)

Massey University ( email )

School of Accountancy
Private Bag 102 904
New Zealand
64 9 414 0800 (Phone)
64 9 441 8133 (Fax)

Mazen Almulla

BDO Auckland CBD ( email )

4 Graham Street
New Zealand

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