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RAAS 2023/12
Vol.13 No.2:
115-148
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Information Demand of Financial Statement Users and the Similarity of Key Audit Matters
Chia-Chun Hsieh1, Yan-Yi Chiou2*, and Shu-Shian Lin3
1Department of Accounting and Information Technology, National Chung Cheng University
2Department of Financial Management, National Defense University
3Navy Command Headquarters, Ministry of National Defense R.O.C.
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Abstract:
This study examines the relationship between the information needs of financial statement users and the content similarity of key audit matters (KAMs). This paper infers auditors’ motivations for disclosing KAMs from the following two aspects. First, according to the theory of helping behavior, when financial statement users have higher information needs, which means there are more investors with limited attention, auditors may prefer to disclose more information in KAMs to protect investors, resulting in lower KAM similarity. Second, based on cost-benefit consideration and the theory of risk amplification, higher information demand implies a higher proportion of non-professional investors. It may not be cost-efficient to provide additional KAMs because the information may not be what these non-professional investors need, and auditors are also worried that these people may misunderstand the disclosure and cause further market fluctuations, leading to subsequent litigation risks. Therefore, they may prefer to make fewer changes, resulting in KAMs that are highly similar to previous years. Empirical results show that when information demand is high, the content similarity of KAM is higher. In other words, when auditors face higher information demand, cost-effectiveness and risk amplification will be the main considerations.
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Keywords: Information demand; Key audit matters; Helping behaviors; Risk amplification
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Corresponding author
; e-mail: yenyeee@gmail.com.tw
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©
2023
Review of Accounting and Auditing Studies, ISSN 2221-9374
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