Abstract
This study aims to examine the investors reaction to the disclosure of key audit matters (KAMs) as mandated by ISA701, the study’s sample consisted of all the (195) public shareholding companies listed in Amman Stock Exchange (ASE) as at the end of 2017, and through which we have conducted a manual content analysis to tracing the auditor practices in reporting KAMs, the final sample consisted of (128) public shareholding companies and for which we used the event study test to examine the study hypothesis, results revealed that the disclosure of KAMs has significantly affected the investors decisions measured by the abnormal trading volume, Our findings suggest that the mandating of KAM’s disclosure has informational value to the investors.
Highlights
The intention of general purpose financial reports is to provide useful information to the interested users (IASB, 2010, OB2)
The aim of this paper is to investigate the impact of the disclosure of key audit matters on the investor’s decisions, in order to do so, we examined the Jordanian market reaction to the announcements of KAMs, the results show that the Jordanian market reacts differently in response to the disclosure KAMs, we conclude that KAMs disclosure have information content to the investors
Our results are consistent with Reid et al (2015) who found that the expanded audit report is informative to the investors in UK, our findings are consistent with the view that additional disclosure in the auditor’s report would enhance the informational value of the auditor’s report (FRC 2015: page 57; Manson and Zaman 2001; church et al 2008), and consistent with the Association of Chartered Certified Accountants review report ( 2018); which found that the disclosure of KAMs is useful to the investors and contribute to better governance,better audit quality and better corporate reporting
Summary
The intention of general purpose financial reports is to provide useful information to the interested users (IASB, 2010, OB2). Years ago the message of auditor’s report has been questioned and become symbolic in its value (Manoel & Quel, 2017), In managing the issue above, standards setters bodies e.g. PCAOB, IAASB, FRC, have been revised the form and content of the auditor’s report in order to rebuild the user’s confidence and to meet the capital market demand for high quality audit ( li, 2017), as a result of the revising process, the IASB proposed a new audit standard (ISA 701) that requires auditors to disclose key audit matters in the audit report, the main objective is to enhance the communication value of auditor’s report.
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