Volume 23 No. 3, December 2024
MANAGEMENT AND ACCOUNTING REVIEW, VOLUME 23 NO. 3, DECEMBER 2024
Heterogeneous Effects of Audit Firm Characteristics on Readability of Key Audit Matters (KAM): Evidence from Panel Quantile Regression
Norazian Hussin1,2♣, Mohd Fairuz Md. Salleh3, Azlina Ahmad2 and Mohd Mohid Rahmat2
1Faculty of Accountancy, Universiti Teknologi MARA, Puncak Alam Campus, Selangor, Malaysia
2Faculty of Economics and Management, Universiti Kebangsaan Malaysia, Selangor, Malaysia
3Graduate School of Business, Universiti Kebangsaan Malaysia, Selangor, Malaysia
ABSTRACT
The readability of KAM has been a major concern for academics; given the increasing complexity of financial reporting, the language used to explain KAM may be challenging to articulate effectively. Thus, this study was motivated to offer empirical insights into the heterogeneous effect of audit firm characteristics on KAM readability. Using the Flesch reading ease index to proxy KAM readability, this study utilised 258 FTSE100 Malaysia-listed companies from 2017 to 2019 and used the panel quantile with fixed effects regression analysis. The results showed that Big 4 audit firms, audit fees, busy season, audit firm tenure, and female partners had a significant and heterogeneous effect on the readability of KAM across low (25th), medium (50th), and upper (75th) quantile levels. However, the highest quantile (90th) demonstrated that only audit fees, busy season, and female audit partners significantly affected the conditional distribution of KAM readability. The current study also identified a heterogeneous impact of the audit committee’s characteristics on the readability of KAM in Malaysia.
Keywords: Key Audit Matter, Audit Firm, KAM Readability, Quantile Regression, Malaysia
♣ Corresponding Author: Norazian Hussin; Universiti Teknologi MARA, Puncak Alam Campus, Selangor, Malaysia; Email: noraz043@uitm.edu.my; Tel: 603-32587388
ARTICLE INFO
Article History:
Received: 24 August 2023
Accepted: 21 August 2024
Available online: 01 December 2024