Key Audit Matters and Audit Outcomes : Evidence from the European Union

In the EU, ISA 701 and EU Regulation 537/2014 introduced the mandatory disclosure of Key Audit Matters (KAMs) for Public Interest Entities starting from the end of 2016. Similar regulatory changes have also taken place in other settings, such as the US. The introduction of KAM mandatory disclosure was the result of a long process that aimed to increase the informative value of auditor’s reports. Indeed, traditionally, audit reports have been highly standardized. Recent studies have investigated the effect of such regulatory changes on the financial statements’ user (e.g., Porumb et al., 2021) or on managers’ decisions (e.g., Bentley et al. 2021). In our study, we use data from all EU countries and examine whether there is any association between the number and the type of KAMs and audit outcomes (i.e., fees, audit report lags, and audit quality). The results from non-financial companies suggest that audit fees and audit report lags are associated with the number of KAMs and also with the type of KAM matters