Potential effects of disclosure of key audit matters in the audit report on the Egyptian business environment

The research aims to analyze the potential effects of applying the International Auditing Standard (IAS 701), which obliges auditors to disclose the key audit matters (KAM) in a separate paragraph in the audit report, in order to verify the extent of similarity and difference between their perceptions of both auditors and users of financial reports regarding the potential effects of disclosure of KAM on the informational content, the benefit of the audit report, the extent of the truthfulness and fairness of the financial statements, the responsibility of the auditor, the audit quality, the audit fees, and the audit report lag. By relying on the SPSS 28 statistical program, and by applied to a sample of 94 auditors and 110 users of financial reports.
The study concluded that there is an agreement between the perceptions of the auditors and users that the disclosure of KAM will increase the informational content and usefulness of the audit report, which improves user’s decisions quality, and it will also increase the responsibility of the auditor towards the undiscovered material misstatements. However, it will increase the audit report lag because writing the new audit report will require more time and effort. On the contrary, there is a difference between the perceptions of auditors and users regarding the impact of disclosure of KAM on the perceptions of users regarding the truthfulness and fairness of the financial statements, audit quality and audit fees, as the auditors believe that it will negatively affect the perceptions of users regarding the extent of the truthfulness and fairness of the financial statements, while the users see the exact opposite. The study also concluded that the auditors believe that it will not affect the audit quality, while the users of the financial reports believe that the disclosure of KAM will improve the audit quality. Finally, the study found that auditors believe that disclosure of KAM will increase audit fees, while users believe that will not have an impact on audit fees.