The Impact of Auditor’s Social Network on the Readability of Key Audit Matters Reporting
Jo-Lan Liu/Department of Accounting Information, National Taichung University of Science and Technology
Hsin-Yi Chi/Department of Accounting, National Chung Hsing University
Tzu-Ching Weng/Department of Accounting, Feng Chia University
Abstract
The purpose of this study is to examine the impact of auditor’s social network on the readability of key audit matters (KAMs) disclosure in Taiwan listed companies from 2016 to 2021. The empirical results suggest that auditors participating more in CPA associations and social organizations tend to reveal more readable KAMs. Although the non-big4 KAMs reporting is less readable than big 4 auditors, however, the non-big4 participating more in social networks, the readability of KAMs disclosure can be improved. To minimize the impact of auditors’ personal qualifications and personalities on their participation in social networks, a difference-in-differences method was used for robust testing. This method analyzed the readability of KAMs before and after auditors joined social organizations, and compared auditors who did and did not join such organizations. The results showed that after auditors joined social organizations, the readability of KAMs texts improved. Additionally, the readability of KAMs significantly improved for non-big4 auditors who joined social organizations. The results of this paper support that auditor’s social network links are an important factor to increase the readability of KAMs reporting.
Keywords
Auditor social networkKey audit mattersNon-big4 auditor
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