Impacts of financial and industry expertise of the audit committee on the readability of key audit matters: New Zealand evidence

Abstract

PURPOSE The purpose of this study is to examine the impact of the audit committee’s financial and industry expertise on the readability of KAMs using New Zealand evidence.

DESIGN/ METHODOLOGY/ APPROACH The sample covers 50 New Zealand listed companies for the financial year 2021. Correlation and regression analyses were conducted to examine possible relationships between the audit committee’s financial and industry expertise and the KAM readability. The Flesch Reading Ease Formula was used to measure the KAM readability.

FINDINGS Both financial and industry experts on the audit committee are positively associated with the KAM readability, although the overall readability of KAMs is very low. Research limitations – This research only covered one year and a sample of 50 companies. Other firm and audit committee attributes excluded in this paper may also impact the KAM readability.

ORIGINALITY/ VALUE The research makes a contribution to prior empirical research on KAM, and evidence of audit committee effectiveness.