The key audit matters and the audit cost: does governance matter?

M Elmarzouky*, K Hussainey, T Abdelfattah

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

16 Citations (Scopus)


This paper aims to investigate the relationship between key audit matters (KAMs) and audit costs and whether board size and independence affect this relationship. Furthermore, this paper examines the moderating effect of corporate governance on the relationship between KAMs and audit costs.

The authors hypothesise that disclosing more KAMs in the audit report is positively associated with audit costs because of the greater effort. The agency theory suggests that firms with good governance will mitigate the agency conflict of interest and improve financial reporting quality. Thus, good governance might moderate the relationship between reported KAMs and audit costs. The authors use a quantitative approach. The authors are using a sample of the UK FTSE all-share non-financial firms from 2014 to 2018 for the UK Financial Times Stock Exchange all-share non-financial firms.

The authors provide evidence of a significant positive relationship between KAMs and audit costs. The relationship is relatively higher when considering the independent directors' percentage as a moderating factor. These results came consistent with the agency theory literature. However, the authors found no empirical evidence to support a moderating effect of board size on the relationship between KAMs and audit cost.

Practical implications
The finding benefits the regulatory setters to better understand the consequences of the new auditing standards. This paper has theoretical and practical implications for regulators, standard setters, professional bodies, shareholders and academics.

This paper contributes to the literature assessing the regulatory changes related to audit reform and adds to the debate on the impact on audit costs. This paper underlines governance factors as a moderating role in this relationship between KAMs and audit costs.
Original languageEnglish
Pages (from-to)195-217
Number of pages23
JournalInternational Journal of Accounting and Information Management
Issue number1
Early online date14 Dec 2022
Publication statusPublished - 31 Jan 2023


  • Audit fees
  • Board size
  • Independent directors
  • KAMs
  • UK


Dive into the research topics of 'The key audit matters and the audit cost: does governance matter?'. Together they form a unique fingerprint.

Cite this