What matters in key audit matters: A disclosure analysis of listed companies in Nigeria

Abstract

This paper explores the extent, type, and characteristics of disclosure of Key Audit Matters (KAMs) in listed companies in Nigeria. The International Auditing and Assurance Standards Board (IAASB) developed KAMs to address demands for greater transparency and clarity in audit reports. This study employs an ex post facto research design, utilizing qualitative content analysis of 44 companies from various sectors and their 2024 financial statements. Findings revealed that KAMs per industry range from 1 to 4. The reported KAMs by 26 companies were 62, averaging 1.3 KAMs per company. Expected Credit Loss Allowance (ECL) on loans and advances to customers is common among all banks, accounting for 60% of the total reported issues. The predominant issue across all industries was revenue recognition. There were five instances where KAMs were not mentioned and three cases with no KAM reference. The Big Four auditing firms dominated the audits of sampled companies reporting 62 KAMs across four sectors. We recommend that issues and trends in KAM be communicated, and that regulators require auditors to provide necessary clarifications when KAMs are absent or not mentioned. Where there is a basis to modify the audit opinion, this should also be explicitly stated.