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

Mahmoud Elmarzouky, Khaled Hussainey, Tarek Mohamed Hassan AbdelFattah

Research output: Contribution to journalArticlepeer-review


This paper investigates the relationship between Key audit matters and audit costs and whether board size and independence affect this relationship. We hypothesise that disclosing more KAMs in the audit report is positively associated with audit costs due to 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. Using a sample of the UK FTSE all-share non-financial firms from 2014 to 2018, we 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, we found no empirical evidence to support a moderating effect of board size on the relationship between KAMs and audit cost. The paper contributes to the literature assessing the regulatory changes related to audit reform and adds to the debate on the impact on audit costs. Thus, it has theoretical and practical implications for regulators, standard setters, professional bodies, shareholders, and academics.
Original languageEnglish
JournalInternational Journal of Accounting & Information Management
Publication statusAccepted/In press - 10 Nov 2022

Bibliographical note

Copyright © 2022, Emerald Publishing Limited. This author's accepted manuscript (AAM) is deposited under the CC BY-NC 4.0 licence. Any reuse is allowed in accordance with the terms outlined by the licence. To reuse the AAM for commercial purposes, permission should be sought by contacting


  • key audit matters
  • KAMs
  • independent directors
  • audit fees
  • UK


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