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

Mahmoud Elmarzouky (Department of Accounting, Aston Business School, Aston University, Birmingham, UK)
Khaled Hussainey (Faculty of Business and Law, University of Portsmouth, UK)
Tarek Abdelfattah (Nottingham University Business School, University of Nottingham, UK and Faculty of Commerce, Mansoura University, Egypt)

International Journal of Accounting & Information Management

ISSN: 1834-7649

Article publication date: 14 December 2022

Issue publication date: 31 January 2023




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.



Elmarzouky, M., Hussainey, K. and Abdelfattah, T. (2023), "The key audit matters and the audit cost: does governance matter?", International Journal of Accounting & Information Management, Vol. 31 No. 1, pp. 195-217.



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