Annals of the University of Oradea: Economic Science (Dec 2020)
KEY AUDIT MATTERS AT THE FINANCIAL SERVICES COMPANIES: ARE THERE DIFFERENCES?
Abstract
The inclusion of Key audit matters section in the new independent auditor’s report aimed to improve the auditor's communication and increase the relevance of the audit of financial statements. Key audit matters differs from one company to another depending on several factors, such as its size, the field of activity, as well as the professional reasoning of the auditor. The objective of the paper is the analysis of key audit matters in financial services companies in order to highlight the most common matters reported. To achieve the proposed objective, the qualitative research method was used by analyzing the content of the information published by companies in the independent auditor’s report and individual financial statements. The sample consisted of 12 financial services companies listed on the main market at Bucharest Stock Exchange for the period 2016 to 2019. The data were collected manually from the reports published by them. The sample is divided into two categories; banks and other financial services companies, which apply accounting regulations specific to each field of activity. With the exception of one company, all were included in the premium trading category. The variables analyzed were: the number of key audit matters identified by the auditors, the size of the auditors, the opinion issued, the audit fees to operating income ratio, the auditors’rotation, the preparation of consolidated financial statements and the profitability of companies. The average number of key audit matters was 1.67, being higher in the case of banks where the most common matter identified were the Depreciation of loans and advance to customers, than in the case of other financial services companies where the Valuation of financial assets had the largest share. It was found that there were matters common to both categories of companies Litigation provisions and Business combinations. No close correlations were identified between the variables, which means that the reporting of key audit matters is not greatly influenced by the variables analyzed. The differences between the key audit matters identified by the auditor are more influenced by the characteristics of the companies such as the field of the activity and profitabilty, and less by the characteristics of the auditor.
