Audit partners’ gender and time variances of key audit matters

What is it about?

We examine if audit partners’ gender affects the year-to year additions and drops of key audit matters (KAMs). We define the year-to-year addition and drop of KAMs as the time variance of KAMs. Our sample consists of the ASX 300 listed companies for the period from 2017 to 2021. After excluding companies for which required KAMs data was not available for extraction from annual reports, we have a sample of 1430 firm-year-observations with 3765 KAMs to examine. We use multivariate regression with robust standard errors clustered by firms. We also use a number of robustness test. Our findings suggest that female audit partners disclose less time variant KAMs and have a lower tendency to add new KAMs, or drop old KAMs. Additional analysis suggests that the differences between female and male audit partners decrease as the female audit partners’ experience increases, or if the female audit partner has a bachelor degree in accounting. Female audit partners’ narcissism also reduces the gender gap in the time variance of KAMs disclosure. The fact that female audit partners report more stable KAMs imply that there are fundamental differences between female and male audit partners in the way audit risks assessments are conducted, audit is planned, and professional judgement is applied by female and male audit partners.

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