Investigating the usefulness of key audit matter in assessing the level of financial distress of companies

Document Type : Original Article

Authors
yasser shirzadi 1
Kaveh Parandin 2
zahra Zamanifadenbeh 3
1 Department of Accounting, Payame Noor University, Tehran, Iran.
2 Department of Accounting, Payame Noor University Tehran, Iran.
3 MSc.of Accounting, Berojen Branch, Islamic Azad University, Berojen, Ira
10.22034/jmaak.2025.77875.4358
Abstract
As an integral part of the financial reporting process, the audit report plays a major role in informing the users. In this regard, by changing the type of audit report preparation, a new section titled key audit matter was added to it. On the other hand, identifying the signs of financial distress in companies is one of the most important information that can help users in making decisions. Therefore, in order to investigate the impact of the disclosure of key audit issues on financial distress, the information of 112 companies accepted to the Tehran Stock Exchange during the period of 2016 to 2018 was collected. The findings of the research show that the total number of key audit matter, key audit matter risk-based at the account level, key audit matter their primary impact with the liquidity and debt solvency have a positive and significant relationship with the level of financial distress. Also, the results show a negative and significant relationship between the key audit matter risk-based at the company level and other key audit matter with the level of financial distress of companies; while the report of going concern and the key audit matter with the initial impact on profitability had no significant relationship with the level of financial distress. In general, the findings of the research show the usefulness of key audit matter in evaluating and predicting the level of financial distress of companies. The results of the research, with the development of literature, contribute to the richness of knowledge in researches in the field of financial distress and key audit matter. The findings of the research can help investors, lenders, analysts and legislators in making decisions.
Keywords
key Audit Matter (KAM)
Financial Distress
Audit Report
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