Disclosure of Key Audit Matters in Assessing the Level of Financial Distress of Companies

Iranian Journal of Accounting, Auditing and Finance

مقاله 3، دوره 9، شماره 4 - شماره پیاپی 33، اسفند 2025، صفحه 45-64   

نوع مقاله: Original Article

شناسه دیجیتال (DOI): 10.22067/ijaaf.2025.46576.1507

نویسندگان

Mohsen Tanani؛ Seyedalireza Hosseini^*

Department of Accounting, Faculty of Financial Science, Kharazmi University, Tehran, Iran

چکیده

This study examines the relationship between the disclosure of Key Audit Matters (KAMs) and the assessment of financial distress among companies listed on the Tehran Stock Exchange (TSE). Grounded in Agency Theory, Signaling Theory, and Transaction Cost Theory, the research posits that KAM disclosures help mitigate information asymmetry between managers and shareholders. According to Signaling Theory, such disclosures convey signals about a firm’s market risk. In contrast, Transaction Cost Theory suggests that greater transparency—through KAM disclosure—can reduce transaction costs and facilitate the evaluation of financial distress. The analysis investigates the association between the quantity and characteristics of KAM disclosures and financial distress using four distinct models. Based on a systematic elimination sampling method, 93 firms were selected, covering eleven years from 2012 to 2022, yielding 1,032 firm-year observations. The study’s hypotheses were tested using multivariate regression analysis performed with EViews software and the partial least squares (PLS) approach. The results indicate a significant relationship between the quantity, risk level, classification, and nature of KAM disclosures and firms’ levels of financial distress.

کلیدواژه‌ها

Audit Transparency؛ Corporate Financial Risks؛ Key Audit Findings

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