The Impact of Audit Rotation on the Disclosure of Key Audit Matters (KAM)
Triana Novitasari, Habiburrochman Habiburrochman

Accounting Department, Economics and Business Faculty, Universitas Airlangga

Abstract

This study examines the effect of audit rotation on the disclosure of Key Audit Matters (KAM) among publicly listed companies on the Indonesia Stock Exchange (IDX) during the 2022-2023 period. Specifically, it analyzes three types of audit rotation: Public Accounting Firm (PAF) rotation, Audit Partner (AP) rotation, and the simultaneous rotation of both PAF and AP. KAM disclosures are assessed based on four dimensions: the number of disclosed items, word count, readability score, and tone.
Employing multiple linear regression analysis, the findings reveal that PAF rotation is positively and significantly associated with an increased number of KAM items disclosed. In contrast, simultaneous rotation of both PAF and AP is negatively and significantly associated with the number of KAM items, suggesting a reduction in disclosure. Notably, AP rotation alone does not have a significant impact on KAM item disclosure. Furthermore, none of the three rotation types significantly influence the length, readability, or tone of the KAM disclosures.
These results offer practical implications for regulators, auditors, and corporate governance professionals by highlighting the nuanced effects of auditor rotation on audit transparency. The study also contributes to the growing literature on audit reporting effectiveness, particularly within the regulatory framework of Indonesia^s financial reporting landscape.

Keywords: Key Audit Matters, Audit Rotation, Public Accounting Firm, Audit Partner, Audit Disclosure

Topic: Audit