REPORTING ON KEY AUDIT MATTERS: THE CASE OF BOSNIA AND HERZEGOVINA
REPORTING ON KEY AUDIT MATTERS: THE CASE OF BOSNIA AND HERZEGOVINA

Summary/Abstract: This paper investigates the application of International Standard on Auditing 701(Communication of Key Audit Matters in the Independent Audit Report) in Bosnia and Herzegovina. The objective of the research is to determine the scope and content of key audit matter (KAM) disclosures in audit reports of listed companies in Bosnia and Herzegovina in 2022 and 2023. The research is designed to answer how many KAMs auditors disclose on average in audit reports of listed companies in Bosnia and Herzegovina, which areas auditors most often identify as KAMs, whether there are differences in the scope and content of KAMs depending on the industry sector, the type of audit firm performing the audit or the type of audit opinion, whether auditors report the same KAMs in two consecutive years, and whether they use identical or modified disclosures related to audit procedures when reporting on the same KAMs in two consecutive years. The research was conducted on a sample of audit reports of companies whose securities are listed on stock exchanges in Bosnia and Herzegovina. The final sample consists of 228 companies and 456 audit reports. The data required to achieve the research objective and to answer the research questions were collected from individual audit reports that make up the sample and processed using descriptive statistics and non-parametric tests (Kruskal-Wallis test and Mann–Whitney test).The research results show that auditors disclose an average of 0.7 KAMs per audit report. In the majority of audit reports, auditors disclosed one or no KAMs, while in a relatively small number of audit reports, 2 or 3 KAMs were disclosed. The results show that in all industry sectors, auditors disclose a small number of KAMs on average and that there is no statistically significant difference between the number of KAMs in most industry sectors. A statistically significant difference is present between the finance and insurance sector and most other industry sectors. The Big 4 audit firms disclose a larger number of KAMs on average than audit firms that do not belong to this group. Auditors disclose a larger number of KAMs when they issue an unmodified audit opinion. Within the KAMs, auditors most often point out the risks associated with revenue recognition, loan impairment and valuation of fixed assets. In 94% of cases, auditors disclosed the same KAMs in two consecutive years, most often with the same or slightly modified text

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