Litigation Risk and Auditors' Disclosure of Key Audit Matters

To improve the transparency and reliability of audit reports, auditors of listed companies in Taiwan have been required to disclose key audit matters (KAM) in their audit reports since 2016. Previous studies suggested that the disclosure of KAM is related to auditors' ' litigation. From the perspective of auditors' ' legal liability, when facing higher litigation risks, will auditors respond with more detailed communication of KAM in their audit reports? This study takes listed companies in Taiwan from 2016 to 2021 as sample to measure litigation risk to explores the association between auditors' ' litigation risk and their disclosure of KAM. The empirical results show that there is a significant positive correlation between the litigation risk and the number of items disclosed and the total number of words used in the KAM paragraph.