Examining the Relationship between Key Audit Matters, Earnings Benchmark Performance, and Management Credibility: Experimental Evidence

Heydari, Zohreh; Mashayekh, Shahnaz; Rahmani, Ali

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year 17, Issue 65 (2025)

fa 2025, 17(65): 69-90

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Examining the Relationship between Key Audit Matters, Earnings Benchmark Performance, and Management Credibility: Experimental Evidence

Zohreh Heydari¹

, Shahnaz Mashayekh ^*¹

, Ali Rahmani¹

1- Department of Accounting, Faculty of Social Sciences and Economics, Alzahra University, Tehran, Iran.

Abstract: (77 Views)

This study investigates the relationship between key audit matters and earnings benchmark performance on management credibility. This research employs a 2x2 between-subjects factorial design. The independent variables are auditor report type and earnings benchmark performance, and the dependent variable is management credibility. Data were collected through scenario design and questionnaire distribution among 176 professional and non-professional subjects. The results indicate that the disclosure of a key audit matter alone does not have a significant impact on management credibility. However, when this disclosure is accompanied by earnings realization consistent with analysts' forecasts, professional investors adopt a more skeptical view of management, and management credibility decreases. This reaction can be explained within the theoretical framework of earnings management, meaning that the interaction of "earnings realization (earnings benchmark performance)" and "key audit matter" is perceived by professional investors as a signal of aggressive earnings management and management's attempt to conceal fundamental weaknesses. In contrast, non-professional investors do not make such an interpretation, and for them, the interaction of key audit matters and earnings benchmark performance has no effect on management credibility. It is worth noting that the only factor affecting management credibility from the perspective of non-professional investors is earnings benchmark performance. The findings of this study can be beneficial for various groups, including standard setters, auditors, analysts, investors, academics, and researchers.

Article number: 5

Keywords: Key Audit Matters, Earnings Benchmark Performance, Management’s Credibility, Professional and Non-Professional Investors.

Full-Text [PDF 912 kb] (45 Downloads)

Type of Study: Research | Subject: Special

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Heydari Z, Mashayekh S, Rahmani A. Examining the Relationship between Key Audit Matters, Earnings Benchmark Performance, and Management Credibility: Experimental Evidence. fa 2025; 17 (65) : 5
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