The Impact of Gender Differences on the Disclosure of Key Audit Matters (KAM)
DOI:
https://doi.org/10.51094/jxiv.1404Keywords:
Gender diversity, Corporate governance, Key Audit Matters (KAMs)Abstract
The purpose of this study is to examine the impact of appointing female directors and female auditors on audit quality and corporate governance, in response to the growing emphasis on board diversity and policies promoting women’s participation at international levels. Specifically, the study analyzes the relationship between female representation and the extent of Key Audit Matters (KAMs) disclosure in audit reports, mandated since 2021 in Japan.
The analysis found a significant negative correlation between the cross-term indicating the proportion of female directors and the simultaneous presence of female audit partners and the number of disclosed KAMs, suggesting that female representation leads to more selective disclosure, which may reflect a shared cautious approach to risk and aversion to overdisclosure. As with the number of KAMs, their combined presence results in a significant reduction in word count, indicating a shared orientation toward concise, non-redundant reporting. This implies the existence of a common evaluative standard for information selection and focus when both parties are involved. Further analysis on the nature of the disclosed risks reveals that female representation is positively associated with KAMs related to entity-level risks, suggesting a tendency to emphasize firm-level accountability and sustainability. In contrast, both variables show significant negative associations with account-level KAMs, implying that female involvement prioritizes broader corporate concerns over narrow financial reporting issues.
Taken together, female directors and auditors individually encourage greater disclosure, but their joint involvement fosters more prudent, selective reporting. Especially in entity-level KAMs, female participation reflects heightened accountability and strategic risk awareness, aligning with a preference for “high-quality disclosure” through refinement and focus. These findings extend prior research by showing that female professionals' approach to risk and disclosure is context-sensitive rather than uniform, offering nuanced insights into how gender diversity shapes audit behavior and governance practices.
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