International Standards on Auditing 701 specifies that key audit matters (KAMs) refer to those matters that, in the auditor’s professional judgment, were of most significance in the audited financial s tatements We propose that KAMs facilitate the auditor’s communication with investors by delivering uncertainty information, as reflected in earnings response coefficients (ERCs) varying with KAM characteristics.

Our empirical a nalyse s indicate that firms with fewer KAMs or with the majority of KAMs being firm specific a re associated with greater ERCs Additionally, for firms that undergo substantial operational changes, a higher percentage of recurring KAMs significan tly decreases ERCs, suggesting that investors expect the KAM reporting to correspond with the changes in operations. Collectively, the evidence shows that the standard s objective, directing investors’ attention to areas of significance, is preliminarily a chieved . Besides , auditor s should provide more firm specific, rather than generic KAMs in order to enhance the communicative value of the auditor's report.