THE EFFECT OF EARNINGS MANAGEMENT, AUDIT QUALITY, AND AUDIT COMMITTEE EFFECTIVENESS ON KEY AUDIT MATTERS WITH CORPORATE COMPLEXITY AS A MODERATING VARIABLE

Abstract

Key Audit Matters (KAM) have become an important component of auditor reporting by providing additional information regarding issues considered most significant during the audit process. This study examines the effects of earnings management, audit quality, and audit committee effectiveness on KAM disclosure and evaluates the moderating role of corporate complexity. The analysis is based on 204 firm-year observations from consumer non-cyclicals companies listed on the Indonesia Stock Exchange between 2022 and 2025. Secondary data obtained from annual reports and independent auditor reports were analyzed using panel data regression and Moderated Regression Analysis (MRA) under the Random Effects Model. The results show that audit quality is positively associated with KAM disclosure, whereas earnings management and audit committee effectiveness do not exhibit significant direct effects. The findings further demonstrate that corporate complexity strengthens the relationship between earnings management and KAM disclosure but does not significantly moderate the relationships involving audit quality and audit committee effectiveness. These results suggest that auditor-related factors play a more prominent role in explaining KAM disclosure than governance mechanisms. In addition, organizational complexity appears to influence how auditors respond to financial reporting risks associated with earnings management. This study contributes to the emerging literature on KAM by providing evidence from Indonesia and highlighting the relevance of corporate complexity in explaining differences in KAM disclosure practices.