Reading between the lines : the impact of Key Audit Matters’ (KAMs) readability and informative value on audit reports in an emerging market

Readability and transparency of Key Audit Matters (KAMs) are essential to improving audit quality and stakeholder understanding, yet evidence from emerging markets remains limited. This study examines how audit firm characteristics, KAM coverage (entity-level versus accounting-level risks), and audit procedure disclosures influence the clarity and informativeness of KAM sections in audit reports. Drawing on Agency Theory and Stakeholder Theory, we analyse KAMs disclosed by companies listed on the Bucharest Stock Exchange. The results show that non-Big 4 auditors, contrary to evidence from developed markets, produce more readable KAM descriptions and audit procedure explanations. Entity-level KAMs are less readable, reflecting their higher inherent complexity. Variations in readability in Romania appear driven less by auditor status and more by differences in disclosure practices and linguistic conciseness. The study advances understanding of audit communication in emerging markets and offers practical implications for regulators and standard-setters seeking to reduce the Audit Expectation Gap (AEG).