KEY AUDIT MATTERS: NEW INFORMATIONAL VALUE OF AUDITOR'S REPORT

Key audit matters are matters that, in auditor's professional judgment, were of most significance in audit of financial statements and represent novelty and significant change in field of auditor's reporting. Their inclusion in auditor's report should contribute to enhanced informativeness and transparency of auditor's report as they inform users about crucial elements of audit engagement required to be disclosed in separate section of auditor's report. The aim of this research was to analyze auditor's reports of the companies listed on the Zagreb Stock Exchange and to determine if inclusion of key audit matters provides new informational value to auditor's report. In order to address this issue, an in-depth analysis of auditor's reports, Mann-Whitney U-test, and Wilcoxon signed ranks test were carried out within this research with purpose of identifying: differences in content and structure of auditor's report before and after the ISA 701 came into effect, method of incorporating key audit matters into auditor's report, key audit matters that are most frequently included in auditor's report, connection between audit opinions and key audit matters, as well as relationship between the type of audit companies ("Big Four" vs. other audit companies) and key audit matters. Research results have shown significant increase of average auditor's report length, enrichment of their structure with new sections, significant association between number of key audit matters and the affiliation of audit company to Big Four and no significant difference between number of key audit matters and type of opinion expressed. Key audit matters which were disclosed most frequently referred to accounting items of revenues, impairment of various asset types, valuation of various asset types and provisions. In most cases, auditor's reports have been positioned after the Basis for Opinion section. In general, it has been concluded that key audit matters represent a new informational value of auditor's report.