The Association Between Independent Audit Firm Rotation, Key Audit Matters And Financial Reporting Quality: BIST 30 Analysis

This study aims to measure the association between independent audit firm rotation, key audit matters, and financial reporting quality. For this objective, the data of the companies included in the BIST 30 index between 2017 and 2022 were analyzed. Discretionary accruals and goodwill impairment disclosures were preferred to represent financial reporting quality. Model (1) measures the association between audit firm rotation, change of key audit matters, and the Big 4 audit firms. Model (2) analyzes the influence of audit firm rotation, change in key audit matters, big 4 audit firms, and return on assets on financial reporting quality. The model developed by Kothari, Leone, and Wasley (2005) was used to measure discretionary accruals. As a result of the panel data analysis conducted for Model (1), it was found that audit firm rotation and the Big 4 audit firms did not have a significant impact on the changes in key audit matters. Panel data analysis was applied to Model (2) using the discretionary accruals data obtained from Model (3). According to the analysis results of Model (2), changes in key audit matters and return on assets have a significant and positive impact on the quality of financial reporting. As a outcome of this study, which examined the data of BIST 30 companies between 2017 and 2022, it was concluded that changes in key audit matters and return on assets positively affect the quality of financial reporting. Keywords: Audit Firm Rotation, Key Audit Matters, Financial Reporting Quality, BIST30, Panel Data Analysis