Peer effect of key audit matters disclosure

Examining Chinese listed companies (2017–2021), we show that key audit matters (KAMs) disclosure exhibits a significant peer effect. We verify a rivalry-based theory of this effect. Audit firms with similar (vs. divergent) resource endowments are more likely to mimic peers’ KAMs disclosure, particularly when auditors face more intense competition and a more uncertain information environment. Material misstatement risks may dampen the peer effect for less economically significant clients and auditors with more industry specialists, suggesting that this effect reflects auditors’ rational cost–benefit trade-off. Finally, the peer effect expands audit market share but reduces KAMs’ communication value. Our findings enrich KAMs disclosure research and provide implications for enhancing audit report reforms and the communicative value of KAMs disclosure.