ISA 701 and KAM reporting

The introduction of ISA 701 on Communicating Key Audit Matters (KAMs), issued by IAASB, marked a significant shift in the auditor’s report, aiming to increase transparency and relevance for financial statement users (IAASB, 2015). Under the ISA 710 requirements, auditors highlight areas that involved the most significant judgments, higher assessed risks of material misstatement, or complex estimates (Gold & Heilmann, 2019). This expanded reporting model was partly driven by long-standing concerns that the traditional pass/fail (unqualified, qualified/adverse) audit opinion provided insufficient insight into how an audit was conducted (Carcello, 2012; Christensen et al., 2014). Collectively, these early studies frame KAMs as a transparency tool that could enhance audit quality by sharpening professional skepti-cism, but might also impose cost and timing pressures that offset any quality gains. To understand which effect prevails, researchers have compared jurisdictions that differ in regulation, market sophistication, and firm structure.

Comparative evidence across European Jurisdictions

The European Union adopted ISA-type “extended audit reports” for public-interest entities starting from June 2016 (Cameran and Campa, 2025), but empirical results differ across countries and stakehold-er groups. As an early adopter, the UK saw richer risk disclosures and shorter expectation gaps, yet archi-val evidence finds no consistent improvement in abnormal accruals or cost of capital; auditors themselves view the change as broadly communicative (Bedard et al., 2016; Vedard et al, 2019). The French expe-rience demonstrates that investors appreciate KAM details for complex estimates, but preparers view the added transparency as a litigation risk (Bedard et al., 2016). Experimental work with professional investors suggests that German-style KAMs enhance report readability and users’ risk assessments, but auditors remain skeptical about any quality improvement (Köhler, Ratzinger-Sakel, & Theis, 2020). Syn-thesising these results, Velte & Issa (2019) conclude that investors and audit-committee members value the additional transparency, while auditors and preparers often view KAMs as a regulatory formality. The mixed European evidence underscores the importance of examining KAM perceptions in smaller, capacity-constrained markets such as Kosovo.

Mixed empirical findings on audit quality and efficiency

Early empirical evidence, especially in larger or more mature markets, indicates that KAMs and similar „expanded auditor’s report” disclosures can foster better communication with corporate gov-ernance bodies (Köhler et al., 2020; Prasad & Chand, 2017). For instance, Sirois et al. (2018) employed an eye-tracking experiment to demonstrate that investors do indeed pay attention to KAM paragraphs, suggesting potential benefits in enhancing users’ focus on critical audit areas. However, despite regu-lators’ emphasis on enhancing transparency and clarity, the impact on audit quality remains a topic of debate (Moroney et al., 2021; Nguyen & Kend, 2021). The mixed results highlight two unresolved issues: (1) whether auditors themselves believe KAMs improve outcome quality versus merely process efficiency and (2) whether those beliefs vary systematically with auditor characteristics

Recent literature recognizes mixed impacts of KAMs on both audit quality and audit efficiency. Audit quality can be viewed in terms of the assurance level achieved and the absence of material misstate-ments, while audit effectiveness/efficiency relate to how smoothly and efficiently the audit is conducted (e.g., timeliness, cost, and process improvements). Rautiainen et al. (2021) categorize the potential effects of KAMs along these two dimensions – quality and efficiency – and find that auditors themselves hold differing views on each. In their survey of Finnish auditors, two dominant perspectives emerged: one group (or mindset) focused on audit quality and largely did not believe KAMs improve quality, whereas another group emphasized audit efficiency and believed KAMs make the audit process more fluent. No-tably, Rautiainen et al. (2021) report that “in general, the respondents did not consider that KAM improve audit quality”, but those auditors who valued efficiency felt that “KAM make the audit process more fluent” and can facilitate better cooperation with clients’ management

Auditor attributes shaping KAM perceptions

This suggests that KAMs might contribute more to the effectiveness of the audit (by focusing at-tention and improving communication) than to traditional notions of audit quality. Their findings also highlighted that the introduction of KAMs brought concerns about audit workload and risks, as auditors must ensure the identified KAM areas are thoroughly audited and clearly reported. Similar concerns about increased effort and workload due to KAMs have been documented in other studies (e.g. in the UK and Thailand).

Research also underscores that the perceived usefulness and effect of KAMs can vary with auditor attributes (Barghathi et al., 2021; Knechel, 2016). Large audit firms (e.g., Big 4/Big10) often have ro-bust internal methodologies emphasizing key risk areas even before KAM requirements (Carcello, 2012; DeFond & Zhang, 2014). Consequently, Big 4/Big 10 auditors might view KAMs as largely a reporting formalism (Nguyen & Kend, 2021). In contrast, smaller firms may see KAMs as a structured way to com-municate significant risks to clients, occasionally perceiving it as an improvement tool – though resource constraints can undermine potential benefits (Rautiainen et al., 2021).

Workload and experience levels also appear to shape auditor attitudes (Gold & Heilmann, 2019; Kachelmeier et al., 2020). Experienced auditors, frequently citing heavier engagements, often appreciate KAM-driven efficiencies, such as streamlined communication with governance bodies, but they do some-times remain skeptical about any incremental assurance gain if they already had mature audit processes in place (Moroney et al., 2021). Less experienced practitioners, meanwhile, might be relatively open to viewing KAMs as beneficial frameworks for risk-focused auditing, although they can also feel burdened by drafting disclosures without robust firm-level support (Rautiainen et al., 2021). If experience, firm size, and workload shape auditors’ cost-benefit calculus, perceptions in a small-firm-dominated market should differ from those documented in Big-4 environments. This sets the stage for hypothesis develop-ment specific to Kosovo.

In emerging markets like Kosovo, implementing globally recognized standards occurs amid unique constraints such as nascent regulatory oversight, limited numbers of public interest entities (PIEs), and varying levels of auditor expertise (Hoti & Sopa, 2022). Prior to this research, little was known about how local auditors, especially those in small or newly established practices, perceive KAM reforms in terms of either quality improvement or process efficiency. Recent research from similar contexts (Abdullatif & Al-Rahahleh, 2020) suggests that while KAM disclosures might strengthen transparency, they do not necessarily address deeper quality issues tied to low fees, weak enforcement, or insufficient training.

Emerging-Market lens and hypotheses

Prior research provides no unanimous verdict: KAMs appear to enhance transparency and possibly certain aspects of audits, but their impact on audit quality is uncertain and context-dependent.

Audit practice in Kosovo features three structural constraints, limited regulatory and oversight capacity, small practitioner size, and uneven KAM exposure, that parallel conditions observed in Jor-dan (Abdullatif & Al-Rahahleh 2020) and Thailand (Suttipun 2021). Prior studies in such contexts em-phasise process gains (better planning, clearer communications) rather than measurable quality gains (lower misstatements). Drawing on that evidence and our narrative above, we formulate three testable hypotheses:

Research design and data collection

We employed a survey-based approach targeting licensed and certified auditors who practice audit-ing in Kosovo. The survey method allows us to capture auditors’ personal perceptions and experiences with KAM implementation, complementing archival analyses of audit reports. A structured question-naire was developed, drawing on prior studies (especially Rautiainen et al., 2021) and ISA 701 guidelines as issued by IAASB (IFAC). The questionnaire was prepared in both English and Albanian (the local language) to ensure clarity for all respondents. It was pilot-tested with two experienced auditors for feedback, then administered electronically via email and an online survey platform. The target popula-tion was all Certified and Licensed Auditors in Kosovo members of Society of Certified Accountants and Auditors of Kosovo Kosovo’s professional accountancy body (PAO). The KCFR register (December 2024) lists 99 licensed statutory auditors in Kosovo and SCAAK register lists 139 certified auditors as its mem-ber (total 238). The final dataset consists of N = 150 fully completed questionnaires, representing 63 % of the 238 licensed or certified auditors in Kosovo (KCFR + SCAAK, December 2024). The respondents in our sample represent a broad cross-section of the Kosovo audit profession. The average auditor in the sample has about 12 years of audit experience. Respondents ranged from newly certified auditors with 1-2 years of experience to veteran auditors with over 23 years in practice.

All respondents were at least familiar with the concept of KAMs. Not everyone had personally signed an auditor’s report with KAMs (since only some audits require them), but the survey instructed par-ticipants to answer based on their general experience and expectations regarding KAMs. We included a question asking if they had been involved in an audit engagement where KAMs were communicated: 60% answered “Yes”, while 40% had not personally issued a KAM (these auditors likely work on small-er non-PIE engagements but are aware of the standard through CPD trainings with SCAAK or industry discussion).

Survey Instrument

The survey questionnaire consisted of three parts: (1) background information, (2) perceptions of KAM impacts, and (3) audit practice and KAM experience. In Part 1, we collected demographic and pro-fessional data (such as years of audit experience, firm size/type, position, typical workload, etc.). Part 2 included a series of statements to gauge the auditor’s perceptions of how KAM implementation has af-fected various aspects of audits. Respondents were asked to indicate their level of agreement with each statement on a five-point Likert scale (1 = “Strongly disagree”, 5 = “Strongly agree”, with 3 = “Neutral”). Key statements for this study included: “The inclusion of Key Audit Matters in the auditor’s report has im-proved overall audit quality.” (measuring perceived impact on audit quality) and “Communicating KAMs has made the audit process more effective or efficient.” (measuring perceived impact on audit effective-ness/efficiency). We also included statements to capture related effects, such as “KAM reporting increases the auditor’s workload”, “KAMs help focus the audit on the most important areas”, “KAMs enhance the value of the audit to financial statement users”, and “KAM discussions improve the communication between auditors and management/audit committee”. These additional items help provide context and were used to cross-check consistency in responses. Part 3 had a few questions for those with direct KAM experience (e.g. how many KAMs they typically include in an audit report, what challenges they faced in drafting KAMs, etc.) and open-ended prompts for any comments on KAM implementation.

The key dependent variables in our analysis are derived from Part 2 Likert-scale responses:

In addition, we use the other survey items to enrich the analysis (for example, the workload increase item helps interpret whether efficiency gains come at the cost of more work). We performed a reliability check on the Part 2 items: the items related to quality focus (e.g. quality improvement, value to users) showed a reasonable internal consistency (Cronbach’s α = 0.78), and items related to efficiency/process focus (efficiency improvement, improved communication, workload) had α = 0.74. This suggests that within each group, responses were generally consistent. Given our research focus, we proceeded with the two main single-item measures (KAM_Quality and KAM_Efficiency) as the outcomes for hypothesis testing, as they directly address our H1 and H2.

Econometric Model and Variables

Our study, as specified in literature review section, culminated in three hypotheses: H1 (no per-ceived quality improvement), H2 (perceived efficiency improvement), and H3 (moderation by auditor attributes). The following model operationalises each hypothesis. H1 and H2 are tested through the two dependent variables KAM_Quality and KAM_Efficiency, while H3 is examined via interaction of those outcomes with experience, firm size, and workload. In essence, we model:

Perceived_Impacti=β0 + β1Experiencei + β2Big4Firmi + β3Workloadii + β4kControlsi+ϵi(1)

where PerceivedImpact is either the quality perception score or the efficiency perception score for auditor i. The main independent variables are:

We also collected other control variables (gender, position, whether the auditor holds an interna-tional/national certification, etc.). In the final regression, we included gender (male=1, female=0) and an indicator for KAM experience (whether the auditor had been involved in a KAM audit or not) as additional controls.

We estimated separate models for the two dependent variables: one for KAM_Quality perception and one for KAM_Efficiency perception. Because the dependent measures are essentially ordinal Likert scores, one could use an ordered logistic regression. However, for interpretability and given the approx-imate continuity (and our interest in linear relationships), we used ordinary least squares (OLS) regres-sion, treating the scores as interval data. The model assumptions (linearity, homoscedasticity, normality of residuals) were checked via residual plots and appeared reasonably satisfied given the data (some slight negative skew in responses, which is expected since many answered “disagree” on quality; a minor skew does not severely affect OLS with n=150).

Statistical Tests

In addition to regression analysis, we conducted various statistical hypothesis tests to address specific aspects of H1 and H2:

Data description

Table 2 summarises the demographic and professional profile of the 150 auditors who completed the questionnaire. The panel shows that two-thirds of respondents are male and that every career level is represented, with partners/owners, managers and senior/staff auditors accounting for roughly one-third each. Almost one-quarter of the sample work in a Big-4/Big-10 network, while the remainder come from small or medium-sized practices (SMPs). Respondents average 15 years of professional experience (SD = 8; range = 1-24) and report a busy-season workload of 59 hours per week (SD = 10). Thirty per cent have already signed at least one audit report containing Key Audit Matters, giving the study substan-tial firsthand KAM exposure. Overall, the dataset combines seasoned Big-4/Big-10 professionals with less-experienced SMP auditors, reflecting the structure of the Kosovo audit market.

Descriptive Statistics and Correlations

The survey results reveal a stark contrast between how auditors view KAMs’ effect on audit quality versus audit effectiveness. On the 5-point agreement scale, the average rating for “KAMs have improved audit quality” was 2.80 (with a standard deviation of 0.70). This mean is below the neutral value of 3, in-dicating a tendency toward disagreement. Indeed, a one-sample t-test confirms that 2.80 is significantly less than 3 (t = –4.21, p < 0.001), meaning auditors on average disagree that KAMs enhance quality. In fact, only a very small fraction of respondents explicitly agreed with that statement: about 2% of audi-tors chose “Agree” (4) and none chose “Strongly Agree” (5) on that item. The vast majority (roughly 60%) answered “Disagree” (2) or “Strongly Disagree” (1), and the remaining 38% were “Neutral” (3). In short, there is widespread skepticism among Kosovo auditors that the inclusion of KAMs has improved the quality of audits. This finding in itself supports H1. It is notable that outright agreement was nearly non-existent – even auditors who did not actively disagree primarily selected the neutral midpoint, perhaps indicating uncertainty or ambivalence rather than endorsement of quality improvement.

In contrast, auditors’ views on audit effectiveness/efficiency gains were more positive. The average rating for “KAMs have made the audit process more effective/efficient” was 3.52 (SD = 0.79), which is above neutral. A t-test shows this mean is significantly greater than 3 (t = +8.10, p < 0.001). Approxi-mately 55% of respondents agreed (rating of 4 or 5) that KAMs improve audit effectiveness, while about 30% were neutral and 15% disagreed. Thus, a majority perceives some efficiency benefit from KAMs. It appears that many auditors feel that identifying and communicating KAMs helps them focus on the most important areas and potentially streamlines the audit. This supports H2, suggesting that while quality (as an outcome) isn’t seen as better, the process of auditing is seen as improved by KAM requirements. Some comments from respondents illustrate this: “Having to determine KAMs early in the audit forces us to clarify what the high-risk areas are and plan accordingly”, and “KAM discussions with the audit committee keep the audit team concentrated on issues that matter, which avoids wasting time on trivial areas.” Such remarks echo the idea that KAMs can provide focus and fluent process, aligning with Rautiainen et al.’s concept of efficiency-focused auditors. The divergence between the quality and efficiency perceptions is itself an interesting result. The two perception variables are in fact negatively correlated (r = –0.26, p < 0.01; see Table 3). In other words, auditors who strongly feel that KAMs make the audit more efficient tend to be the ones who are skeptical about improvements in audit quality (and vice versa, those few who think quality might improve tend not to emphasize efficiency as much). This inverse relationship suggests two mindsets, as identified in prior research: one could label them “efficiency-oriented” vs. “quality-oriented” auditors. Our sample includes both types, though the majority are clearly not seeing a quality uptick. This negative correlation can also be interpreted as a trade-off in perceptions – some auditors might even worry that focusing on KAM areas (to be efficient) could mean other areas get less attention, potentially diminishing overall quality, while others might simply compartmentalize the two concepts. We will discuss this dynamic later. For now, it is important to note that KAM_Efficiency has a considerably higher mean than KAM_Quality, and this difference is statistically significant. A paired t-test comparing the two ratings within respondents yields t = –11.5 (p < 0.001), confirming that individ-ual auditors rate efficiency impacts higher than quality impacts on average.

From Table 3, we observe several notable correlations: The negative correlation between experi-ence and quality perception (r = –0.34) indicates that more experienced auditors tend to disagree more strongly with „KAMs improve quality”. This supports our hypothesis that veteran auditors are more cynical about the value-added by KAMs. In contrast, experience has a slight positive correlation with efficiency perception (r = 0.15), though not very strong; this suggests older auditors might slightly ac-knowledge efficiency benefits, or at least they don’t deny them as much. Big4 affiliation shows a moderate negative correlation with quality perception (r = –0.37), meaning Big4 auditors are notably more skep-tical about quality improvements than non-Big4 auditors. There is also a positive correlation between Big4 and efficiency perception (r = 0.35), implying Big4 auditors more often agree that KAMs improve the process. This paints an interesting picture: auditors at large firms seem to say, “KAM doesn’t make our audit better in quality, but it does help make it smoother.” Non-Big4 auditors (often from smaller firms) are comparatively less negative on quality (some might even be neutral or slightly positive) and less positive on efficiency. One reason could be that smaller-firm auditors deal with KAM less frequently and might not feel a significant change in their process (and if they do think KAM could improve quality, perhaps they view it as a learning opportunity or a way to impose more rigor on significant issues).

The workload variable correlates negatively with quality perception (r = –0.27) and positively with efficiency perception (r = 0.43). This suggests auditors who work longer hours (often those in big firms or with many engagements) tend to say KAM hasn’t improved quality (possibly seeing it as extra burden) but do appreciate the efficiency (they likely rely on KAM to manage time by focusing on key matters). Indeed, workload is significantly higher for Big4 auditors (correlation r = 0.36 between Big4 and hours). Big4 auditors in our sample reported an average of 60 hours/week vs 50 for others, reflecting the heavi-er demands in international firms. Workload and experience are not strongly correlated in our sample (many young auditors at Big4 have high hours, whereas some older auditors in small practices might have fewer clients and lower hours), so their effects can independently be examined.

Group differences

To further illustrate these patterns, we compare group means: Big4 auditors had a mean quality perception score of 2.39, compared to 2.93 for non-Big4 auditors. This difference of =0.54 points is sta-tistically significant (t(148) = –4.85, p < 0.001). In practical terms, almost all Big4 respondents disagreed that KAM improves quality, whereas among non-Big4, a substantial minority were neutral. Similarly, Big4 auditors’ mean efficiency perception was 3.85 vs 3.42 for others (t(148) = 3.60, p < 0.001), indicating Big4 auditors are more convinced of efficiency gains (many of them agreed with the statement) relative to smaller-firm auditors who might only slightly agree or be neutral.

Experience-wise, auditors with >15 years experience had a mean quality score of 2.64, whereas those with ≤15 years had a mean of 2.96. The difference (–0.32) is significant (t(148) = 3.25, p = 0.0012). Thus, less experienced auditors were closer to neutral (some even mildly agreed) about quality improve-ment, while highly experienced auditors generally disagreed. An ANOVA across three experience brack-ets confirms a significant difference (F(2,147) = 6.58, p = 0.002). Post-hoc comparisons (Tukey) showed the low-experience group differed from high-experience group at p < 0.01, while the mid group was in between and not significantly different from either extreme. There was no significant difference in the efficiency perception by experience group in ANOVA (means were relatively similar, around 3.5–3.6 for all groups, with perhaps a slight uptick in the high experience group). This indicates the efficiency view is more uniformly accepted across ages.

Chi-square analysis

We created a contingency table to examine the association between firm type (Big4 vs Non-Big4) and perception category (negative vs non-negative view on quality). We defined “negative view on qual-ity” as responding 1 or 2 (disagree) on the quality item, and “neutral/non-negative” as responding 3, 4, or 5. Among Big4 auditors, 86% fell into the negative category, versus 55% of non-Big4 auditors. The chi-square test of independence was significant (χ²(1) = 11.13, p < 0.001), indicating a strong association between firm type and outlook on KAM impact. Big 4 auditors were much more likely than expected to be in the „KAM doesn’t improve quality” camp. Conversely, non-Big4 auditors were more evenly split (though still mostly skeptical, a higher portion of them were neutral or slightly positive). We found no statistically significant association between auditor gender and their stance on KAM impact (χ²(1) ≈ 2.14, p = 0.14 for quality perception split by gender). Male and female auditors responded similarly so that we won’t focus on gender differences. The lack of gender effect is perhaps not surprising given both genders operate in the same firms and culture; any differences are likely more driven by experience and role than gender.

Regression Analysis

We now turn to the multivariate regression results, which test how auditor characteristics jointly relate to KAM perceptions. Table 4 presents the OLS regression estimates for the dependent variable Quality Perception (agreement that KAM improves audit quality). Table 5 presents the analogous re-gression for Efficiency Perception (agreement that KAM improves audit effectiveness). In each model, the independent variables are auditor experience, Big4 firm (dummy), and workload (hours), with con-trols for gender and KAM experience included. We report unstandardized coefficients, with t-statistics in parentheses.

The regression in Table 4 is highly significant overall (F-statistic p<0.001) and explains about 29% of the variance (R² = 0.29) in auditors’ perceived quality impact scores. This R² is reasonably strong for per-ceptual data, indicating our chosen factors capture meaningful differences among respondents. Looking at the coefficients:

Overall, the regression confirms H3 in that auditor experience, firm size, and workload all have significant relationships with the perceived impact of KAM on quality. And all three relationships point in the same direction – auditors who are more senior, in larger firms, and working longer hours are more negative about KAM improving quality.

This model is also significant (p<0.001) and explains about 26% of the variance in the efficiency percep-tion. We see a nearly mirror-image but opposite-direction set of effects compared to the quality model:

In summary, the regression results support H3: auditor characteristics significantly influence per-ceptions of KAM impact. Moreover, the patterns are intuitive and internally consistent: the same factors that made auditors more skeptical about quality (experience, Big4, workload) made them more positive about efficiency. This reinforces the notion of two dimensions – those factors essentially shift an auditor’s focus from quality to efficiency benefits. We see that KAMs are not viewed as a quality booster by those who deal with them the most (experienced Big4 auditors), but those same auditors highlight efficiency and process improvements. Meanwhile, the auditors less involved with KAM (junior, small firm) didn’t see much efficiency gain but some of them kept an open mind that maybe quality could benefit (though, again, not strongly). Overall, across the whole sample, the dominant sentiment is “KAMs help the audit process, but they don’t make the audit results any better in quality.” This directly addresses our primary research questions: no, auditors do not think KAMs have improved audit quality in Kosovo, and yes, au-ditors generally think KAMs have improved audit effectiveness to a moderate degree. Tests of H1 , H2 and H3

H1 states that auditors do not perceive KAMs to have improved overall audit quality. A one-sample t-test compares the mean response on the KAM_Quality item (μ = 2.80, SD = 0.70) with the neutral midpoint of 3. The result ( t = –4.21, p < .001; 95 % CI = [2.69, 2.89] ) indicates a statistically significant inclination toward disagreement. The effect size is modest (Cohen’s d = –0.29) but the direction is unambiguous: auditors, on average, do not believe that ISA 701 has lifted audit quality. Consequently, H1 is supported.

H2 predicts that auditors perceive KAMs to enhance audit effectiveness/efficiency. The one-sample t-test for the KAM_Efficiency item (μ = 3.52, SD = 0.79) against the neutral value of 3 yields t149 = +8.10, p < .001; 95 % CI = [3.39, 3.65]. The effect size is medium (Cohen’s d = 0.66). Thus respondents agree that KAM communication makes the audit process more fluent and targeted. H2 is therefore supported.

H3 states that auditor attributes moderate the perceptions documented above. Experience is negatively associated with perceived quality improvement (β = –0.028, p < .001) but positively associated with per-ceived efficiency gains (β = +0.013, p = .012). Big-4 affiliation shows a similar pattern: a sizeable negative coefficient on quality (β = –0.447, p < .001) and a positive coefficient on efficiency (β = +0.285, p = .005). Workload (busy-season hours) reduces quality perceptions (β = –0.012, p = .012) yet strongly increases efficiency perceptions (β = +0.020, p < .001). The ordered-logit results mirror these signs and signifi-cance levels, confirming robustness to the ordinal nature of the Likert scales. Collectively, the evidence supports H3: seasoned, Big-4, high-workload auditors are sceptical about a quality uplift but enthusiastic about efficiency benefits.

The “Process vs Outcome” Divide

The most striking pattern across results is the contrast between auditors’ views on quality and on efficiency. This mirrors the duality identified by Rautiainen et al. (2021) in Finland, where KAMs were seen to “make the audit more fluent” but did not alter the core assurance function. In our study, Cohen’s d = –0.29 for quality versus d = +0.66 for efficiency underscores this divergence.

Velte & Issa (2019), in their multi-country review, similarly noted that investors value KAMs as a transparency tool, but auditors do not equate disclosure with better audit outcomes. Our results sup-port that stance: Kosovo auditors, like their European counterparts, distinguish between how the audit is conducted (process) and what it achieves (outcome). The dominant sentiment appears to be: “we already focused on key risks; now we write about them, nothing else changed.”

Firm size, experience and the SMP-BIG4/10 divide

Perceptions vary systematically with firm characteristics. Big-4 auditors – who have the most ex-posure to KAMs – were significantly more likely to disagree that audit quality improved, yet more likely to report process benefits. These patterns are consistent with Carcello (2012), who argued that large firms already operate under internal risk protocols akin to KAMs, so the new standard merely formalizes existing practices.

Nguyen & Kend (2021) also observed that Australian Big-4 auditors saw little added value in KAMs for quality, though they acknowledged its communicative role. Our results echo this. Meanwhile, smaller SMP auditors, while somewhat less engaged with KAMs, were slightly more open to the idea that it might improve quality – perhaps viewing it as a structured opportunity for better documentation or focus.

Interestingly, more experienced auditors were the most skeptical of quality improvement yet the most appreciative of efficiency benefits. This aligns with Moroney et al. (2021), who noted that senior au-ditors often see disclosure mandates as “reporting overlays,” rather than transformative tools. In Kosovo, auditors with >20 years’ experience may view KAMs as redundant with their established professional judgment.

The role of workload and efficiency value

One of the strongest predictors of efficiency perception was workload. Auditors with longer hours were more likely to rate KAMs as useful for streamlining effort and focusing engagement teams. This is consistent with Gold & Heilmann (2019), who identified workload pressure as a key lens through which audit professionals assess new standards.

In our data, those under high time pressure appreciated how early KAM determination forced struc-tured risk discussions and improved coordination with clients. Köhler et al. (2020) also found that KAMs improve the communicative value of audit reports, Kosovo auditors extend this benefit internally, point-ing to better planning and team communication.

Emerging Market Constraints and Localised Scepticism

First, the country’s audit profession is dominated by SMPs with limited resources (Hoti & Sopa, 2022). Many auditors in our study noted that KAM drafting is burdensome in small teams—templates, peer review, or training are often lacking. This echoes concerns raised by Suttipun (2021) in Thailand and Abdullatif & Al-Rahahleh (2020) in Jordan, where KAM implementation created strain in small-firm contexts.

Second, some respondents expressed concern that over-emphasizing KAM areas could divert atten-tion from other critical zones – especially when teams are stretched. This supports the “blind spot” risk suggested in Rautiainen et al. (2021): if not well managed, focusing on KAMs could lead to under-auditing elsewhere.

Finally, the perceived disconnect between KAMs and quality improvement may reflect deeper sec-toral issues. As one auditor noted: “KAM or no KAM, if an audit is underpriced and rushed, quality won’t be high.” This aligns with Pratoomsuwan & Yolrabil (2020), who warned that legal mandates alone do not improve assurance unless structural weaknesses (fees, oversight, training) are addressed.

Emerging Market Constraints and Localised Scepticism

Taken together, our findings highlight the need for a balanced policy response. Regulators and pro-fessional bodies such as KCFR and SCAAK should not expect that ISA 701 alone will raise audit quality. However, they can leverage KAMs as a tool to promote better audit planning, more consistent communi-cation with those charged with governance, and a risk-based audit mindset.

To do this effectively, capacity-building for SMPs is essential. Templates, case-based training, and partner-level guidance can help smaller firms extract process value from KAMs, without increasing doc-umentation burden. KAMs should be seen as a process tool, not just a disclosure requirement.

Key findings

Survey evidence from Kosovo auditors shows a clear process–outcome split. Auditors reject the notion that ISA 701 has lifted audit quality (mean 2.80 < neutral; t = –4.21, p < .001) but accept that KAMs improve audit effectiveness (mean 3.52 > neutral; t = +8.10, p < .001). Regression analysis confirms that seasoned, Big-4/10, high-workload auditors are most sceptical about quality gains yet most positive on efficiency. Thus, KAMs are viewed primarily as a planning and communication tool, not a quality enhancer.

Practical implications

For regulators (KCFR) and the profession (SCAAK), the message is pragmatic: keep KAMs for trans-parency, but do not assume they cure underlying quality issues. Instead, leverage them to institutionalise early risk dialogue, strengthen auditor–governance communication and benchmark audit planning qual-ity. Targeted CPD, templates and peer-learning circles will help SMPs capture the same process benefits already evident in Big-4/10 firms, without adding disproportionate documentation burden. Further-more, our findings of this research have clear policy relevance for professional bodies and the national regulator (SCAAK and KCFR). Given that small and medium-sized audit firms (SMPs) dominate Koso-vo’s audit market, these institutions could strengthen capacity-building initiatives focused on practical KAM implementation. This could include mentorship programs, standardized templates, and case-based workshops aimed at translating KAM guidance into scalable, resource-appropriate practices for SMPs.

Academic contribution

This study offers rare, empirical evidence from a developing-country audit market and extends KAM research beyond mature economies, confirming in an emerging-market setting the “process-not-quali-ty” thesis advanced by Rautiainen et al. (2021) and Velte & Issa (2019). By isolating workload, firm size and experience as significant moderators, it also refines attribute-based theories of standard adoption (Carcello 2012; Nguyen & Kend 2021). The Kosovo evidence underscores that auditors’ cost-benefit anal-ysis, and hence their attitudes toward disclosure reforms, is remarkably consistent across regulatory environments. This study contributes to the literature by providing evidence from an emerging market on auditors’ perceptions of a major auditing reform. It demonstrates that the attitudes in Kosovo are remarkably consistent with those in other countries, reinforcing the external validity of prior studies like Rautiainen et al. (2021). For academia, this suggests that theories about auditor behavior and the effects of audit report changes hold across contexts – auditors, by and large, respond similarly to global standards changes despite different local conditions.

Limitations and future research

Findings rely on self-reported perceptions; observational or archival tests (e.g., restatements, in-spection scores) are needed to confirm whether quality truly remains unchanged. The cross-sectional design captures only the early years of ISA 701 adoption; longitudinal data could reveal learning effects as SMPs gain experience.

Future mixed-methods studies, combining surveys, interview evidence and file reviews, could ex-plore whether KAMs unintentionally create “blind spots” in non-KAM areas, and whether user confidence in Kosovo has shifted since the reform. Future research could also extend this work by investigating whether users in Kosovo perceive any change in their confidence or understanding due to KAMs (comple-menting the auditor perspective). Additionally, as more years of data become available, researchers could examine whether there are any measurable impacts on financial reporting quality or audit outcomes in Kosovo post-KAM, for instance, any change in restatement rates or audit delays.