Key Audit Matters: An Analysis of the Disclosed Categories in the Water and Sanitation Sector

Abstract

This study focuses on the companies of the Águas de Portugal Group, which operate in the water and sanitation sector, and aims to perform a content analysis of the auditor's reports and, specifically, of the key audit matters (KAM) disclosed from 2017 to 2021. Although it is not mandatory to disclose KAM, 57% of companies disclosed KAM in the period under review. Content analysis shows a high similarity in the number and content of KAM disclosed by companies in the period in which the same firm audits them. The categories of KAM disclosed are investment - recognition and measurement; impairment of investments; impairment of debts; revenue - recognition of downward activity; revenue - expense recovery deviations; and process of split. Audit responses to disclosed KAM mainly included inspections, followed by analytical procedures and inquiries, with reperformance being the least common procedure.