Key Audit Matters in Independent Audit Reports in Azerbaijan
Aydan Isabeyli
Abstract. This study examines the application, legal framework, and practical significance of Key Audit Matters (KAM) in independent audit reports in Azerbaijan. KAMs refer to areas in the financial statements where, according to the auditor's professional judgment, the risk of material misstatement is high and requires special attention during the audit process. In the first stage of the research, the place of the KAM concept in international standards (ISA 701), selection criteria, presentation formats in reports, and communication function are theoretically evaluated. Subsequently, the level of reflection of KAMs in reports is analyzed by examining Azerbaijani legislation, Azerbaijan Accounting Standards (AMS), IFRS compliance, and the practices of audit firms operating in the country. In the study, sample independent audit reports from different sectors are compared; types of KAMs concentrated especially in the banking, insurance, oil and gas, and manufacturing sectors are identified. The findings indicate that Key Audit Matters (KAM) implementation in Azerbaijan is generally compliant with international requirements, but needs improvement in terms of the depth of disclosure, risk justification, and user-oriented information presentation. The research offers recommendations for increasing transparency in the country's audit practice, strengthening auditor-stakeholder communication, and deepening international integration.
Keywords: independent audit, Key Audit Matters (KAM), audit reports, ISA 701, financial reporting, Azerbaijan audit system