For publically listed New Zealand (NZ) companies with a balance date post-December 2016, the disclosure of Key Audit Matters will become mandatory. This requirement, aimed at enhancing the information value of audit reports, is a direct response to the recent Global Financial Crisis. Further, many auditors and market participants have voluntarily expanded these requirements and include a materiality threshold disclosure. Despite the significant response from regulators, little research has been conducted which explores the possible impacts of this enhanced materiality disclosure.

This quantitative research, using an experiment based research design, aims to investigate whether the disclosure of materiality thresholds will have an impact on both the decisions of non-professional investors and their perceived quality of the audit.

The results of this study suggest that with a large (ten percent) materiality threshold disclosure, non-professional investors will reduce their equity based investment, in favour of risk-free NZ Government Bonds. Alternatively, non-professional investors perceive no change in the quality of audit following small (five percent) or large materiality threshold disclosure, due to lack of statistical significance.

Overall, this research tentatively supports the public disclosure of materiality thresholds, noting that additional longitudinal studies are required.