Abstract

Purpose: This study examines the effect of peers on the disclosure of key audit matters (according to Standard 701) and the moderating role of industry competition—a change that, while enhancing transparency and information quality, increases auditors’ risk and may lead them to imitate peers’ disclosure practices.

Method: This applied, descriptive–correlational study includes a sample of 180 companies listed on the Tehran Stock Exchange in 2022 and 2023 (1401–1402). Linear regression with panel data and year effects control was used to test the hypotheses.

Results: The results indicate that the disclosure of key audit matters by peer companies has a significant positive effect on the focal company’s disclosure; however, this effect becomes negative after isolating the “industry effect.” Moreover, industry competition, rather than reinforcing this effect, weakens it, leading companies in more competitive markets to pursue differentiated disclosure. Robustness tests confirmed these findings.

Conclusion: These results expand the literature on peer effects in an emerging area, showing that industry competition can reduce the tendency to imitate peers’ disclosure practices and has important implications for improving regulatory policies and auditors’ behavior.

Contribution: By leveraging the context of implementing Standard 701 in Iran since 2022 (1401), this study provides an innovative framework for understanding auditors’ behavior and enhancing regulatory policies.