Trends and outliers in industry risks, as revealed by KAMs data
We have published the second post in our series analysing world-first digitally tagged Key Audit Matters (KAMs) data from Japan, exploring how the use of XBRL can help us get a better handle on the risks identified by auditors. Having begun last week with a general overview, we now break down the data by industry sector, showing how we can visualise keywords by frequency to create rapid insights into the most important KAMs in each industry. For example, ‘doubtful accounts’ stand out as the most widespread concern identified in the banking sector.
Having determined industry-specific baselines, this analysis can also identify KAMs that do not fit the usual pattern, using outlier recognition. “Variations from the most common industry-specific KAMs can help analysts to spot entity-specific risk and may be of interest to investors and other users alike” . Such deviation from the industry pattern is not in itself problematic, but enables data users to discover special cases – which might represent unusual risks for investors, or even opportunities.
Read more here.