Gender Diversity, Governance–Audit Alignment, and Audit Risk Disclosure: Evidence from Key Audit Matters in Japan

1. Introduction

Recent reporting reforms have expanded the informational content of the auditor’s report by requiring auditors to identify the issues that demanded the greatest attention during the engagement. KAM disclosures give outside users a view of the estimates, transactions, and uncertainties that were most challenging in the audit. Their usefulness, however, is not determined by volume alone. A short section may be informative when it isolates consequential risks, whereas a longer section may add little when the descriptions are repetitive or highly standardized.

KAM reporting therefore involves a disclosure trade-off. Auditors and governance bodies are expected to explain important audit concerns, yet detailed reporting can also attract scrutiny, heighten perceived responsibility, or expose the firm and auditor to reputational and litigation consequences. The resulting KAM section should be viewed as an outcome of professional judgment and governance communication rather than as a purely mechanical reporting requirement.

This study asks whether gender diversity on the governance and audit sides is related to that trade-off. It does not assume that female involvement necessarily increases or decreases reporting. Instead, it examines whether female board representation, female audit partner involvement, and their interaction are associated with the amount, length, and risk composition of KAM disclosure. This approach is motivated by mixed prior evidence: gender diversity can strengthen monitoring and accountability, but it can also support more selective reporting when additional wording is viewed as redundant or costly.

Japan offers a useful empirical setting because mandatory KAM reporting is recent and typically concise. The requirement applies to listed companies for fiscal years ending in March 2021 or later. In the final sample, firms report an average of 1.233 KAMs, and account-level matters dominate. This environment makes it possible to distinguish broad disclosure expansion from a reallocation of attention toward more salient firm-wide risks.

The analysis covers 9,808 firm-year observations from 2021 to 2023. KAM headings are manually collected from statutory audit reports and classified as account-level KAMs (ALKAMs) or entity-level KAMs (ELKAMs). ALKAMs concern particular balances, estimates, or transactions; ELKAMs concern risks affecting the organization more broadly, such as going concern, restructuring, fraud, internal-control deficiencies, and major organizational change. The distinction separates disclosure quantity from risk focus.

Two gender measures are examined. FEBOARD is derived from NEEDS-Cges and represents the proportion of women among the governance positions reported in statutory filings, including directors, audit and supervisory board members, audit and supervisory committee members, and executive officers. FEAUD identifies engagements with at least one female signing audit partner, based on the Nikkei Audit Firms and Audit Opinions database and corroborating public sources. Their interaction captures concurrent female involvement on the governance and audit sides.

The evidence is not uniformly disclosure-increasing or disclosure-decreasing. The stand-alone gender variables do not reduce KAM counts, but their interaction is negatively associated with both KAM counts and logged narrative length. At the same time, each stand-alone variable is positively associated with ELKAM disclosure, and FEBOARD is negatively associated with ALKAM disclosure. The pattern is consistent with more selective communication rather than generalized non-disclosure.

The study contributes in three respects. First, it treats KAM reporting as a question of risk prioritization rather than disclosure volume alone. Second, it examines the simultaneous presence of women on the client-governance and audit-engagement sides, extending work that studies either side separately. Third, it adds evidence from Japan, where the low number of reported KAMs makes differences in disclosure focus especially visible.

2. Institutional Background and Theoretical Framing

2.1. KAMs as Audit Risk Disclosure

ISA 701 requires auditors to identify, from the matters discussed with those charged with governance, the issues that required the greatest audit attention during the period (IAASB, 2015). Japan implemented the same reporting concept through Auditing Standards Committee Statement No. 701 (Japanese Institute of Certified Public Accountants, 2018). Under the Japanese standard, the auditor selects KAMs from governance communications and explains why those matters were significant and how they were addressed.

KAMs sit at the intersection of governance and risk communication. Their selection emerges from dialogue between the external auditor and governance bodies, while their publication affects how investors and other users interpret responsibility for difficult judgments or emerging risks. The KAM section is therefore best understood as a public communication product shaped by audit judgment, governance interaction, and disclosure incentives.

Evidence on expanded auditor reporting points to both benefits and costs. KAMs can make audit reports more informative, but they can also alter perceptions of auditor responsibility and potential exposure (Bedard et al., 2016; Gutierrez et al., 2018; Velte and Issa, 2019). Subsequent studies show that KAM wording reflects organizational routines, regulatory pressure, repetition, and the degree of engagement-specific detail (Fu et al., 2025; Kuster, 2024; Maroun and Duboisée de Ricquebourg, 2024). These findings support examining not only how many KAMs are disclosed, but also which risks are selected and how they are framed.

Cross-country evidence further shows that KAM practice is institution-dependent. Studies from Jordan and stakeholder-based research on expanded reporting document differences in implementation, audit work, and perceived audit quality (Abdullatif and Al-Rahahleh, 2020; Nguyen and Kend, 2021). Archival evidence from Europe and Asia similarly links KAM volume and content to client and auditor characteristics (Ferreira and Morais, 2020; Pinto and Morais, 2019; Wuttichindanon and Issarawornrawanich, 2020).

2.2. Gender, Monitoring and Risk-Related Judgment

Research on gender and professional judgment does not yield a single prediction. Experimental and behavioral evidence indicates that women may take less risk in some settings and may evaluate questionable business conduct more critically (Byrnes et al., 1999; Croson and Gneezy, 2009; Franke et al., 1997). Auditing studies also connect gender with judgments under complex tasks and with several audit-quality outcomes (Chung and Monroe, 2001; Hardies et al., 2015; Ittonen et al., 2013). At the board level, female representation has been associated with stronger monitoring, higher earnings quality, and more informative capital-market outcomes (Adams and Ferreira, 2009; Gul et al., 2011; Srinidhi et al., 2011).

These findings do not imply a stable female preference for either more or less disclosure. They instead suggest that gender composition may shape how decision-makers respond to a particular governance or reporting environment. Recent studies illustrate this conditionality: board gender diversity changes the relation between charitable donations and earnings management, and it also moderates the audit-quality consequences of partner workload (Kolsi and Al-Hiyari, 2026; Ahmed et al., 2025). The relevance of gender thus appears to depend on the surrounding governance and audit conditions.

Research focused directly on KAMs reaches similarly varied conclusions. UK evidence associates female audit partners with more extensive reporting (Abdelfattah et al., 2021). Other studies link audit-committee gender diversity to readability, show that conclusions depend on the readability metric, and document differences between account-level and entity-level KAMs (Velte, 2018; Hussin et al., 2023; Bepari et al., 2022). Partner gender has also been related to year-to-year KAM variation and to the detail of explanations in a dual-signature setting (Bepari and Mollik, 2023; He and Rivai, 2024). Collectively, this evidence supports a context-dependent rather than uniformly directional expectation.

2.3. Auditor-Client Matching and the Joint Gender Effect

The interaction examined here is also informed by research on engagement-partner assignment. Partners are allocated with reference to client needs, capacity constraints, industry knowledge, and relationship considerations; client representatives and audit committees can influence continuation and selection decisions as well (Dodgson et al., 2020; Hardies et al., 2026; Lee et al., 2019). Concurrent female representation on the client and audit sides may therefore reflect an alignment in communication preferences rather than two unrelated demographic effects.

Individual-level audit research reinforces the economic relevance of this interaction. Auditor identity, engagement-partner identity, and the experience of audit managers or auditors-in-charge have all been linked to audit effort, responsiveness, and reporting decisions (Gul et al., 2013; Knechel et al., 2015; Contessotto et al., 2019). FEAUD should therefore be viewed as an engagement characteristic capable of affecting the reporting process.

Lee et al. (2019) show that partner assignments are related to client-side characteristics, including the gender composition of boards and senior management. Accordingly, the FEAUD × FEBOARD term may capture a governance–audit alignment in the way risks are discussed. The analysis does not establish that such alignment caused the assignment, but it tests whether its observed presence is associated with KAM focus and length.

The predicted joint effect is not a blanket reduction in transparency. If communication across the governance and audit sides improves agreement about which matters are genuinely useful to outside users, the KAM section may become shorter because routine or duplicative items are omitted. Under this interpretation, concision reflects prioritization rather than concealment.

3. Hypothesis Development

3.1. Stand-Alone Gender Involvement and KAM Disclosure

Prior KAM research provides reasons for both disclosure expansion and disclosure restraint. Stronger monitoring may produce additional explanation, whereas concern about repetition, ambiguity, or legal exposure may favor a narrower report (Abdelfattah et al., 2021; Velte, 2018; Bepari et al., 2022; He and Rivai, 2024). A directional prediction for each stand-alone gender variable would therefore impose more structure than the literature supports.

Accordingly, H1 and H2 test whether the stand-alone gender variables are related to KAM reporting attributes without specifying a sign. This formulation is particularly appropriate in Japan, where KAM counts are low and account-level matters are pervasive.

H1. Female board representation is associated with KAM disclosure attributes.

H2. Female audit partner involvement is associated with KAM disclosure attributes.

3.2. Joint Involvement and Selective KAM Disclosure

Because KAMs emerge from exchanges between the auditor and those charged with governance, the interaction between FEAUD and FEBOARD is the central prediction. Homophily and interpersonal-communication research suggests that shared characteristics can facilitate coordination, while the auditor–client literature shows that partner relationships and assignments reflect client characteristics (Eagly and Johnson, 1990; Ibarra, 1992; McPherson et al., 2001; Dodgson et al., 2020; Hardies et al., 2026; Lee et al., 2019). When women participate on both sides, the discussion may converge more quickly on the matters that warrant public reporting.

Better coordination can reduce uncertainty over the boundary between significant and routine matters. The interaction may consequently be associated with fewer KAMs and a shorter narrative even if the resulting report remains informative. This prediction links communication alignment to the trade-off between transparency and the reputational or litigation costs of defensive disclosure.

H3. The interaction between female board representation and female audit partner involvement is associated with more selective KAM disclosure, reflected in fewer KAMs and shorter KAM narratives.

3.3. KAM Type and Risk-Disclosure Focus

Following Sierra-Garcia et al. (2019) and Bepari et al. (2022), KAMs are divided into ALKAMs and ELKAMs. ALKAMs address particular accounts or transactions and are often recurring. ELKAMs address broader organizational risks, including going concern, restructuring, fraud, internal-control deficiencies, and major operational change. Because ELKAMs concern the entity as a whole, they are more likely to convey strategically salient risk information.

Disclosure theory predicts different incentives across these categories. Public acknowledgment of significant bad news can reduce later litigation or credibility costs, while every additional disclosure also carries preparation, proprietary, and interpretation costs (Skinner, 1994; Verrecchia, 2001). Conservatism likewise reflects contracting and legal-risk considerations (Watts, 2003). Evidence that KAMs help users assess financial distress further supports the informational importance of entity-level risks (Camacho-Minano et al., 2024).

The argument is therefore about risk focus, not an inherent female preference for ELKAMs. Caution may discourage repetitive ALKAM disclosure when the incremental informational value is low, yet encourage ELKAM disclosure when silence would obscure a firm-wide risk. The same orientation can thus be associated with restraint in one category and greater visibility in another.

This setting may also explain why the results differ from Bepari et al. (2022), who find greater ALKAM disclosure by female audit partners elsewhere. Japanese reports are unusually concise and already dominated by ALKAMs. In this environment, greater attention to risk may be expressed through pruning routine account-level items and highlighting less common entity-level matters.

H4. Female board representation and female audit partner involvement are associated with the type of KAM disclosure, with greater emphasis on entity-level KAMs than on routine account-level KAMs.

4. Materials and Methods

4.1. Data Sources and KAM Extraction

The study covers Japanese listed companies during 2021–2023, the first three mandatory-reporting years. Firm and governance information comes from NEEDS-Cges, while financial data come from NEEDS-FinancialQUEST. KAM headings, narrative length, audit fees, auditor changes, and signing-partner names are manually collected from annual securities reports and the Nikkei Audit Firms and Audit Opinions database. A heading is treated as one KAM. Narrative length is measured as the number of Japanese characters in the KAM section, and WORD is the natural logarithm of that count.

The eligibility screens remove financial institutions in the banking, securities, and insurance sectors, observations with non-12-month fiscal periods, firm-years without KAM reporting because of adverse or disclaimer opinions, and observations lacking required financial or announcement-date data. The full KAM coding database contains 9,985 firm-years. After 99 observations fail the initial industry or fiscal-period screens and a further 78 observations fail the opinion or data-completeness screens, the final regression sample contains 9,808 firm-years.

Table 1. Sample selection procedure.

Sample selection step	Firm-years	Source or note
Full KAM coding database before industry and fiscal-period screens	9,985	All manually coded firm-years
Firm-years excluded by industry and fiscal-period screens	(99)	Industry and fiscal-period eligibility screens
Candidate firm-years after initial screens	9,886	Candidate observations before final opinion and missing-data exclusions
Firm-years excluded because KAM disclosure was unavailable due to adverse or disclaimer opinions	(48)	Public filing review
Firm-years excluded because ROA was missing	(20)	NEEDS-FinancialQUEST
Firm-years excluded because days to announcement was missing	(10)	Public filing and disclosure-date review
Final analytical sample	9,808	Firm-years used in the main analyses

Table 1. Sample selection procedure.

Sample selection step	Firm-years	Source or note
Full KAM coding database before industry and fiscal-period screens	9,985	All manually coded firm-years
Firm-years excluded by industry and fiscal-period screens	(99)	Industry and fiscal-period eligibility screens
Candidate firm-years after initial screens	9,886	Candidate observations before final opinion and missing-data exclusions
Firm-years excluded because KAM disclosure was unavailable due to adverse or disclaimer opinions	(48)	Public filing review
Firm-years excluded because ROA was missing	(20)	NEEDS-FinancialQUEST
Firm-years excluded because days to announcement was missing	(10)	Public filing and disclosure-date review
Final analytical sample	9,808	Firm-years used in the main analyses

Table 2. KAM classification criteria.

Code	Category	Classification criterion	Examples
ALKAM	Account-level KAM	Specific account balances, estimates or transactions; typically recurring and closely linked to financial statement line items.	Revenue recognition; fixed asset valuation; inventory valuation; deferred tax assets; financial instruments; provisions.
ELKAM	Entity-level KAM	Firm-wide or strategic risks that affect the entity as a whole; less routine and more closely related to accountability and business continuity.	Going-concern matters; restructuring; fraud risk; internal-control deficiencies; IT systems; major organizational changes.
Mixed KAM	Coding rule	If one KAM heading contains both account-level and entity-level content, the KAM is coded as ELKAM when the entity-level component is substantive.	For example, a going-concern assessment that also discusses impairment is treated as ELKAM.

Table 2. KAM classification criteria.

Code	Category	Classification criterion	Examples
ALKAM	Account-level KAM	Specific account balances, estimates or transactions; typically recurring and closely linked to financial statement line items.	Revenue recognition; fixed asset valuation; inventory valuation; deferred tax assets; financial instruments; provisions.
ELKAM	Entity-level KAM	Firm-wide or strategic risks that affect the entity as a whole; less routine and more closely related to accountability and business continuity.	Going-concern matters; restructuring; fraud risk; internal-control deficiencies; IT systems; major organizational changes.
Mixed KAM	Coding rule	If one KAM heading contains both account-level and entity-level content, the KAM is coded as ELKAM when the entity-level component is substantive.	For example, a going-concern assessment that also discusses impairment is treated as ELKAM.

4.2. Dependent Variables and Model Specification

KAM is the number of headings reported in a firm-year. WORD_COUNT is the number of Japanese characters in the KAM section, and WORD is the natural logarithm of WORD_COUNT. ELKAM equals one when a firm-year contains at least one entity-level KAM, while ALKAM equals one when it contains at least one account-level KAM.

The KAM equation is estimated by Tobit because the estimation sample is bounded at one KAM. WORD is estimated by ordinary least squares, and the two binary KAM-type outcomes are estimated by logistic regression. All specifications include industry and year fixed effects together with the control set described below.

All statistical analyses were conducted using Stata/BE 19.0 (StataCorp LLC, College Station, TX, USA). OpenAI ChatGPT (GPT-5.5 Pro) was used to assist with language editing and manuscript restructuring. The tool was not used to generate or modify the underlying data, statistical code, or empirical results. All AI-assisted content was reviewed and verified by the author.

The models estimate associations rather than a fully identified causal effect. Unobserved governance culture, client preferences, and audit-firm assignment practices may jointly affect gender composition and reporting choices.

Y_i,t = α₀ + α₁ FEAUD_i,t + α₂ FEBOARD_i,t + α₃ (FEAUD_i,t × FEBOARD_i,t) + γ′X_i,t + IND_j + YEAR_t + ε_i,t

(1)

In Equation (1), Y denotes either KAM or WORD for firm i in year t. FEAUD identifies engagements with at least one female signing audit partner, FEBOARD measures female governance representation, and their interaction captures concurrent female involvement on the audit and governance sides. X is the vector of control variables; IND and YEAR denote industry and year fixed effects; and ε is the error term.

4.3. Key Explanatory Variables

FEAUD equals one if at least one signing partner is coded as female. Names are taken from the Nikkei database and statutory reports; ambiguous cases are checked against audit-firm webpages, professional profiles, and other public records.

FEBOARD is the proportion of women in the governance population reported by NEEDS-Cges. It extends beyond directors to audit and supervisory board members, audit and supervisory committee members, and disclosed executive officers. This breadth reflects the Japanese governance structure, although it prevents identification of the specific role that drives the association.

FEAUD × FEBOARD represents simultaneous female involvement on the audit and governance sides. It is interpreted as a governance–audit alignment variable, not as proof of an assignment mechanism.

4.4. Control Variables

The control set is based on prior evidence that KAM reporting varies with auditor and client characteristics (Abdullatif and Al-Rahahleh, 2020; Ferreira and Morais, 2020; Pinto and Morais, 2019; Sierra-Garcia et al., 2019; Wuttichindanon and Issarawornrawanich, 2020). BIG4 controls for audit-firm scale and quality-control capacity (DeAngelo, 1981; Francis and Yu, 2009; Lennox, 1999). FEES is the natural logarithm of observed audit fees and is reported in the descriptive statistics. RDFEES is the residual from the audit-fee expectation model and is the variable used in the multivariate regressions; it is intended to capture the component of audit fees associated with unusual effort or client risk (Choi et al., 2010; Simunic, 1980).

SWITCH captures a change in audit firm, BUSY identifies March year-ends, and DAYS measures the interval from fiscal year-end to the earnings announcement. These variables reflect transition costs and reporting-time pressure that may affect KAM preparation (Lin and Yen, 2022; Nguyen and Kend, 2021).

SIZE and SEG control for scale and organizational complexity; IFRS, POLICY, and WARN capture reporting complexity and changes; GC, LEV, LOSS, ROA, and SALES capture financial condition and operating risk. The choices are informed by prior work on corporate information environments, IFRS complexity, restatements, and financial distress (Bushman et al., 2004; Frias-Aceituno et al., 2014; Jermakowicz and Gornik-Tomaszewski, 2006; Miah et al., 2023; Feldmann et al., 2009; Chi and Pan, 2021; Peterson et al., 2022; Camacho-Minano et al., 2024).

NOMCOM, AUDCOM, and OUTSIDE control for committee structure and board independence. These features may affect both the appointment of women and the intensity of communication with the auditor (Armstrong et al., 2010; Beasley et al., 2009; Carcello et al., 2011).

Table 3. Variables, measurement and expected associations.

Variable	Measurement	Role	Expected association
KAM	Count of KAM headings in the audit report	Dependent variable	N/A
WORD	Natural logarithm of the KAM character count	Dependent variable	N/A
ELKAM	Indicator for at least one entity-level KAM	Dependent variable	N/A
ALKAM	Indicator for at least one account-level KAM	Dependent variable	N/A
FEAUD	Indicator for at least one female signing audit partner	Key explanatory variable	Non-directional for H2; positive for ELKAM focus
FEBOARD	Proportion of female board members under the broad NEEDS-Cges definition	Key explanatory variable	Non-directional for H1; positive for ELKAM focus and negative for ALKAM focus
FEAUD x FEBOARD	Interaction between female audit partner involvement and female board representation	Governance–audit alignment variable	Negative for KAM volume/narrative length
FEES	Natural logarithm of observed audit fees	Input used to construct RDFEES; descriptive measure	N/A
RDFEES	Residual from the audit-fee expectation model	Audit effort/risk control used in regressions	Positive
BIG4	Indicator for Big Four audit firm	Auditor quality/control system	Positive or mixed
SWITCH	Indicator for audit firm change	Auditor transition control	Mixed
BUSY	Indicator for March year-end	Busy-season control	Mixed
DAYS	Days from fiscal year-end to earnings announcement	Reporting-timing control	Mixed
SIZE	Natural logarithm of total assets	Firm size control	Positive
SEG	Natural logarithm of one plus business segments	Firm complexity control	Positive
IFRS	Indicator for IFRS application	Reporting complexity control	Positive
POLICY	Number of accounting policy changes	Accounting-change control	Positive
WARN	Indicator for restated report	Reporting-risk control	Positive
GC	Indicator for going-concern note	Financial distress control	Mixed
LEV	Liabilities divided by prior-year total assets	Financial risk control	Positive
LOSS	Indicator for loss-making firm-years	Financial risk control	Positive
ROA	Operating income divided by prior-year total assets	Profitability control	Negative
SALES	Sales scaled by prior-year total assets	Operating scale control	Mixed
NOMCOM	Indicator for nomination committee structure	Governance control	Mixed
AUDCOM	Indicator for audit and supervisory committee structure	Governance control	Mixed
OUTSIDE	Proportion of outside directors	Board independence control	Mixed

Table 3. Variables, measurement and expected associations.

Variable	Measurement	Role	Expected association
KAM	Count of KAM headings in the audit report	Dependent variable	N/A
WORD	Natural logarithm of the KAM character count	Dependent variable	N/A
ELKAM	Indicator for at least one entity-level KAM	Dependent variable	N/A
ALKAM	Indicator for at least one account-level KAM	Dependent variable	N/A
FEAUD	Indicator for at least one female signing audit partner	Key explanatory variable	Non-directional for H2; positive for ELKAM focus
FEBOARD	Proportion of female board members under the broad NEEDS-Cges definition	Key explanatory variable	Non-directional for H1; positive for ELKAM focus and negative for ALKAM focus
FEAUD x FEBOARD	Interaction between female audit partner involvement and female board representation	Governance–audit alignment variable	Negative for KAM volume/narrative length
FEES	Natural logarithm of observed audit fees	Input used to construct RDFEES; descriptive measure	N/A
RDFEES	Residual from the audit-fee expectation model	Audit effort/risk control used in regressions	Positive
BIG4	Indicator for Big Four audit firm	Auditor quality/control system	Positive or mixed
SWITCH	Indicator for audit firm change	Auditor transition control	Mixed
BUSY	Indicator for March year-end	Busy-season control	Mixed
DAYS	Days from fiscal year-end to earnings announcement	Reporting-timing control	Mixed
SIZE	Natural logarithm of total assets	Firm size control	Positive
SEG	Natural logarithm of one plus business segments	Firm complexity control	Positive
IFRS	Indicator for IFRS application	Reporting complexity control	Positive
POLICY	Number of accounting policy changes	Accounting-change control	Positive
WARN	Indicator for restated report	Reporting-risk control	Positive
GC	Indicator for going-concern note	Financial distress control	Mixed
LEV	Liabilities divided by prior-year total assets	Financial risk control	Positive
LOSS	Indicator for loss-making firm-years	Financial risk control	Positive
ROA	Operating income divided by prior-year total assets	Profitability control	Negative
SALES	Sales scaled by prior-year total assets	Operating scale control	Mixed
NOMCOM	Indicator for nomination committee structure	Governance control	Mixed
AUDCOM	Indicator for audit and supervisory committee structure	Governance control	Mixed
OUTSIDE	Proportion of outside directors	Board independence control	Mixed

5. Sample and Descriptive Evidence

Table 4 presents the final-sample distribution by industry and year. The observations cover a wide range of Japanese industries, with the largest concentrations in services, trading companies, retail, electrical machinery, machinery, and chemicals.

Table 5 describes the final regression sample. Firms disclose 1.233 KAMs on average; ELKAM appears in 8.4% and ALKAM in 95.7% of firm-years. FEAUD equals one in 10.7% of observations, and the mean FEBOARD ratio is 8.6%. FEES in this table is the observed log audit-fee measure used to construct RDFEES; the regression tables report RDFEES.

Table 6 uses a broader KAM-coding database than the regression sample. It reports 12,623 KAM-level observations from 9,985 firm-years before the industry, fiscal-period, opinion, and missing-data screens used for the multivariate analyses. The largest categories are fixed-asset valuation, revenue recognition, investment and other assets, and inventory valuation. Entity-level categories are much less common. Because Table 5 and Table 6 differ in both unit of analysis and sample scope, the KAM-level total in Table 6 should not be inferred from the final-sample mean in Table 5.

6. Empirical Results

6.1. KAM Counts and KAM Narrative Length

Table 7 reports the baseline estimates. FEAUD and FEBOARD are individually insignificant in the KAM equation, consistent with the non-directional formulation of H1 and H2. The negative coefficient on FEAUD × FEBOARD supports H3: simultaneous female involvement on the governance and audit sides is associated with a smaller set of reported KAMs.

In the WORD equation, each stand-alone gender variable is positive, whereas the interaction remains negative. Thus, either form of female involvement alone is associated with greater narrative length, but their joint presence is associated with a shorter KAM section. This pattern is consistent with selectivity rather than a uniform tendency toward more or less disclosure.

The interpretation remains associational. The interaction may reflect more efficient prioritization, but the design does not directly observe the communication process or establish why the assignment occurred.

6.2. Results by KAM Type

Table 8 reports the KAM-type models. FEAUD and FEBOARD are each positive in the ELKAM equation at the 10% level, providing suggestive evidence that female involvement is related to greater visibility of firm-wide risks. This result qualifies the negative interaction in the volume and length models.

FEBOARD is negative and significant in the ALKAM equation, whereas FEAUD and the interaction are not. H4 therefore receives partial support: the evidence is strongest for a positive association with ELKAMs and a negative association between FEBOARD and ALKAMs.

The non-significant interactions in the type models indicate that the joint effect is concentrated in the intensity and concision of the KAM section rather than in the simple presence of either category. The very high incidence of ALKAMs and low incidence of ELKAMs may also limit variation in the binary outcomes.

7. Robustness Analyses and Additional Interpretation

7.1. Alternative Specification Using Industry-Level Female Representation

FEBOARD may be correlated with unobserved governance characteristics. As a supplementary check, the analysis replaces firm-level FEBOARD with the average female-board ratio in the firm’s industry, following the use of industry-level gender conditions in prior board-diversity research (Ahern and Dittmar, 2012; Liu et al., 2014). This variable is labeled IND_FEBOARD. The specification is not treated as a complete instrumental-variable design and does not establish causality.

Table 9 shows that FEAUD and IND_FEBOARD are positively related to ELKAM disclosure. The result is consistent with the main analysis, but it is interpreted only as evidence that the association is not confined to the firm-level FEBOARD measure.

7.2. Prime Market Effects

Japan’s 2022 market reclassification raised governance expectations for Prime Market firms. The additional ELKAM model includes PRIME and its interactions with FEAUD and FEBOARD. This is a cross-sectional institutional analysis, not an endogeneity correction.

Table 10 provides suggestive rather than strong evidence. FEBOARD and FEAUD are positive in the ELKAM model, while the three-way interaction is positive at the 10% level. The association between joint female involvement and ELKAM disclosure may therefore be stronger among Prime Market firms, but the marginal significance warrants cautious interpretation.

8. Discussion

Three conclusions emerge. First, the insignificant stand-alone coefficients in the KAM count model show that neither gender variable operates as a simple disclosure-reduction mechanism. This is consistent with a non-directional view of H1 and H2.

Second, the negative interaction in both baseline models is the paper’s central result. When female representation is observed on both sides, the KAM section contains fewer headings and less text. Given Japan’s concise reporting environment, this pattern is consistent with tighter prioritization, although it cannot by itself establish communication efficiency.

Third, the type models indicate that concision is not equivalent to ignoring salient risk. Both stand-alone variables are weakly positive for ELKAM disclosure, while FEBOARD is negative for ALKAM disclosure. The combined evidence points to a shift in emphasis from recurring account-level matters toward less common entity-level risks.

The interaction is not significant in the binary type models. Its apparent boundary is therefore disclosure intensity rather than the presence of a category. Future work could test this interpretation with direct measures of specificity, repetition, and readability.

The study’s broad FEBOARD measure should also be interpreted carefully. The variable captures female representation across directors, audit and supervisory board members, audit and supervisory committee members and executive officers. This broad measure is appropriate for the Japanese institutional setting because multiple governance roles may participate in auditor communication. However, the measure cannot identify which role drives the effect. Future research should separate female audit committee members, outside directors and executive officers if data become available.

9. Conclusions

This study examines how female representation on the governance and audit sides is related to KAM reporting in Japan. Across 9,808 firm-years, the stand-alone gender variables do not reduce KAM counts, but their interaction is associated with fewer KAM headings and lower narrative length. The evidence therefore concerns joint governance–audit alignment rather than a universal female reporting effect.

The type analysis provides partial support for the predicted shift in risk focus. FEAUD and FEBOARD are weakly positively associated with ELKAM disclosure, while FEBOARD is negatively associated with ALKAM disclosure. More reporting is not necessarily better reporting; what matters is whether the KAM section directs attention to consequential risks.

These findings are relevant to boards, audit committees, audit firms, and regulators. Diversity may influence not only monitoring outcomes but also the way audit concerns are prioritized and communicated. The results do not justify selecting auditors or directors on gender alone, but they suggest that the composition of both sides of the audit dialogue deserves attention.

The study has limitations. The empirical design is associational and cannot fully establish causal mechanisms. The FEBOARD variable is broad and does not distinguish the influence of specific governance roles. Gender coding based on public names and profiles may involve classification error and cannot capture gender identity beyond observable information. The study also does not directly test the mechanisms of risk perception or communication efficiency, and the KAM classification involves judgment. Future research could add count-model robustness, firm fixed effects where sufficient within-firm variation exists, partner fixed effects, inter-coder reliability tests and text-based measures of KAM specificity, readability and boilerplate language.