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    The Auditor's Reporting Model: A Literature Overview and...
    research summary posted March 31, 2016 by Jennifer M Mueller-Phillips, tagged 12.0 Accountants’ Reports and Reporting, 12.05 Changes in Reporting Formats 
    The Auditor's Reporting Model: A Literature Overview and Research Synthesis.
    Practical Implications:

    Though modest improvements have been made in recent years, confusion still exists as to the content and meaning of the auditor’s report (e.g., users are confused as to the auditor’s responsibilities, the audit process, and the level of assurance provided). The authors suggest that the communicative value of the auditor’s report can be enhanced by including additional disclosures.


    Church, B. K., S. M. Davis, and S. A. McCracken. 2008. The Auditor's Reporting Model: A Literature Overview and Research Synthesis. Accounting Horizons 22 (1): 69-90.

    auditor’s reporting decision, auditor’s report, accounting standards
    Purpose of the Study:

    This article examines academic research to contribute to the Public Company Accounting Oversight Board’s (PCAOB) project on the auditor’s reporting model. The authors develop a framework to organize a discussion of the literature in light of key questions raised at two Standing Advisory Group (SAG) meetings. They trace the historical development of the auditor’s report and then delve into relevant research that focuses on the auditor’s reporting decision and the content of the auditor’s report.

    This article is important because it provides a state of the art basis to understand the auditor’s reporting model. Such an understanding is necessary to assess the merits of the current model and to establish its shortcomings. Throughout the article, the authors identify areas needing change and areas needing further study.

    Design/Method/ Approach:

    The authors review three lines of research that underlie the auditor’s reporting decision.

    • First, they look at the collection and evaluation of audit evidence, targeting research on factors that directly affect the auditor’s reporting decision.
    • Second, they consider the role of accounting standards in shaping financial statements. The authors look at research on rules- versus principles-based standards and how such standards affect the auditor’s interpretation and application of accounting principles (i.e., GAAP).
    • Third, the authors ponder the role of the auditor in the financial-reporting process. They examine research on auditor-client negotiations, which are integral in the preparation of financial statements, and then look at studies on the auditor’s decision to book or waive misstatements.

    The authors then examine three lines of research on the content of the auditor’s report.  

    • First, they summarize studies that elicit and compare users’ and auditors’ assessments of the report to identify differences that create an expectations gap.
    • Next, they look at research on the market’s reaction to the issuance of the auditor’s report.
    • Finally, the authors evaluate studies on disclosure of additional information in the auditor’s report (e.g., materiality levels) and weigh whether users would benefit from such disclosures.
    • The authors’ review of the extant literature suggests that the audit process is affected by factors that, typically, are assumed to be irrelevant (e.g., the sequence of evidence collection or the specific auditor performing a task).
    • They also find that the nature of accounting standards (principles-based versus rules-based) can influence the audit process, via an effect on auditor-client negotiations.
    • As for the auditor’s report, they conclude that it has symbolic value (i.e., it represents the auditor’s work), but that it provides little communicative value (i.e., it conveys little information).
    Accountants' Reporting
    Changes in Reporting Formats