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    Perceptions and Misperceptions Regarding the Unqualified...
    research summary posted June 22, 2013 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 01.01 Changes in Reporting Formats, 12.0 Accountants’ Reports and Reporting, 12.05 Changes in Reporting Formats 
    Perceptions and Misperceptions Regarding the Unqualified Auditor’s Report by Financial Statement Preparers, Users, and Auditors
    Practical Implications:

    The audit reporting model has been an item on the recent PCAOB agendas.  The findings of this study show there are still large gaps that exist between the intended communication of the audit report as stipulated in auditing standards and the perceptions by users, preparers, and auditors.  This study provides evidence to be used in the current debate about updating the current auditor’s report to provide more meaningful information.


    Gray, G.L., J.L. Turner, P.J. Coram, and T.J. Mock. 2011. Perceptions and misperceptions regarding the unqualified auditor’s report by financial statement preparers, users, and auditors. Accounting Horizons 25 (4): 659-684.

    auditor’s report; audit expectation gap; auditor disclosures; audit stakeholders; focus groups
    Purpose of the Study:

    This research project was commissioned by the AICPA’s Auditing Standards Board (ASB) and the International Audited and Assurance Standards Board (IAASB) because of concern that financial statement users may not understand “intended communications” contained in the auditor’s report.  The purpose of this study is to identify the perceptions and misperceptions regarding the current unqualified auditor’s report and to identify suggestions to improve the auditor’s reports. 

    Design/Method/ Approach:

    Focus groups were conducted for five different stakeholder groups:

    • CFOs (preparers of financial statements)
    • Bankers (users of financial statements)
    • Financial analysts (users of financial statements)
    • Non-professional investors (users of financial statements)
    • External auditors

    The focus group discussions focused on three research areas:

    • overall perception of the audit report;
    • perception about key concepts already incorporated or that should be incorporated;
    • suggestions and challenges for improving the communication of the report.

    The authors found a lack of consensus among all stakeholders as to what is the intended communication of the auditor’s report. Financial statement users only look at the report to see if the opinion is unqualified and if the auditor is a Big 4 auditor. Further, bankers and analysts consider the report to be boilerplate and do not read the report.  These groups also said no matter how much additional content is added to the report they would still not read the report if the additional content is more boilerplate information. Concepts of level of assurance, reasonable assurance, and high level of assurance are not clear to all stakeholder groups. Most participants believed the PCAOB-based audit report is superior to the ASB-report because of the inclusion of reporting on internal controls.

    Standard Setting, Accountants' Reporting
    Changes in Reporting Formats

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