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    Enhancing the Auditor’s Report: To What Extent is There S...
    research summary posted March 1, 2015 by Jennifer M Mueller-Phillips, tagged 01.0 Standard Setting, 12.0 Accountants’ Reports and Reporting 
    Enhancing the Auditor’s Report: To What Extent is There Support for the IAASB’s Proposed Changes?
    Practical Implications:

    This study provides greater nuance to discussions about the overarching international aspect of a cluster of cooperative standard-setting initiatives. The proposed reforms in the ED reflect that the IAASB has modified its position on some options presented in the ITC, such as reporting on ‘‘key audit matters’’ replacing the more general auditor commentary, and a harm’s way exemption regarding disclosure of the engagement partner’s name, in response to feedback received. In other areas, such as auditor reporting on going concern, the IAASB appears to be holding its course notwithstanding resistance from some stakeholder groups. Notably, statements about going concern in the auditor’s report were strongly supported by users, suggesting that the IAASB may have been influenced by this stakeholder group’s preferences on this issue in their decision to continue to explore this option for change. These findings are broadly in line with Mock et al.’s (2013) synthesis showing that ‘‘users desire more information about the auditor, the audit, the financial statements, and aspects of the entity that are related to the financial statements’’ (Mock et al. 2013, 345), as well as providing additional insights into the other stakeholder groups whose views significantly differ from users on these issues. Importantly, the IAASB’s ED can be seen to be responsive to users in relation to each of these issues.

    For more information on this study, please contact Roger Simnett.


    Simnett, R., and A. Huggins. 2014. Enhancing the Auditor's Report: To What Extent is There Support for the IAASB's Proposed Changes? Accounting Horizons 28 (4):719-747.

    auditor reporting; International Auditing and Assurance Standards Board; expectations gap; communication theory; information gap
    Purpose of the Study:

    Auditor reporting as we know it is facing potentially revolutionary change. For many years the auditing profession has argued that the benefits of a standardized auditor’s report, which brings with it the ability to compare across entities, outweighs any benefits that could be gained by customizing the report for entity-specific information. The International Audit and Assurance Standards Board (IAASB), Public Company Accounting Oversight Board (PCAOB), Financial Reporting Council (FRC) in the United Kingdom (U.K.), and the European Commission (EC) have all engaged in recent projects considering how the auditor’s report can become a more effective communication device reflecting all the work and knowledge gained through the audit process. Specifically, the IAASB’s work plan on improving the auditor’s report culminated in an Invitation to Comment (ITC) in 2012, and in 2013 an Exposure Draft (ED) outlining suggested changes to the international auditing standards ISA 700 and 720 (IAASB 2008a, 2008c). This paper adds to recent academic contributions on the appropriate role of the auditor’s report by analyzing responses to the IAASB’s 2012 ITC (IAASB 2012b) to determine levels of agreement with proposed reforms, and the differences, if any, between the views of various respondents based on stakeholder groups and regional classifications. We use communication theory to guide the analysis of the responses, facilitating evaluation of how responsive the IAASB has been to concerns expressed in the responses to the ITC. We also compare the reforms that are being considered at the international level with those being undertaken by national and transnational standard-setters/regulators.

    Design/Method/ Approach:

    We analyze the 165 stakeholder responses to the IAASB’s 2012 Invitation to Comment: Improving the Auditor’s Report to determine levels of support for the IAASB’s proposed reforms, and the differences, if any, between the views of various respondents based on stakeholder groups (e.g., audit and assurance firms, users, preparers, regulators, etc.) and regional classifications. The stakeholder groups were coded as audit and assurance firms, preparers, users, professional accounting and auditing bodies, regulators and standard-setters, public sector organizations, and other. The geographic regions were categorized in the first instance by continent and responses from international companies and organizations.


    The study finds that:

    • The levels of stakeholder support for the IAASB’s proposed reforms addressing auditors’ expectations, information, and communication gaps are mixed.
    • The strongest overall support was for enhanced auditor reporting on other information attached to, or intended to be read with, the financial statements, and the least supported initiative was including additional information in the auditor’s report about the auditor’s judgments and processes.
    • While overall there is generally consensus across both stakeholder groups and regions concerning the various questions investigated, we highlight where statistically significant differences between groups do exist.
    • Notably, North American respondents were less likely to support a number of the IAASB’s proposed reforms than their counterparts from other regions. A closer comparison of the IAASB’s and PCAOB’s consultation documents and exposure drafts shows that the preferences of North American respondents to the IAASB consultation are more accurately reflected in the PCAOB’s nationally focused proposed standard than the IAASB’s exposure draft.
    Accountants' Reporting, Standard Setting