The Changing Face of the Auditor's Report: Implications for Suppliers and Users of Financial Statements

Abstract

The International Auditing and Assurance Standards Board (IAASB) recently finalised several significant and controversial reforms of the audit reporting model. The reforms are in response to long-standing criticisms about the form and content of the existing audit report. This study critically examines the current audit report reforms and their implications. In particular, we investigate the perceptions of prominent stakeholders in respect of these reforms and then evaluate the implications of the reforms on the informational value of the audit report, audit quality and audit costs. The findings suggest that the changes to the audit report are of significant informational value to users, while the implications for audit quality are unclear. Indeed, the changes would increase audit costs and potentially the legal liability of auditors. This appraisal is timely given the efforts made by the IAASB in commissioning these reforms to enhance the relevance and informational value of the audit report.

Key audit matters: did IAASB unravel the knots of confusion in audit reports decisions?

“…The introduction of KAMs and the changes in reporting requirements in the audit reports presented to shareholders and other stakeholders would help to reduce the existing principal-agent problem and enhance the companies’ corporate governance. In a content analysis of the IAASB, 2013 Exposure Draft, Prasad and Chand (2017) concluded that many of the respondents supported the enhanced auditor reporting on GC matters. Bens et al (2019) study provided empirical evidence that the expanded audit report in the UK increased the likelihood of issuing GC opinions or using additional paragraphs in the audit report to draw users’ attention to matters that will affect their use of financial reports.…”

The consequences of disclosing key audit matters (KAMs): A review of the academic literature

“…In May 2011, the IAASB published the consultation paper "Enhancing the value of auditor reporting: Exploring options for change", discussing possible ways to improve the auditor's report, particularly regarding the increased need for information by users and the persisting expectation and information gap (IAASB 2011). The IAASB's (2012) Invitation to Comment resulted in a high level of support by various stakeholders for the amendments proposed by the IAASB (Prasad and Chand 2017;Simnett and Huggins 2014). In July 2013, these initiatives were followed by the Exposure Draft "Reporting on audited financial statements: Proposed new and revised International Standards on Auditing (ISAs)" (IAASB 2013).…”

Promosi Penjualan, Audit Manajemen, dan Peran Audit Program terhadap Penerimaan Kas Era Covid-19

“…Hasil dari penelitian ini adalah ada beberapa kelemahan antara lain tidak ada pemisahan tugas antara fungsi penyimpanan di gudang dan pengiriman barang, surat jalan dan kwitansi yang dipakai oleh perusahaan tidak bernomor unit cetak, bagian penjualan tidak menyimpan faktur penjualan secara rapi, perusahaan tidak memiliki syarat pembayaran piutang, fungsi penerimaan kas tidak terpisah, tidak dilakukan penyetoran kas secara rutin setup hari, debt collector tidak mengembalikan faktur yang belum dapat tertagih pada hari bersangkutan, debt collector tidak diberikan tanda terima penyerahan pembataran ke kasir. (Muttakin, & Mihret,2017: Nasdaq, 2019: Prasad, & Chand, 2017 pembayaran, dan pencatatan sebagai bukti pendukung transaksi penjualan yang jarang diperiksa. Suatu pemeriksaan, dimulai dengan mengadakan perencanaan pemeriksaan.…”