A note on perceptions of auditors’ internal control report mandated by the PCAOB: Can reformatting the report enhance perceived value added?

Benjamin P. Foster, Guy McClain and Trimbak Shastri

Research in Accounting Regulation, 2009, vol. 21, issue 1, 63-67

Abstract: The auditor’s report is a critical link in communicating financial data to users. Because of substantial audit costs incurred in integrated audits, the perceived value added by the auditor’s report becomes even more important. The auditor’s report prescribed by Auditing Standard No. 2 (and the new Auditing Standard No. 5) issued by the Public Company Accounting Oversight Board (PCAOB) includes a limitations paragraph. The SAS 58 audit report format that has been in use over 15 years does not contain a limitations paragraph. The SAS 58 report likely serves as a mental frame of reference (a referent report) for users evaluating other independent auditor’s report formats relating to assurance services, including the AS2 and AS5 reports. Whether inclusion of a limitations paragraph could adversely affect the users’ evaluation of the AS2 report is the focus of this study. In light of the publicity given to fraudulent financial reporting and other prevailing economic/environmental conditions, it is reasonable for users to expect that the auditor’s report provide a high degree of assurance regarding material fraud.

Keywords: Auditor’s internal control report; Expectations gap; Readability; Reliability; Accommodation; Auditor’s liability; Audit assurance; Limitations paragraph; PCAOB AS2 and AS5 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reacre:v:21:y:2009:i:1:p:63-67

DOI: 10.1016/j.racreg.2008.11.002

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