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Expanded or long-form audit report

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Expanded or long-form audit report

Require auditors to provide an expanded or long-form audit report:

Arguments in support

  • More information on purpose, audit procedures and responsibilities of auditors and directors
  • Will address the reasonableness gap

Arguments against

  • Users do not want additional information regarding audit process, but rather for the auditor to conduct the audit according to their existing expectations
  • A better approach to tailor the audit report to each client
  • Because users skim read the audit report and focus their attention on the auditors opinion
  • So additional information does not add any value to users level of confidence in the financial statements
  • A better approach to tailor the audit report to each client
  • Users would be more likely to carefully read and therefore understand the report
  • However, standard setters have gone with the longer audit report option
  • Provide detailed information on roles and responsibilities of the auditor and that of management.
  • Give users a chance to better understand the responsibilities an auditor

International Standard on Auditing 700 (ISA 700):

  • Auditor’s report should contain explicit and simple language outlining the responsibilities of management and the auditor and of the nature, scope and procedures of the audit
  • ISA 700 first became effective in 2006 and

Arguments against

  • Despite numerous revisions to ISA 700 (since 2006), AEG persists
  • Also annual reports already very long (anywhere between 50-100 pages).
  • Users may not really take the time to read the added disclosure.
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