Expanded or long-form audit report

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.