The Communicative Value of the Auditor's Report

Abstract

Communicating the results of the audit is a crucial part of the audit process. This potentially enables the users of financial reports to assess the quality of the audit, which will in turn contribute to their assessments of financial reporting quality. This research reports the results of a verbal protocol study of 16 financial analysts to assess how they use an auditor's report as part of a company evaluation. Auditors' reports perse are found to be important to analysts in that they signal a level of reliability in the financial statements. However, the content of the auditor's report, including the additional content of the recently issued longer form auditor's report (ISA 700, ASA 700), generally was not attended to by the analysts. This suggests the communicative value of the auditor's report is minimal beyond signalling the elevated reliability of the financial statements. © 2011 CPA Australia.