Do Different Audit Report Formats Affect Shareholders' and Auditors' Perceptions?

Abstract

This study investigates the impact of three different audit report formats on shareholders' and auditors' perceptions. The formats are derived from the Guidance Note Report to Australian Standard AUS702 which aims to improve communications between auditors and shareholders. Formats include an expanded report, a ‘plain language’ expanded report with the audit opinion at the end, and a ‘plain language’ expanded report with the audit opinion at the start. A questionnaire research instrument was mailed to shareholders and auditors. In general, the audit report formats did not reduce the expectations gap between shareholders and auditors. A greater number of significant differences between shareholders' and auditors' perceptions were evident for the expanded format (vis‐à‐vis the AUS 702 short format), while fewer significant differences existed for the ‘plain language’ expanded report with the audit opinion at the start.

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