UK audit reporting practices in the pre-ISA700 (2015 revision) era
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UK audit reporting practices in the pre-ISA700 (2015 revision) era George-Silviu Cordoș 1,2 & Melinda-Timea Fülöp 1,2
& Adriana
Tiron-Tudor 1,2
Received: 1 April 2019 / Accepted: 12 November 2020/ # Springer Nature B.V. 2020
Abstract Given its significance to stakeholders, the process of revising audit reports is an essential subject in today’s economic context. This study aims to detail relevant elements of this process by evaluating alterations to and developments of the audit report, as supported by international and regional standard-setters and regulators. To that end, we examine audit reports that have already applied new auditing regulations. This case study approach allows us to highlight UK audit-reporting practices both before and after the ISA 700 was issued and entered practice. Our findings reveal that in terms of content and content positioning, UK companies’ audit reports make use of the psychological effects of primacy versus serial position and have done so long before the applicability of the international standard for financial statements published after December 2016. Keywords Audit report . IAASB . Audit reporting changes . Exposure draft . Key audit
matters . Comment letter . Audit theories . Audit . Credibility . Financial crisis JEL classification M42
* Melinda-Timea Fülöp [email protected] George-Silviu Cordoș [email protected] Adriana Tiron-Tudor [email protected]
1
Transylvania Business School, Babeș-Bolyai University, Cluj-Napoca, Romania
2
Faculty of Economics and Business Administration, Babeș-Bolyai University, Cluj-Napoca, Romania
Cordoș G.-S. et al.
Introduction For years, those who make use of audit reports have expressed dissatisfaction with the fact that, in their reports, auditors fail to provide—by a large margin—a complete accounting of information known about the audited company (Gray et al. 2011; TironTudor et al. 2018). Moreover, audit reports are liable to be misunderstood by many readers of financial statements (Bailey et al. 1983; Gay and Schellugh 1993; Fakhfakh 2016). The International Auditing and Assurance Standards Board (IAASB) has acknowledged this situation, and it has undertaken a revision process aimed at resolving this deficiency (IAASB 2012, 2013). The several revisions of audit-reporting practices that have been adopted have resulted in a change of structure—probably the most significant transformation arising within the 2015 revision. The International Standard for Auditing (ISA) 701 focuses on the auditor’s responsibility to disclose ‘Key Audit Matters (KAMs)’ in the auditor’s report. The ISA 705 (Revised) and ISA 706 (Revised) standards regulate how the content and form of an auditor’s report may be altered when the auditor issues a qualified opinion. According to the IAASB, the new structure of the audit report applies to all audits of financial statements, of any company, for periods ending on or after 15 December 2016 (IAASB 2015). The study analyses the changes in audit reporting introduced by audit refo
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