Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Auditor Materiality in Expanded Audit Reports: More (Disclosure) is Less

Auditor Materiality in Expanded Audit Reports: More (Disclosure) is Less The United Kingdom (UK) Financial Reporting Council (FRC) introduced expanded audit reports to improve audit report disclosures and render audits more transparent to financial statement users. This study examines audit materiality threshold disclosures, providing descriptive evidence of how auditors disclose materiality information in UK audit reports. This research uses manual content analysis (i) to assess auditors’ benchmarks and the percentages auditors apply to those benchmarks. The analysis examines (ii) auditors’ use of non‐GAAP benchmarks, including non‐recurring and recurring item exclusions and (iii) auditors’ rationales for their benchmark choices. The research finds that auditors choose a wide variety of benchmarks and apply a wide range of percentages to the chosen benchmarks. Non‐GAAP adjustments are pervasive. Auditors’ rationales for benchmark choices include that the benchmark is a financial statement performance measure, and the benchmark eliminates volatility. The authors question whether the FRC's expanded disclosures have met its transparency objectives and concludes that ‘more (disclosure) is less’. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Australian Accounting Review Wiley

Auditor Materiality in Expanded Audit Reports: More (Disclosure) is Less

Download PDF
15 pages

Loading next page...
 
/lp/wiley/auditor-materiality-in-expanded-audit-reports-more-disclosure-is-less-RYq6POj01C

References (29)

Publisher
Wiley
Copyright
© 2023 CPA Australia Ltd (CPA Australia).
ISSN
1035-6908
eISSN
1835-2561
DOI
10.1111/auar.12392
Publisher site
See Article on Publisher Site

Abstract

The United Kingdom (UK) Financial Reporting Council (FRC) introduced expanded audit reports to improve audit report disclosures and render audits more transparent to financial statement users. This study examines audit materiality threshold disclosures, providing descriptive evidence of how auditors disclose materiality information in UK audit reports. This research uses manual content analysis (i) to assess auditors’ benchmarks and the percentages auditors apply to those benchmarks. The analysis examines (ii) auditors’ use of non‐GAAP benchmarks, including non‐recurring and recurring item exclusions and (iii) auditors’ rationales for their benchmark choices. The research finds that auditors choose a wide variety of benchmarks and apply a wide range of percentages to the chosen benchmarks. Non‐GAAP adjustments are pervasive. Auditors’ rationales for benchmark choices include that the benchmark is a financial statement performance measure, and the benchmark eliminates volatility. The authors question whether the FRC's expanded disclosures have met its transparency objectives and concludes that ‘more (disclosure) is less’.

Journal

Australian Accounting Review – Wiley

Published: Mar 1, 2023

There are no references for this article.