The Impact of Expansion of International Normative Illustrations of Auditors Reports on the Readability of Auditing Information: A Theoretical Discussion and an Exploratory Empirical Study

Abstract

The latest version of the revised International Standard on Auditing (ISA 700) recommends that independent financial auditors issue audit reports in long form. The purpose of this article is to examine the effect of expanding the international normative illustrations of the independent auditor’s report on the readability of audit information. Also, this article discusses the impact of the characteristics of the financial reporting framework that is applied in the preparation of the audited financial statements. The empirical analyses contain several readability measures based on the formulas that are most commonly accepted in the linguistic literature. Descriptive analyses and advanced comparative examinations based on statistical tests are also included. The results show that the content expansion of the international normative illustrations in the independent auditor’s report has not improved the readability of the audit information that is published to the users of the audited financial statements. The empirical analyses also show that the change in the accounting framework relating to the preparation of the financial statements does not cause a significant change in the readability of the long-form audit report. The article includes an original measurement of the readability of the international normative illustrations of the expanded audit report. This article also contains an advanced analysis of the readability gaps between empirically observed scores and desirable readability scores. It also tests the effects of the characteristics of the accounting standards that are used in the preparation of the audited financial statements.

Keywords: Expanded Audit Report, Revised ISA 700, Readability, International Auditing Standardisation

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