Going Concern in the Auditor’s Report: Will the Implementation of the ISAs Reduce the Audit Expectation-performance Gap Between the Users of the Annual Report and the Auditor?

Mette Ahm Sigh

Student thesis: Master thesis

Abstract

IAASB has since 2006 worked on changing the auditor’s report. This was done in order to reduce the audit expectation-performance gap between the auditor and the users of the annual report. The auditor’s report is presently short and contains a brief description of the audit, a description of the responsibilities of the management and auditor and the auditor’s opinion and whether the opinion was modified or not. The users of the annual report requested more information from the auditor, especially with regard to whether there were any issues regarding going concern.
In 2013 IAASB presented the new and revised ISA 260, 570, 700, 705, 706 and the new invention,
th
ISA 701, and the new ISAs will commence for periods ending on December 15 , 2016 or later. The
new auditor’s report is longer and contains more information than the present auditor’s report and the order of the paragraphs in the auditor’s report have been changed, so the first paragraph in the auditor’s report will be the auditor’s opinion.
I have examined whether the audit expectation-performance gap between the auditor and the users of the annual report will be reduced, when the new auditor’s report will take effect with regard to going concern. In order to do so, I have examined the answers IAASB received from questions asked in the Exposure Draft relating to going concern. My focus in this thesis will be on the implementation of ISA 700 (revised) and ISA 570 (revised) with regard to going concern in the annual report.
The new auditor’s report will be changed significantly and the users of the annual report will need time to get used to the order and the increased amount of information in the auditor’s report. The answers to the questions asked in the Exposure Draft showed that most of the respondents were positive towards the inclusion of additional information regarding going concerning the auditor’s report, as this would add greater transparency. The concern amongst the respondents, who were negative towards the changes in the auditor’s report, was that there would be an information overload as the auditor’s report will be longer. In addition, the information tends to be standard information instead of specific information, that would tell the users of the annual report valuable information about the revised entity.
The conclusion of this thesis is, that even though the new and revised auditor’s report will contain even more information from the auditor to the users of the annual report, the audit expectation- performance gap will not be reduced accordingly.

EducationsMSc in Auditing, (Graduate Programme) Final Thesis
LanguageDanish
Publication date2016
Number of pages129