The Auditor’s Reporting Model: Current Research Synthesis and Implications

Abstract

This research synthesis evaluates relevant research concerning the auditor’s report. For too long, there has been a significant “expectations gap” between what financial statement users expect an audit is delivering and what the audit profession believes it is providing. This gap becomes particularly problematic for auditors when there is a “business crisis” and attention is directed to the role of the auditor. Two related gaps are considered in this synthesis, a communications gap and an information gap. All of these gaps relate to the demand for, understanding of, and use of auditor communications, which is the focus of this synthesis. Our synthesis is driven by two primary research questions: What do financial statement users perceive as information that should be communicated and what does research show to be the effects of existing and proposed auditor communications on users? As we discuss in detail, prior research does address many aspects of these two questions, but many of the findings are mixed and some important aspects have not been studied. Further research, particularly in areas regarding proposed changes to the current auditor’s reporting model, could lead to the improvement of the value relevance of auditor services, disclosures, and assurances.Note: A revised version of this paper is accepted for publication in Auditing: A Journal of Practice and Theory.