Understanding assurance services reports: A user perspective

Abstract

In 1997 the International Auditing Practices Committee (IAPC) issued an exposure draft (ED) outlining a framework for providing assurance services. It was recommended that the level of assurance provided be expressed on a continuum from absolute to low. The user was to infer this assurance from, among other things, the nature of the engagement and the description of the work undertaken. Using a 2x2 between‐subjects research design this study examined whether assurance report users would differ in their identified level of assurance as a result of the description of the nature of the engagement (historical versus prospective) and the amount of work performed (higher level versus lower level). It was found that shareholders desired such assurance reports, but many did not find the format suggested by the IAPC useful for their decision‐making. A higher level of assurance was found to be attached to historical compared with prospective reports, but no difference was found for reports attempting to communicate higher versus lower levels of assurance as a result of the description of work performed. These results suggest that the IAPC should consider the use of alternative wording in order to accurately communicate the level of work performed in assurance engagements.