Keywords
audit report
going concern
qualification
going concern
qualification
How to Cite
The new extended audit reports. Case: The Spanish listed companies. (2019). Cuadernos De Contabilidad, 20(49), 1-18. https://doi.org/10.11144/Javeriana.cc20-49.ania
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Abstract
The greater complexity of the regulatory and business environment has led stakeholders to demand greater assurance on financial information from the auditor. In this context, the International Auditing and Assurance Standards Board (IAASB) adopted a new international standard on audit reports. One of the main changes has been the auditor’s obligation to describe in his report the key audit matters (KAM) related to significant financial reporting risks. The objective of this study is to analyse the content of the report in the first year of application of the standard in Spain for 131 listed companies. These firms report between two and four KAM, highlighting revenue recognition, impairment of goodwill and recovery of deferred taxes. Our study has important implications in other countries that will face this reform as the United States, and can serve as a comparison to what happens in other countries.
Asare, S. & Wright, A. (2012). Investors’, auditors’, and lenders’ understanding of the message conveyed by the standard audit report on the financial statements. Accounting Horizons, 26(2), 25-44. https://doi.org/10.2308/acch-50138.
Boolaky, P. & Quick, R. (2016). Bank Directors’ Perceptions of Expanded Auditor’s Reports. International Journal of Auditing, 20(1), 158-174. https://doi.org/10.1111/ijau.12063
Brasel, K., Doxey, M., Grenier, J. & Reffett, A. (2016). Risk disclosure preceding negative outcomes: The effects of reporting critical audit matters on judgments of auditor liability. Accounting Review, 91(5), 1345-1362. https://doi.org/10.2139/ssrn.2487396
Butler, M., Leone, A. & Willenborg, M. (2004). An empirical analysis of auditor reporting and its association with abnormal accruals. Journal of Accounting and Economics, 37(2), 139-135. https://doi.org/10.2139/ssrn.298700.
Carson, E., Fargher, N., Geiger, M., Lennox, C., Raghunandan, K & Willekens, M. (2013). Audit reporting for going-concern uncertainty: A research synthesis. Auditing-A Journal of Practice and Theory, 32(1), 353-384. https://doi.org/10.2308/ajpt-50324.
Christensen, B., Glover, S. & Wood, D. (2012). Extreme estimation uncertainty in fair value estimates: Implications for audit assurance. Auditing-A Journal of Practice and Theory, 31(1), 127-146. https://doi.org/10.2308/ajpt-10191.
Clive L. (2012) Are large auditors more accurate than small auditors?, Accounting and Business Research, 29(3), 217-227. https://doi.org/10.1080/00014788.1999.9729582.
Clive S., Schmidt, J. & Thompson, A. (2019). Are the expanded audit reports informative to investors? Evidence from the UK. Journal of Accounting and Economics, 3-53 (forthcoming). https://doi.org/10.2139/ssrn.2619785.
Coram, P., Mock, T., Turner, J. & Gray, G. (2011). The Communicative Value of the Auditor’s Report. Australian Accounting Review, 21(3), 235-252. https://doi.org/10.1111/j.1835-2561.2011.00140.x.
Cox, J. (2013). Strengthening financial reporting: An Essay on expanding the auditor’s opinion letter. George Washington Law Review, 81(3), 1036-1062. Available at: https://scholarship.law.duke.edu/faculty_scholarship/2869
Czerney, K., Schmidt, J. & Thompson, A. (2014). Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk? The Accounting Review, 89(6), 2115-2149. https://doi.org/10.2308/accr-50836.
DeAngelo, L. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199. https://doi.org/10.1016/0165-4101(81)90002-1.
Deumes, R., Schelleman, C., Vander B. & Vanstraelen, A. (2012). Audit Firm Governance: Do Transparency Reports Reveal Audit Quality? Auditing: A Journal of Practice & Theory, 31(4), 193-214. doi: 10.2308/ajpt-10301
Dye, R. (1993). Discussion: Limiting Auditors’ Liability. Journal of Economics & Management Strategy, 2, 435-443. https://doi.org/10.1111/j.1430-9134.1993.00435.x.
Fakhfakh, M. (2016a). Linguistic features and legibility of the consolidated audit reports: An original investigation from the Tunisian case. Cogent Business and Management, 3(1), 655-687. https://doi.org/10.1080/23311975.2016.1234360.
Fakhfakh, M. (2016b). Understandability of unmodified audit report on consolidated financial statements: A normative and advanced study of the international normalization. Cogent Business and Management, 3, 1-25. https://doi.org/10.1080/23311975.2016.1258134
FRC - Consejo de Información Financiera (2015). Extended auditor’s reports. A review of experience in the first year.
FRC - Consejo de Información Financiera (2016). Extended auditor’s reports. A further review of experience.
Garza Sánchez, H., Cortez, A., Méndez Sáenz, A & Rodriguez García, M. (2016). Efecto en la calidad de la información ante cambios en la normatividad contable: caso aplicado al sector real mexicano. Contaduría y Administración, 62(3), 746-760. Doi: https://doi.org/10.1016/j.cya.2015.11.012.
Gray, G., Turner, J., Coram, P. & Mock, T. (2011). Perceptions and misperceptions regarding the unqualified Auditor’s Report by Financial Statement Preparers, users, and auditors. Accounting Horizons, 25(4), 659-684. https://doi.org/10.2308/acch-50060.
Guiral-Contreras, A., Gonzalo-Angulo, J.A & Rodgers, W. (2007). Information content and recently effect of the audit report in loan rating decisions. Accounting and Finance, 47(2), 285-304. https://doi.org/10.1111/j.1467-629x.2006.00208.x.
Gutierrez, E., Minutti-Meza, M., Tatum, K. & Vulcheva, M. (2017). Consequences of adopting an expanded auditor’s report in the United Kingdom. Review of Accounting Studies, Springer, 23(4), 1543-1587. https://doi.org/10.1007/s11142-018-9464-0.
Hategan, C., Ioana, J., Renata Dana, N., Nicoleta, S. & Iacobuta, A. (2015). The relevance of communication through independent auditor´s report to the European business environment. Comparative study of Romania and Spain. Transformations in Business and Economics, 14 (2A), 378-392.
IAASB (2016). More Informative Auditor’s Reports - What Audit Committees and Finance Executives Need to Know
IAASB (2015). The new auditor´s report: enhancing auditor communications. Greater Transparency into the Financial Statement Audit. Available at: https://www.ifac.org/system/files/uploads/IAASB/Auditor-Reporting-Fact-Sheet.pdf
ICAEW Audit and Assurance Faculty (2007). Audit Quality Fundamentals-Auditor reporting. Available at: https://www.icaew.com/-/media/corporate/files/technical/audit-and-assurance/audit-quality/audit-quality-forum/january-2007-auditor-reporting.ashx
IFAC (2013). Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing. Exposure Draft. Available at: https://www.ifac.org/system/files/publications/files/All%20Proposed%20ISAs%20Included%20in%20ED.pdf
Kachelmeier, S., Rimkus, D., Schmidt, J. & Valentine, K. (2019). The Forewarning Effect of Critical Audit Matter Disclosures Involving Measurement. http://dx.doi.org/10.2139/ssrn.2481284
Kilgore, A., Barghathi, Y., Collison, D. & Crawford, L. (2014). Earnings Management and the Role of the External Auditor. Conference: Financial Reporting and Business Communication FRBC At: Bristol, UK.
KPMG (2016). Nuevo informe de auditoría: mayor transparencia e información más relevante. Available at: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/03/nuevo-informe-auditoria.pdf
KPMG (2018). Claves de la regulación financiera: impacto y horizonte para las entidades de crédito. Julio 2018[Keys to financial regulation: impact and horizon for credit institutions. July 2018]. Available at: https://assets.kpmg.com/content/dam/kpmg/es/pdf/2018/07/claves-de-regulacion-financiera.pdf
Lennox, C., Wu, X. & Zhang, T. (2015). The effect of audit adjustments on earnings quality: Evidence from China. Journal of Accounting and Economics, 61(2-3), 545-562. https://doi.org/10.1016/j.jacceco.2015.08.003.
Mock, T., Gray, G., Coram, P & Turner, J. (2009). Perceptions and Misperceptions Regarding the Unqualified Auditor’s Report by Financial Statement Preparers, Users, and Auditors. Accounting Horizons, 25(4), 659-684. https://doi.org/10.2308/acch-50060
Muñoz-Izquierdo, N., Camacho-Miñano, M. & Pascual-Ezama, D. (2017). The Content of the Audit Report in the Year Prior to Bankruptcy Filing. Empirical Evidence from Spain. Spanish Journal of Finance and Accounting, 46(1), 92-126. Available at SSRN: https://ssrn.com/abstract=2858851
PCAOB (2013). Release No. 2013-005 August 13, 2013 PCAOB Rulemaking Docket Matter No. 034. Available at: https://pcaobus.org/Rulemaking/Docket034/Release_2013-005_ARM.pdf
PCAOB (2017). Release No. 2017-001 June 1, 2017 PCAOB Rulemaking Docket Matter No. 034. Available at: https://pcaobus.org/Rulemaking/Docket034/2017-001-auditors-report-final-rule.pdf
Prasad, P. & Chand, P. (2017). The Changing Face of the Auditor’s Report: Implications for Suppliers and Users of Financial Statements. Australian Accounting Review, 27(4), 348-367. https://doi.org/10.1111/auar.12137.
Reid, L., Carcello, J., Chan, L. & Neal, T. (2018). Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom. Working paper SSNR. https://doi.org/10.2139/ssrn.2647507.
Ruiz-Barbadillo, E., Gómez-Aguilar, N. & Aguilar-Contreras, G. (2002). Una comparación intersectorial y por tamaño de la calidad de la información contable a través del análisis del informe de auditoría [A cross-sector comparison and size comparison of the quality of accounting information through the analysis of the audit report.]. Revista Española de Financiación y Contabilidad, 31(112), 545-581.
Sierra-García, L., Gambetta, N., García-Benau, M., & Orta-Pérez, M. (2019). Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom. The British Accounting Review, 51(3), 227-240. https://doi.org/10.1016/j.bar.2019.02.004.
Sikka, P. (2009). Financial crisis and the silence of the auditors. Accounting, Organizations and Society, 34(6-7), 868-873. https://doi.org/10.1016/j.aos.2009.01.004
Sirois, L., Bédard, J. & Palash, B. (2017). The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study. Accounting Horizons, 32(2), 141-162. https://doi.org/10.2308/acch-52047
Zenzerovic, R. & Valic-Vale, M. (2016). Diagnosing companies in financial difficulty based on the auditor’s report. Croatian Operational Research Review, 7(1), 147-158. https://doi.org/10.17535/crorr.2016.0010.
Boolaky, P. & Quick, R. (2016). Bank Directors’ Perceptions of Expanded Auditor’s Reports. International Journal of Auditing, 20(1), 158-174. https://doi.org/10.1111/ijau.12063
Brasel, K., Doxey, M., Grenier, J. & Reffett, A. (2016). Risk disclosure preceding negative outcomes: The effects of reporting critical audit matters on judgments of auditor liability. Accounting Review, 91(5), 1345-1362. https://doi.org/10.2139/ssrn.2487396
Butler, M., Leone, A. & Willenborg, M. (2004). An empirical analysis of auditor reporting and its association with abnormal accruals. Journal of Accounting and Economics, 37(2), 139-135. https://doi.org/10.2139/ssrn.298700.
Carson, E., Fargher, N., Geiger, M., Lennox, C., Raghunandan, K & Willekens, M. (2013). Audit reporting for going-concern uncertainty: A research synthesis. Auditing-A Journal of Practice and Theory, 32(1), 353-384. https://doi.org/10.2308/ajpt-50324.
Christensen, B., Glover, S. & Wood, D. (2012). Extreme estimation uncertainty in fair value estimates: Implications for audit assurance. Auditing-A Journal of Practice and Theory, 31(1), 127-146. https://doi.org/10.2308/ajpt-10191.
Clive L. (2012) Are large auditors more accurate than small auditors?, Accounting and Business Research, 29(3), 217-227. https://doi.org/10.1080/00014788.1999.9729582.
Clive S., Schmidt, J. & Thompson, A. (2019). Are the expanded audit reports informative to investors? Evidence from the UK. Journal of Accounting and Economics, 3-53 (forthcoming). https://doi.org/10.2139/ssrn.2619785.
Coram, P., Mock, T., Turner, J. & Gray, G. (2011). The Communicative Value of the Auditor’s Report. Australian Accounting Review, 21(3), 235-252. https://doi.org/10.1111/j.1835-2561.2011.00140.x.
Cox, J. (2013). Strengthening financial reporting: An Essay on expanding the auditor’s opinion letter. George Washington Law Review, 81(3), 1036-1062. Available at: https://scholarship.law.duke.edu/faculty_scholarship/2869
Czerney, K., Schmidt, J. & Thompson, A. (2014). Does Auditor Explanatory Language in Unqualified Audit Reports Indicate Increased Financial Misstatement Risk? The Accounting Review, 89(6), 2115-2149. https://doi.org/10.2308/accr-50836.
DeAngelo, L. (1981). Auditor size and audit quality. Journal of Accounting and Economics, 3(3), 183-199. https://doi.org/10.1016/0165-4101(81)90002-1.
Deumes, R., Schelleman, C., Vander B. & Vanstraelen, A. (2012). Audit Firm Governance: Do Transparency Reports Reveal Audit Quality? Auditing: A Journal of Practice & Theory, 31(4), 193-214. doi: 10.2308/ajpt-10301
Dye, R. (1993). Discussion: Limiting Auditors’ Liability. Journal of Economics & Management Strategy, 2, 435-443. https://doi.org/10.1111/j.1430-9134.1993.00435.x.
Fakhfakh, M. (2016a). Linguistic features and legibility of the consolidated audit reports: An original investigation from the Tunisian case. Cogent Business and Management, 3(1), 655-687. https://doi.org/10.1080/23311975.2016.1234360.
Fakhfakh, M. (2016b). Understandability of unmodified audit report on consolidated financial statements: A normative and advanced study of the international normalization. Cogent Business and Management, 3, 1-25. https://doi.org/10.1080/23311975.2016.1258134
FRC - Consejo de Información Financiera (2015). Extended auditor’s reports. A review of experience in the first year.
FRC - Consejo de Información Financiera (2016). Extended auditor’s reports. A further review of experience.
Garza Sánchez, H., Cortez, A., Méndez Sáenz, A & Rodriguez García, M. (2016). Efecto en la calidad de la información ante cambios en la normatividad contable: caso aplicado al sector real mexicano. Contaduría y Administración, 62(3), 746-760. Doi: https://doi.org/10.1016/j.cya.2015.11.012.
Gray, G., Turner, J., Coram, P. & Mock, T. (2011). Perceptions and misperceptions regarding the unqualified Auditor’s Report by Financial Statement Preparers, users, and auditors. Accounting Horizons, 25(4), 659-684. https://doi.org/10.2308/acch-50060.
Guiral-Contreras, A., Gonzalo-Angulo, J.A & Rodgers, W. (2007). Information content and recently effect of the audit report in loan rating decisions. Accounting and Finance, 47(2), 285-304. https://doi.org/10.1111/j.1467-629x.2006.00208.x.
Gutierrez, E., Minutti-Meza, M., Tatum, K. & Vulcheva, M. (2017). Consequences of adopting an expanded auditor’s report in the United Kingdom. Review of Accounting Studies, Springer, 23(4), 1543-1587. https://doi.org/10.1007/s11142-018-9464-0.
Hategan, C., Ioana, J., Renata Dana, N., Nicoleta, S. & Iacobuta, A. (2015). The relevance of communication through independent auditor´s report to the European business environment. Comparative study of Romania and Spain. Transformations in Business and Economics, 14 (2A), 378-392.
IAASB (2016). More Informative Auditor’s Reports - What Audit Committees and Finance Executives Need to Know
IAASB (2015). The new auditor´s report: enhancing auditor communications. Greater Transparency into the Financial Statement Audit. Available at: https://www.ifac.org/system/files/uploads/IAASB/Auditor-Reporting-Fact-Sheet.pdf
ICAEW Audit and Assurance Faculty (2007). Audit Quality Fundamentals-Auditor reporting. Available at: https://www.icaew.com/-/media/corporate/files/technical/audit-and-assurance/audit-quality/audit-quality-forum/january-2007-auditor-reporting.ashx
IFAC (2013). Reporting on Audited Financial Statements: Proposed New and Revised International Standards on Auditing. Exposure Draft. Available at: https://www.ifac.org/system/files/publications/files/All%20Proposed%20ISAs%20Included%20in%20ED.pdf
Kachelmeier, S., Rimkus, D., Schmidt, J. & Valentine, K. (2019). The Forewarning Effect of Critical Audit Matter Disclosures Involving Measurement. http://dx.doi.org/10.2139/ssrn.2481284
Kilgore, A., Barghathi, Y., Collison, D. & Crawford, L. (2014). Earnings Management and the Role of the External Auditor. Conference: Financial Reporting and Business Communication FRBC At: Bristol, UK.
KPMG (2016). Nuevo informe de auditoría: mayor transparencia e información más relevante. Available at: https://assets.kpmg.com/content/dam/kpmg/pdf/2016/03/nuevo-informe-auditoria.pdf
KPMG (2018). Claves de la regulación financiera: impacto y horizonte para las entidades de crédito. Julio 2018[Keys to financial regulation: impact and horizon for credit institutions. July 2018]. Available at: https://assets.kpmg.com/content/dam/kpmg/es/pdf/2018/07/claves-de-regulacion-financiera.pdf
Lennox, C., Wu, X. & Zhang, T. (2015). The effect of audit adjustments on earnings quality: Evidence from China. Journal of Accounting and Economics, 61(2-3), 545-562. https://doi.org/10.1016/j.jacceco.2015.08.003.
Mock, T., Gray, G., Coram, P & Turner, J. (2009). Perceptions and Misperceptions Regarding the Unqualified Auditor’s Report by Financial Statement Preparers, Users, and Auditors. Accounting Horizons, 25(4), 659-684. https://doi.org/10.2308/acch-50060
Muñoz-Izquierdo, N., Camacho-Miñano, M. & Pascual-Ezama, D. (2017). The Content of the Audit Report in the Year Prior to Bankruptcy Filing. Empirical Evidence from Spain. Spanish Journal of Finance and Accounting, 46(1), 92-126. Available at SSRN: https://ssrn.com/abstract=2858851
PCAOB (2013). Release No. 2013-005 August 13, 2013 PCAOB Rulemaking Docket Matter No. 034. Available at: https://pcaobus.org/Rulemaking/Docket034/Release_2013-005_ARM.pdf
PCAOB (2017). Release No. 2017-001 June 1, 2017 PCAOB Rulemaking Docket Matter No. 034. Available at: https://pcaobus.org/Rulemaking/Docket034/2017-001-auditors-report-final-rule.pdf
Prasad, P. & Chand, P. (2017). The Changing Face of the Auditor’s Report: Implications for Suppliers and Users of Financial Statements. Australian Accounting Review, 27(4), 348-367. https://doi.org/10.1111/auar.12137.
Reid, L., Carcello, J., Chan, L. & Neal, T. (2018). Impact of Auditor Report Changes on Financial Reporting Quality and Audit Costs: Evidence from the United Kingdom. Working paper SSNR. https://doi.org/10.2139/ssrn.2647507.
Ruiz-Barbadillo, E., Gómez-Aguilar, N. & Aguilar-Contreras, G. (2002). Una comparación intersectorial y por tamaño de la calidad de la información contable a través del análisis del informe de auditoría [A cross-sector comparison and size comparison of the quality of accounting information through the analysis of the audit report.]. Revista Española de Financiación y Contabilidad, 31(112), 545-581.
Sierra-García, L., Gambetta, N., García-Benau, M., & Orta-Pérez, M. (2019). Understanding the determinants of the magnitude of entity-level risk and account-level risk key audit matters: The case of the United Kingdom. The British Accounting Review, 51(3), 227-240. https://doi.org/10.1016/j.bar.2019.02.004.
Sikka, P. (2009). Financial crisis and the silence of the auditors. Accounting, Organizations and Society, 34(6-7), 868-873. https://doi.org/10.1016/j.aos.2009.01.004
Sirois, L., Bédard, J. & Palash, B. (2017). The Informational Value of Key Audit Matters in the Auditor’s Report: Evidence from an Eye-tracking Study. Accounting Horizons, 32(2), 141-162. https://doi.org/10.2308/acch-52047
Zenzerovic, R. & Valic-Vale, M. (2016). Diagnosing companies in financial difficulty based on the auditor’s report. Croatian Operational Research Review, 7(1), 147-158. https://doi.org/10.17535/crorr.2016.0010.
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