A Call for a New Report

Do Users’ Expectations Call for a New Report?

In the wake of the financial failures of companies such as Enron and WorldCom, auditors were blamed and held accountable for the financial losses suffered by the stakeholders of the companies. The users of the financial statements of these failed companies expected the auditor to inform users of any going concern problems associated with the companies and discover fraudulent practices during the audit (Dennis, 2010). The auditor’s job involves opining on the fair presentation of a company’s financial statements in accordance with the generally accepted accounting principles (GAAP) and to present information on all important matters that affect the company. The auditor’s opinion is communicated to the intended users of the financial statements through the auditor’s report.

However, several concerns have been raised relating to the relevance of the auditors’ report to the intended users and the continued existence of the “expectation gap”, the difference between what the auditor delivers and what users expect the auditor to deliver. This paper aims to understand what the auditors’ report offer and what the intended users expect from the report. The paper explores the current state of the expectation gap and the ways the auditor can deliver a more meaningful and useful report to its intended users. The auditor’s report is an important tool that aims to enhance the confidence of the intended users in the financial statements of the company being audited (Louwers, Ramsay, Sinason, Strawser, & Thibodeau, 2011). To fulfill this objective, auditors must understand the intended users’ expectations to add value to the auditors’ report.

The Auditor’s Report and Intended Users’ Expectations

The current auditor’s report presents the findings of the auditor resulting from the auditor’s examination how a company’s transactions occur, how they were recorded and reported in the financial statements. The report specifically...