The AICPA recently finished a harmonization project to converge U.S. audit standards with those of the International Audit and Assurance Standards Board. The assumption implicit in this project is that users of financial statements will benefit from a converged, or consistent set of audit standards. Additionally, the AICPA’s clarified auditing standard AU-C700, Audit Conclusions and Reporting, now requires explicit acknowledgement of the auditor’s responsibility for fraud procedures in the auditor’s report, which is the focus of advisory committees in both the U.S. Department of Treasury and the European Commission. Therefore, the purpose of this study is to investigate how users (U.S. and French) rate a harmonized audit communication. Specifically, we test perceptions of the auditor’s internal control report using the PCAOB’s AS2 report. Results indicate that U.S. and French users rate the report similarly, with no significant differences along dimensions of readability, reliability, and liability. Additionally, we investigate how user perceptions change when evaluating a report that contains wording as to the auditor’s fraud detection responsibility. Results indicate that while U.S. users’ perceptions increase positively when fraud wording is added, French perceptions remain unchanged. Overall, our results suggest that both U.S. and non-U.S. users perceive the information from an auditor’s internal control report the same. However, specific wording changes (like fraud) do not universally increase positive perceptions perhaps because of country-specific legal and regulatory environments.
Original Publication Information
Foster, Benjamin P., Guy M. McClain, and Trimbak Shastri. "The Auditor’s Report on Internal Control & Fraud Detection Responsibility: A Comparison of French and U.S. Users’ Perceptions." 2013. Journal of Accounting, Ethics and Public Policy 14(2): 221-257.
Foster, Benjamin P.; McClain, Guy M.; and Shastri, Trimbak, "The Auditor’s Report on Internal Control & Fraud Detection Responsibility: A Comparison of French and U.S. Users’ Perceptions" (2013). Faculty Scholarship. 354.