What Should Be Included in Auditor’s Report? A Review

Certain contemporary national and international incidents highlight that some auditors are causing the profession distress and creating an ‘audit expectation-performance gap’- AEG, which is the difference between what the public expects from the auditing profession and what the profession actually provides. On the other hand, an audit report could be considered to address the information needs of users, while aiming to enhance the relevance of the audit and is clearly in the interest of users, and thus expected to lower the AEG. However, extant literature indicated one of the main causes of AEG is also considered to be inadequate audit reporting. Thus, this study aims to identify the information content of the external auditor’s report by reviewing comprehensively the relevant extant literature on the expectations of stakeholders of such audit reports. Accordingly, based on a comprehensive literature survey performed, the expected information content of auditor report was identified as: the auditor’s opinion, fundamental information (i.e., title, addressee, etc.), nature and the process of audit in detail, responsibilities of auditors and management, detailed auditors’ findings, ethical responsibilities of the auditor including auditor’s independence, the level of assurance provided, the level of materiality considered in the audit, material and significant issues encountered in performing the audit including matters of emphasis, information on going concern, observations of the auditor on key performance indicators, financial position and other information in the annual report, detailed information of the auditor and the auditee, and information about component auditors (if applicable). While theoretically contributing to an expanded model on audit reporting, these findings also are expected to assist policymakers including regulators in the audit profession in deciding the content and form of the audit report and other related communications.