Auditors And The Financial Statement Essay

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There is an “expectation gap” between the auditor and the financial statement users which is due to the expectations of the financial statement users set too high and the realistic approach of the auditors on matching that expectation being close to impossible. The increasing communication and expectations gap has led to standard setters throughout the world to change the approach of auditors reporting model. Thus, PCAOB proposed changes to the auditors reporting model, which would now require the auditors to disclose critical audit matters in the audit report model. This PCAOB proposed approach may benefit the financial statement users but CAM disclosures could also be misinterpreted by these users as a “piecemeal” assurance, which means there is difference in assurance levels throughout the financial report (e.g., Ernst & Young [2013], KPMG [2013]. Tysiac [2013]). There is also a possibility that the auditors, in order to incur less liability would identify various areas in the audit report as CAMs and if that happened the audit reports could turn out to be long documents, like the long legal documents such as “terms and conditions” which users nowadays acknowledge for everything. Backof, Bowlin, and Goodson [2014], Brasel, Doxey, Grenier, and Reffett [2014], Brown, Majors, and Peecher [2014], Gimbar, Hansen, and Ozlanski [2014], which deal with the actual results of perceived assurance before discovery of a misstatement, while this study deals with the forecasted
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