Importance Of Auditing

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Summary The purpose of this international consultation is to find possible ways to improve the quality, relevance and value of auditor reporting by concerning the need of key users and other parties. There are two main issues affecting the usefulness of auditor reporting which are “expectations gap” and the “information gap”. Thus, possible options for change are necessary to diminish the “information gap” and improve the communicative value of the auditor’s report. Besides key users and other parties, IAASB is considering possible options to make audited financial statements of smaller entities useful and welcomes any additional suggestions of other options for not being addressed issues. Additional and relevant information about entities…show more content…
Hence, choosing appropriate options is a way to address these issues. The “expectations gap” is the difference between the expectation of users and the reality towards an audit. Especially, it also comes from the difference between the ability and responsibilities of the auditor to detect financial statement fraud. Using generic language in auditor’s report widens the gap. Higher transparency may help boost communicative value. Auditor’s report needs further development. The “information gap” represents that information is hard to be understood, especially in economic turbulence. The weak financial reporting frameworks or disclosures result in the gap. Furthermore, combining the complex business and reporting environment make the information more difficult to be understood. In order to solve the gap, more transparency of the entity, its financial statements and its audit can deal with key risks in financial reporting and auditing. Additional information disclosed especially in operating, financial, accounting, managerial and auditing areas can narrow the information gap. There also strengthens that auditor’s further information can increase a degree of credibility. Conversely, such information provided by…show more content…
Here mainly focus on large investor and financial analysts ignores the users of smaller entities and public sector. Smaller entities are supposed to be less affected by issues in a less complex environment, there should be enough information provided to users. However, it is difficult to determine an entity size in different countries or jurisdictions. Thus, Consultation Paper needs to solve the SMEs issues encouraged by IAASB. The public sector auditors are responsible for the mandate or obligations for public sector entities lawfully. A broader scope of audit is implemented in public sector that in private sector. INTOSAI or relevant setters deal with auditor reporting requirements. The auditor’s report is lengthier and more explanatory, reports more widely on aspects of performance than the standard auditor’s report. Consultation Paper needs to solve the issues of public sector encouraged by IAASB.IAASB will further solve special issues of public sector with INTOSAI and relevant setters if necessary. Exploring options for change and using them either individually or in combination minimizes the information gap or improve the communicative value of auditor reporting. The various options are

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