Question

Let’s go full circle and talk about the Expectation Gap again. Do you think that any otherwise intelligent person who is not involved in accounting or audit can possibly understand what either the public or nonpublic audit report is communicating? Does the technical nature of the audit report help or hinder the financial transparency that has been our profession’s goal since SOX? Please write an articulate, thoughtful response to the question above. This response should be 200-250 words in length. PROVIDE SOURCE AND CITE YOUR ANSWER

Answer 1

Solution:

Audit helps to state whether the financial statement shows true or fair view or not. The audit report helps to understand the true picture of the business to the users of the financial statement and they can take various economic decision based upon the same. So the audit report is form or structure in that way which can be easily understandable and analysis by the users of the financial statement. The various accounting and auditing standards are issued by GAAP for making the presentation of the report more transparent. So it can be easily understandable by non-technical person. The audit report clearly states all the material facts of the financial statement. The cleared audit report states that the financial statement is true and fair and in other hand the qualified, adverse report and report of disclaimer represents that the financial statement are not reflecting true and fair view and the matter of discrepancy and misstatement facts are clearly stated in the audit report.

The SOX Act makes to safeguard the interest of the users of the financial statement. So it is very important to consider the same at the time of forming opinion on the fairness of the financial statement. The auditor is planning the audit work after considering all the important and material clause of the SOX act. So the audit report helps to maintain the transparency of the financial statement and safeguard the interest of the shareholders and other users of the financial statement.

References:

Backof, A., Bowlin, K., & Goodson, B. (2017). The impact of proposed changes to the content of the audit report on jurors’ assessments of auditor negligence.

Bamber, E. M., Bamber, L. S., & Schoderbek, M. P. (1993). Audit structure and other determinants of audit report lag: An empirical analysis. Auditing, 12(1), 1.

Karanja, E., & Zaveri, J. (2014). Ramifications of the Sarbanes Oxley (SOX) Act on IT governance. International Journal of Accounting and Information Management, 22(2), 134-145.

Zhong, K., Cheng, X. K., & Yao, L. J. (2014). The disclosure of internal control information and tunneling of controlling shareholders: Consequences of the Chinese “SOX” Act [J]. China Soft Science, 9, 103-116.