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The IUP Journal of Accounting Research and Audit Practices:
An Empirical Investigation of Readability and Communicative Performance of Auditorís Report Post ISA 700
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Currently, the International Standard on Auditing (ISA 700) is a reference model for several independent auditors. The purpose of this paper is to examine the understandability of the illustrations provided by ISA 700 in terms of the structural features of international auditorsí reports. The paper discusses the compliance level of international auditorsí reports with the linguistic rules and the implications for users of financial statements. It provides new empirical evidence about the linguistic features of international illustrations provided by the ISA 700 and legibility of auditing results. The measurement of the understandability of unmodified reports is performed in terms of the linguistic characteristics of standardized reports wording. The empirical results show that the standardized illustrations are not fully understandable by users of financial statements. The illustrations of international auditorsí reports are not compliant with several linguistic rules.

 
 
 

International Federation of Accountants (IFAC) has published a revised standard which deals with forming an opinion and reporting on financial statements. The current version of the audit report was the result of several exposure drafts. The last revision of the independent auditor’s report aimed to improve communication between preparers and users of audited financial information.

Unquestionably, the effectiveness of the audit report is largely influenced by its understanding by users of financial statements. It is generally accepted that this understanding is conditioned by the level of readability of audit reports. The ambiguity of the auditor’s report is a bad signal to readers of audited financial statements. It promotes the misinterpretation of information and intensifies the expectation gap in auditing.

 
 
 

Accounting Research and Audit Practices, International Federation of Accountants (IFAC), International Standards on Auditing (ISA), Understandability of Auditing Report, Conceptual Framework, Definitions of Readability, Empirical Investigation, Readability, Communicative Performance, Report.