The Perceived Message in the Audit Report – An Experimental Exploration

This paper reports on the findings of a series of experiments which investigated the perceived message in four different audit reports. The study involved 252 participants, 125 in New Zealand and 127 in the United Kingdom. In a between-groups design, the participants were allocated to four experimental conditions, each containing a variation of the audit report (from short-form to long-form). Under each experimental condition, participants were asked to express an opinion on the audit report and on the related financial statements. The research findings indicate that the content of the audit report does not have a significant influence on the message perceived by the reasonably knowledgeable users of financial statements with regard to the nature of the audit, the respective roles of the auditor and the directors and the risk of investing in the reporting entity. However, those who do not read or only occasionally read financial statements are less inclined to agree that the auditor ‘guarantees’ the accuracy of the financial statements and the going concern of the reporting entity than those who read financial statements more regularly.