Perceptions of the unqualified statutory audit report in Malta : a study

Abstract

Purpose: This study investigates the perceptions of three Maltese stakeholder groups: external auditors, financial advisers and bank lending officers, pertaining to the Communication and Information Aspects of the recently revised ISA 700 Unqualified Audit Report. Design: A mixed-method approach was adopted, consisting of both quantitative and qualitative techniques. A questionnaire was devised and disseminated to the groups under study, as to ascertain their perceptions, and the extent to which these vary amongst the groups. A sample of 12 participants was selected for an interview, to expand on prior quantitative findings and attain their recommendations on the research topic. Findings: The findings indicate that the most important section in the Unqualified Audit Report is the opinion, as it helps users determine the reliance that they can place in an entity’s accompanying financial statements. Yet, users proved sceptical on the clarity of the Unqualified Audit Report’s message; auditors believed this is justified, since users are merely witnessing an audit from a thirdparty perspective, hence they are bound to remain with a certain element of uncertainty regarding the audit work performed. Key Audit Matters were identified as the most prominent introduction of ISA 700’s revision, yet participants were concerned on how the technicality involved in this section may limit users’ understanding of the matters being discussed. Although the introduction of Key Audit Matters has proven to be a positive shift towards non-standardised reports, the demand for further auditor information continues. Conclusions: The Audit Report should be a valuable source of information which assists users in their interpretation of complex financial statements. Furthermore, auditors should seek to improve the way they communicate an audit’s conclusions to an entity’s stakeholders, bearing in mind the restrictions they may face from auditing standards. Value: The findings are significant to the local auditing profession, financial institutions and client companies; suggesting how auditor communications can be improved in the local scenario, to guarantee that end-users have adequate audit information at their disposal to support their financial decisions.