Big4 Compliance with Changes to Audit Reporting Standard ASA2007-1: A Note

38 Pages Posted: 15 Feb 2010  

Chris Ikin

affiliation not provided to SSRN

Stephen A. Zeff

Rice University - Jesse H. Jones Graduate School of Business

Neil L. Fargher

Australian National University (ANU)

Date Written: November 5, 2009

Abstract

Auditors have a valuable reputation for being quality providers of audit and assurance services. Recent changes to an Australian auditing standard (ASA 700 The Auditor’s Report on a General Purpose Financial Report) provided a rare opportunity to assess one aspect of auditor quality between Big4 auditors - compliance with new Auditing Standards. The mandated changes to ASA 700 were hurried into force, potentially catching less aware auditors off-guard.

We examined all auditor’s reports issued by the Sydney partners of the Big4 audit firms between 1 July 2007 and 29 May 2008 for compliance with the new standard. We find that 13% failed to comply with the amended provisions of ASA700. We also noted 18% using either confusing and/or inconsistent language to describe the IFRS compliant financial statements being audited. Furthermore, this aspect of audit quality is variable across the Big4 brand in Sydney.

While these results may be explainable in terms of the relative effectiveness of internal control systems the audit firms put in place to keep partners technically up to date with changes in regulations, it seem clear that the hasty introduction of new auditing standards is unlikely to produce timely and consistent compliance.

Keywords: Auditing standards, auditor quality, audit reports

JEL Classification: M42, M48

Suggested Citation

Ikin, Chris and Zeff, Stephen A. and Fargher, Neil L., Big4 Compliance with Changes to Audit Reporting Standard ASA2007-1: A Note (November 5, 2009). Available at SSRN: https://ssrn.com/abstract=1552072 or http://dx.doi.org/10.2139/ssrn.1552072

Chris Ikin

affiliation not provided to SSRN ( email )

Stephen A. Zeff (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

6100 South Main Street
P.O. Box 1892
Houston, TX 77005
United States
713-348-6066 (Phone)
713-348-6296 (Fax)

Neil L. Fargher

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Paper statistics

Downloads
179
Rank
137,190
Abstract Views
796