Communicating Assurance Using Practitioner-Customized Procedures: An Experiment and Emerging Research Opportunities
Auditing: A Journal of Practice & Theory (Vol. 39, No. 4; 201-222)
45 Pages Posted: 2 Jan 2019 Last revised: 27 Jun 2022
Date Written: November 1, 2020
Abstract
Traditionally, financial and nonfinancial information assurance standards have specified either "high" assurance based on "sufficient evidence" or "moderate" assurance based on analytical procedures and inquiries. Recently, in response to rapidly growing nonfinancial assurance demand, the IAASB extended the possible range of limited assurance by allowing practitioner-customized procedure descriptions and assuming diverse users can "appreciate" the varying reliability achieved. To test the validity of this policy change, we examine report users' confidence judgments for a GHG emissions assurance report using combinations of report attributes: critical practitioner-customized procedure descriptions, conclusion frame, and engagement label. We find that, consistent with an "assurance communication gap," including or explicitly excluding a practitioner-customized procedure deemed essential-for-reasonable assurance does not significantly affect users' confidence judgments. However, we find that both positive conclusion frames and reasonable assurance engagement labels incrementally enhance confidence judgments. We outline research and practice opportunities related to emerging policy prescriptions involving practitioner-customized procedures.
Keywords: Nonfinancial Assurance, Limited Assurance, Sustainability Reporting, Measurement Uncertainty, Conclusion Frame, Communication Gap, Investors' Confidence
JEL Classification: M42, M49
Suggested Citation: Suggested Citation