Can Customized Procedure Descriptions Communicate Information Credibility? Conflicting Nonfinancial Assurance Standards

Abstract

The IAASB maintains that expert assurance practitioners are unable to quantify limited assurance achieved for nonfinancial information and presumes users can read practitioner-customized procedure descriptions to differentiate information reliability between “inconsequential” and “high.” Can non-expert users do what assurance professionals cannot?

The answer is important because (a) demand for reliable nonfinancial information is growing and the assurance achieved is critical to information value, (b) no cited research or other basis supports the IAASB’s presumption regarding typical users’ ability to quantify information reliability, and (c) the IAASB’s standard conflicts with other assurance standards for nonfinancial and financial information.

We conduct an experiment to isolate effects of customized procedure descriptions, conclusion frames, and engagement labels. We find participants’ confidence judgments are not significantly influenced by important differences in customized procedure descriptions, but are influenced by conclusion frame and by engagement labels, implying an important credibility communication gap for customized procedure descriptions standards.

Keywords: Nonfinancial Assurance, Limited Assurance, Customized Verification, Measurement Uncertainty, Negative Frame Conclusion, Communication Gap

JEL Classification: M42, M49