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Auditor Materiality in Expanded Audit Reports: More (Disclosure) is Less

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  • Karen‐Ann M. Dwyer
  • Niamh M. Brennan
  • Collette E. Kirwan

Abstract

The United Kingdom (UK) Financial Reporting Council (FRC) introduced expanded audit reports to improve audit report disclosures and render audits more transparent to financial statement users. This study examines audit materiality threshold disclosures, providing descriptive evidence of how auditors disclose materiality information in UK audit reports. This research uses manual content analysis (i) to assess auditors’ benchmarks and the percentages auditors apply to those benchmarks. The analysis examines (ii) auditors’ use of non‐GAAP benchmarks, including non‐recurring and recurring item exclusions and (iii) auditors’ rationales for their benchmark choices. The research finds that auditors choose a wide variety of benchmarks and apply a wide range of percentages to the chosen benchmarks. Non‐GAAP adjustments are pervasive. Auditors’ rationales for benchmark choices include that the benchmark is a financial statement performance measure, and the benchmark eliminates volatility. The authors question whether the FRC's expanded disclosures have met its transparency objectives and concludes that ‘more (disclosure) is less’.

Suggested Citation

  • Karen‐Ann M. Dwyer & Niamh M. Brennan & Collette E. Kirwan, 2023. "Auditor Materiality in Expanded Audit Reports: More (Disclosure) is Less," Australian Accounting Review, CPA Australia, vol. 33(1), pages 31-45, March.
    • Handle: RePEc:bla:ausact:v:33:y:2023:i:1:p:31-45
    DOI: 10.1111/auar.12392
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    References listed on IDEAS

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    Cited by:

    1. Yongliang Wu & Zihui Li & Min Zhang & Shengbao Zhai, 2023. "Auditor Assignments and Audit Quality," Australian Accounting Review, CPA Australia, vol. 33(2), pages 160-187, June.
    2. Yaowen Shan & Sue Wright, 2023. "Editorial," Australian Accounting Review, CPA Australia, vol. 33(1), pages 3-4, March.

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