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Information Asymmetry in Statutory Audit: A Literature Review

In: Digitalization in Finance and Accounting

Author

Listed:
  • Hana Stárková

    (University of Economics, Prague)

  • Martin Janíčko

    (University of Economics, Prague)

Abstract

The chapter deals with selected aspects of information asymmetry in statutory audit, backed by relevant—though not exhaustive—literature on the topic. External auditors for the statutory audit are typically chosen by the shareholders as such exercise is mandatory, in conformity with the legal framework of the respective jurisdiction. Hence, information asymmetry plays an important part in audit from at least two angles. First, conventional aim of most statutory audits is to provide and convey clear and comprehensive information to potential investors, or outsiders, overcoming information asymmetry between them and the company, or insiders. Second, information asymmetry and ensuing “principal-agent” problem may arise between auditors and auditees, usually leading to imprecise information about functioning or financial statements of the company in question. The text concludes that the existing framework has still a long way to go to reduce information asymmetry between auditors and auditees, while parametric adjustments can be made to auditing standards and enforcement to mitigate inaccuracy of final audit reports.

Suggested Citation

  • Hana Stárková & Martin Janíčko, 2021. "Information Asymmetry in Statutory Audit: A Literature Review," Springer Proceedings in Business and Economics, in: David Procházka (ed.), Digitalization in Finance and Accounting, pages 219-226, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-55277-0_19
    DOI: 10.1007/978-3-030-55277-0_19
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