The Informational Value of Emphasis of Matter Paragraphs and Auditor Commentaries: Evidence from an Eye-Tracking Study

• In Event: Auditor Impact on Investor Decisions

Abstract

In order to respond to the demand for more information on matters important to users’ understanding of audited financial statements and the audit, the International Auditing and Assurance Standards and the U.S. Public Company Accounting Oversight Board have both proposed a new auditing standard requiring the communication of additional information in the auditor report. In an experiment, using eye-tracking technology we examine whether and how additional information in the audit report affect how users navigate through and integrate the information presented in the related audited financial statements. The main results show that the matters mentioned in the audit report affect the participants’ information search and increase their attention to financial statements disclosures mentioned in the audit report. Whereas the communication of additional information has attention directing value, users’ perception of the audit seems to be negatively affected – the communication of additional information is associated with a lower perceived value of the audit and a perception that the degree of assurance provided by the auditor differ across components of the financial statements.

Authors

• Louis-Philippe Sirois, HEC Montréal

• Jean Bedard, Université Laval

• Palash Bera, Saint Louis University