Audit data analytics of unregulated voluntary disclosures and auditing expectations gap
The study is concerned with the usefulness of using audit data analytics of unregulated voluntary disclosures in reducing the auditing expectations gap. It argues that the lack of credibility and assurance of the unstructured voluntary disclosures and other big data will impact the level of public users’ expectations towards the quality of these unregulated voluntary disclosures. Therefore, we argue that non-financial, as well as financial data require assurance by an independent auditor. Consequently, this would expand the auditors’ role and responsibilities which will lead to raising the degree of stakeholders’ satisfaction and approaching their expectations potentially reducing the auditing expectations gap. Auditors will need to rely more heavily on big data analytics and technological techniques to perform this new role efficiently and effectively. Therefore, we provide empirical evidence that the perceptions of auditors, bankers, investors and academics, support the use of audit data analytics when providing assurance of unregulated voluntary disclosures in reducing auditing expectations gap. To do so, we categorized unregulated voluntary into eight different categories that auditing data analytics is required to capture from various sources and analyse in an informative and useful fashion.
KeywordsAuditing data analytics (ADA) Unregulated voluntary disclosures (UVD) Auditing expectations gap (AEG) Unregulated voluntary disclosures assurance (UVDA) Stakeholders–agency theory Environmental disclosures Corporate governance Mann–Whitney U nonparametric test Risk management disclosures
The authors would like to thank the participants of the 41st World Continuous Auditing and Reporting Symposium Universidad de Huelva Spain 9–10 November 2017 for their valuable and constructive comments on the paper.
- AccountAbility. 2003. The State of Sustainability Assurance AccountAbility, London.Google Scholar
- Accounting Standards Committee (ASC). 1986. Accounting for the Effect of Changing Prices: A Handbook. London: ASC.Google Scholar
- Adams, C., and R. Evans. 2004. Accountability, completeness, credibility, and the audit expectations gap. JCC 14(Summer): 97–115.Google Scholar
- Aeppel, T. 1993. Firms reveal more details on environmental efforts but still don’t tell all. The Wall Street Journal 13: B-1.Google Scholar
- Banghøj, J., and T. Plenborg. 2006. The Value of Voluntary Disclosure in the Annual Report, Working Paper, Copenhagen Business School.Google Scholar
- Barton, J., and G. Waymire. 2003. Investor Protection Under Unregulated Financial Reporting, Working Paper, Emoy University.Google Scholar
- Best, P.J., S. Buckby, and C. Tan. 1999. The audit expectation gap in Singapore evidence in support of the long-form audit report. Brisbane: Queensland University of Tecnology.Google Scholar
- Bromwich, M. 1992. Financial Reporting, Information and Capital Markets. London: Pearson Education.Google Scholar
- Brown, R.G. 1962. Changing audit objectives and techniques. The Accounting Review 37: 696–703.Google Scholar
- Chow, C.W. 1982. The demand for external auditing: Size, debt and ownership influences. The Accounting Review 57(2): 272–291.Google Scholar
- Coram, P. 2004. An experimental evaluation of the effect of voluntary disclosure of non-financial performance indicators and assurance on this information on stock price estimates and earning forecasts, Working Paper, University of Melbourne.Google Scholar
- Coopers and Lybrand. 1984. Manual of Auditing, 4th ed. London: Gee and Corporation Publishers.Google Scholar
- Deegan, C. 2000. Financial Accounting Theory. Australia: McGraw-Hill.Google Scholar
- Deegan, C. 2002. Australian Financial Accounting. Sydney: McGraw Hill Book Company.Google Scholar
- Doane, D. 2000. Corporate Spin: The Troubled Teenage Years of Social Reporting. London: New Economics Foundation.Google Scholar
- Elliott, R.T. 1998. Assurance services and the audit heritage. Auditing: A Journal of Practice and Theory 17(Supplement): 1–8.Google Scholar
- FEE (Federation des Experts Comptables Europeens). 2002. Providing Assurance on Environmental Reports, Discussion Paper, Brussels: FEE.Google Scholar
- Global Reporting Initiative (GRI). 2002. Sustainability Reporting Guidelines. http://www.globalreporting.org/guidlines/2002.asp.
- Guthrie, J., and L.D. Parker. 1990. Corporate social disclosure practice: A comparative international analysis. Advances in Public Interest Accounting 3: 159–176.Google Scholar
- Gonella, C., and C.M. Woo. 2000. Total assurance. AccountAbility Quarterly 13: 12–14.Google Scholar
- Greer, J., and K. Bruno. 1996. Greenwash: The reality behind corporate environmentalism, 28–30. Penang: Third World Network.Google Scholar
- Gwilliam, D. 1988. A Survey of Auditing Research. The Institute of Chartered Accountants in England and Wales. Upper Saddle River: Prentice-Hall.Google Scholar
- Henriques, A. 2003. How to trust a verifier. Ethical Corporation Magazine. http://ethical.corp.com/content_print.asp?ContentID=685.
- Hunton, J.E., T. Benford, V. Arnold, and S.G. Sutton. 2000. The impact of electronic commerce assurance on financial analyst’s earnings forecasts and stock price estimates. Auditing: A Journal of Practice and Theory 19: 5–22.Google Scholar
- Jamal, K., and S. Sunder. 2006. Auditing as Certification Activity in the Broader Economy, Working Paper, School of Business, University of Alberta and Yale University.Google Scholar
- Johnson, D.A., K. Pany, and R. White. 1983. Audit reports and the loan decision: Actions and perceptions. Auditing: A Journal of Practice and Theory 2: 38–51.Google Scholar
- Kamp-Roelands, N. 1999. Audits of Environmental reports: Are We Witnessing the Emergence of Another Expectation Gap?. Rome: Koninklijk Netherkands Institute.Google Scholar
- Karpoff, J. 1986. A theory of trading volume. Journal of Finance 41: 766–794.Google Scholar
- Kent, R.L., and M. Matinko. 1995. ‘The measurement of attributions in organizational research’, Attribution Theory: An Organizational Perspective. Florida: St.Lucie Press.Google Scholar
- Koonce, L., and M. Mercer. 2002. Using Psychology Theories in Archival Financial Accounting Research. Presented at the American Accounting Association Conference.Google Scholar
- KPMG. 1999. KPMG International Survey of Environmental Reporting 1999. http://www.wimm.nl/publicties/kipmg1999.pdf.
- KPMG. 2002. International Survey of Corporate Sustainability Reporting. KPMG Global Sustainability Services, De Meern, The Netherlands.Google Scholar
- Laan, S.V. 2006. Voluntary Corporate Social Disclosures: Mapping the Territory, Paper presented in the Australasian CSEAR Conference at the Victoria University of Wellington.Google Scholar
- Leftwich, R. 1983. Accounting Information in private markets: Evidence from private lending agreements. Accounting Review 58: 23–42.Google Scholar
- Lev, B. 1988. Toward a theory of equitable and efficient accounting policy. The Accounting Review LXIII(1): 1–22.Google Scholar
- Lewelly, P.G. 2000. Sustainability auditing: issues for the AICPA. AccountAbility Quarterly 13: 30–34.Google Scholar
- Liberty, S.E., and J.L. Zimmerman. 1986. Labour union contract negotiations and accounting choices. The Accounting Review 61(4): 692–712.Google Scholar
- Liggio, C.D. 1974. The expectation gap: The accountant’s legal Waterloo. Journal of Contemporary Business 3: 27–44.Google Scholar
- Manson, S., and M. Zaman. 2000. Auditor communication in an evolving environment: going beyond SAS 600 auditors’ reports on financial statements. Aberystwyth: The University of Wales.Google Scholar
- Miller, P., and P. Bahnson. 2002. Quality Financial Reporting. New York: McGrew-Hill.Google Scholar
- Owen, D., and B. O’Dwyer. 2004. Assurance Statement Quality in Environmental, Social and Sustainability Reporting: A Critical Evaluation of Leading Edge Practice, Research Paper Series, International Center for Corporate Social Responsibility, Nottingham University Business School.Google Scholar
- Sarbanes-Oxley Act (SOX). 2002. www.findlaw.com.
- Scott, W.R. 2003. Financial Accounting Theory, 3rd ed. Toronto, Ontario: Pearson Education.Google Scholar
- Show, J.C., and BL, ACX, FCMA, and Jdipma. 1980. The Audit Report What it Says and What it Means. London: Gee and Co Publishers Ltd.Google Scholar
- Singhvi, S.S., and H.B. Desai. 1971. An empirical analysis of the quality of corporate financial disclosure. Accounting Review 46: 129–138.Google Scholar
- Vasarhelyi, M.A., M.G. Alles, and A. Kogan. 2010. Continuous Assurance for the New Economy. Chartered Accountants.Google Scholar
- Wallace, W.A. 1987. The economic role of the audit in free and regulated markets: A review. Research in Accounting Regulation 1: 7–34.Google Scholar
- Watts, R.L., and J.L. Zimmerman. 1982. Auditor Independence and Scope of Services, unpublished working paper, University of Rochester.Google Scholar
- Watts, R.L., and J.L. Zimmerman. 1983. Agency problems, auditing and the theory of the firm: Some evidence. Research in Accounting Regulation 1: 7–34.Google Scholar
- Wolk, H.I., and M.G. Tearney. 1997. Accounting Theory: A Conceptual; and Institutional Approach, 4th ed. Cincinnati, OH: South-Western College Publishing.Google Scholar
- Zadek, S. 2003. Materiality in Reporting, Ethical Corporation Magazine. http://ethical.corp.com/contaent_print.asp?ContentID=928.
- Zeff, S.A. 1978. The rise of economic consequences. Journal of Accountancy 56–63.Google Scholar