Clarifying Auditors’ Responsibility for Fraud

Commercial Lenders’ Perceptions of Changes to the Audit Report

Xia Zhang, PhD, and Quinton Booker, PhD, CPA

In BriefThe PCAOB recently issued changes to the audit report, one of which explicitly clarifies auditors’ responsibilities for fraud by adding the phrase “whether due to error or fraud” when describing the responsibility to obtain reasonable assurance about whether the financial statements are free of material misstatements. The authors surveyed commercial lenders to examine the impact of this explicit clarification for fraud in the auditor report along four dimensions: general statements, informative value, responsibility, and liability. The findings should be of interest to regulators, auditors, financial statement users, and researchers.