This study examines the effect of expanded audit disclosures required by ISA 700 (UK and Ireland), The Independent Auditor’s Report on Financial Statements, on the communication value of the audit report. Using content analysis measures, readability and tone, as proxies for communication value, Ms. Williams Smith found that in the post-ISA 700 period: 1) audit report readability improves and 2) audit report tone changes with a higher occurrence of negative and uncertain words. She also evaluated analyst behavior in response to the ISA 700 audit report. She found that analyst forecast dispersion decreases in the post-ISA 700 period.

Her research demonstrates that ISA 700 reports are easier to read and provide more information to assist investors and information intermediaries in making informed investment decisions. In addition, the ISA 700 reports are not boilerplate in nature and adequately capture the underlying client-specific audit risks through negative and uncertain word usage.

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