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Open AccessArticle

ISA 701 and Materiality Disclosure as Methods to Minimize the Audit Expectation Gap

Department of Accounting, Akademia Leona Koźmińskiego, Jagiellońska 57/59, 03-301 Warsaw, Poland
Author to whom correspondence should be addressed.
J. Risk Financial Manag. 2019, 12(4), 161;
Received: 30 September 2019 / Revised: 7 October 2019 / Accepted: 11 October 2019 / Published: 16 October 2019
Purpose: The main purpose of this paper is to determine how particular audit firms deal with ISA 701 requirements and the society expectations towards reporting the materiality levels. Additionally, the aim of this paper is to range the assertions in terms of the frequency of their occurrence. Design/methodology/approach: The tested sample consisted of 317 companies listed on Warsaw (158 companies) or London (159 companies) stock exchange. The analysis was divided into companies from the following ten market indexes (WIGs): construction, IT, real estate, food, media, oil and gas, mining, energy, automotive and chemicals. The research was executed based on the analysis of annual consolidated financial statements (annual reports) and independent auditor reports that were published by in-scope entities for the latest twelve-months period available as at the date of the research (mostly periods ended on 31 December 2017 and 31 March 2018). All values were denominated to euro (EUR) with use of average exchange rates published by the National Bank of Poland. All performed analyses and developed charts were supported by Microsoft Power BI data analysis tool. Findings: The general conclusion, which may be drawn from this research, is that implementation of ISA 701 and materiality disclosure limited the audit expectation gap. Detailed observations are described throughout the paper and summarized in the conclusions section. Originality/value: This study extends the prior research by providing various dimensions of the analysed matters. It contributes to understanding of the audit expectation gap and investigates on methods of minimizing it. View Full-Text
Keywords: ISA 701; audit expectation gap; key audit matters; materiality; Poland ISA 701; audit expectation gap; key audit matters; materiality; Poland
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Iwanowicz, T.; Iwanowicz, B. ISA 701 and Materiality Disclosure as Methods to Minimize the Audit Expectation Gap. J. Risk Financial Manag. 2019, 12, 161.

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