Compliance with International Standards on Auditing (ISA) As a Framework for Reducing Audit Risk and Narrowing the Expectation Gap: A Comparative Study of Saudi SABIC Company and the Algerian BIOPHARM Group.

Abstract

This study aims to evaluate the role of compliance with International Standards on Auditing (ISA) in reducing audit risk and narrowing the expectations gap, through a comparative analysis of the external auditor reports of both SABIC (Saudi Arabia) and BIOPHARM (Algeria). The study is based on the premise that the actual level of compliance with ISA standards, particularly those related to risk-based auditing and reporting transparency, is a crucial factor in improving audit quality and enhancing users' understanding of the auditor's liability. The study adopted a descriptive-analytical approach to develop its theoretical framework, drawing on peer-reviewed literature on auditing standards, audit risk, and the expectations gap. For the practical application, a comparative approach and content analysis were employed, examining the published external auditor reports of the two companies under study. The measurement tool was an ISA checklist designed according to the requirements of international standards related to planning, risk assessment, audit evidence, going concern, and report structure. The qualitative assessment results were then translated into quantitative indicators to measure the degree of compliance. The study results showed that SABIC's report demonstrated a high degree of compliance with modern ISA standards, particularly regarding the disclosure of key audit matters, the clarification of the risk-based audit methodology, and the responsibilities of stakeholders. This contributed to reducing audit risk and narrowing the expectations gap. In contrast, BIOPHARM's report showed partial compliance with the standards, with the absence of some essential requirements. This limited the areport's effectiveness in managing audit risk and enhancing communication with users. The study concludes that there is a positive relationship between the level of compliance with International Auditing Standards and the reduction of audit risk and the expectations gap. This relationship is influenced by the regulatory context and the level of professional practice maturity.