To sum up the expectation gap in one sentence, the expectation gap is the difference between what
Fantastic news! We've Found the answer you've been seeking!
Question:
To sum up the expectation gap in one sentence, the expectation gap is the difference between what the public expects from the auditors and what the auditor actually provides.
- The users of financial statements tend to believe that the auditor can detect and prevent all frauds whether they are occurred intentionally or not. However, due to the effort of people concealing their frauds, it is very hard for auditors to detect all of them. Additionally, the auditor cannot check all the information in financial statements due to the large volume of information, so they usually conduct based on the test-based audit. So Auditor, not detecting the fraud does not mean audit failure.
- There are 2 types of expectational gap
- Performance Gap
- the difference between the level of work an auditor is required to do by the auditing standards and what the public believes they ought to do.
- Performance Gap
- Liability Gap
- The auditor usually conducts the audit with a test-basis audit which means they select sampling among the population to which it relates.
- Therefore, an auditor`s opinion involves judgment and there is a rare possibility that the opinion give is false
- The expectation gap is the original reason why the auditor gets sued by the clients and third parties.
- To resolve the expectation gap, the auditor should conduct an audit by communicating with management and the people who are in charge of governance
- The auditing standards should clarify and specify what auditors do or the auditors and the company have to adjust what the auditor should do in audit to reduce the expectation gap.
The audit report was recently expanded from the previous six-paragraph format. The new format includes a section on key audit matters. This was an attempt to narrow the expectations gap. Discuss the expectations gap and whether you think the new audit report is likely to have any significant effect.
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
Posted Date: