The audit expectation gap arises as a fundamental difference between what the general public expects from auditing and what a financial audit actually involves. The problem with this gap is that it leads to concern about the auditing process in general.
What are the components of audit expectation gap?
According to the ACCA, an audit expectation gap is made up of three different types of gaps: (1) Knowledge gap, (2) Performance gap and (3) Evolution gap. Briefly, a knowledge gap is the difference between what the public thinks auditors do and what auditors actually do.
What are the two major components of the audit expectation gap?
This indicates that the gap has two major components: (a)a gap between what society expects auditors to achieve and what they can be reasonably be expected to accomplish (‘reasonableness gap’)(b)a gap between what society can reasonably expect auditors to accomplish and what they are perceived to achieve (‘performance …
What is meant by the term the expectations gap?
(2013) defined as the expectations gap; the difference between what users expect from the audit and what a financial statement audit is. (2013) looks at what the auditors’ role is in the financial process. So the line for the auditor to detect and disclose fraud is part of the expectations gap.
What can auditors do to reduce the expectation gap?
Having higher audit quality will help reduce the expectation gap. The challenge is getting everybody working together and moving in the same direction.
How can audit expectations be reduced?
The role of the auditor in verifying financial statements and providing an opinion in relation to those statements is one which relies on too much judgment, is too subjective and creates greater possibilities of widening the expectations gap. Bringing back the fraud and detection role should help reduce this component.
What is the best way to reduce the expectation gap?
The study concluded that among the methods of constriction the expectation gap are: improvement of communication with users of financial statements in order to correct their unreasonable expectations, and this can be achieved by both the management report and the auditor’s report in order to define the responsibilities …
How do you narrow audit expectation gap?
Recommendations There are some recommendations that could narrow the audit gap such as increase the awareness of public about the auditors’ responsibilities and duties, and increase the practitioners’ (external auditors) skills and abilities through education and training; increase the quality of audit standards.
Can audit expectation gap be eliminated?
According to Sikka et al, the nature of the components of the expectations gap make it difficult to eliminate17. Perceived performance of auditors is an element which is difficult to measure and changes constantly. It is however possible to substantially reduce but not totally eliminate.
When did the expectation gap in auditing start?
In 1992, The American Institute of Certified Public Accountant (AICPA) has described the audit expectation gap as the distinction between what the users of financial statements think about the obligations that auditors are required to, and what the audit profession requires from auditors.
What is the meaning of the expectation gap?
Auditing expectation gap or simply expectation gap is the term used to signify the difference in expectations of users of financial statements and auditor’s expectations concerning audited financial statements. Although it’s about expectations still its scope and meanings have been defined in several ways.
What’s the expectation gap between client and Auditor?
For last few years this gap has been debated number of times at different forums and stakeholders have agreed on reducing this gap as most of the time it has been bone of contention between client, auditor and other users of financial statements.
Why is there a problem with audit expectations?
Such a problem has reached an unprecedented level as a result of the spectacular fall of well-publicized corporations like Enron and WorldCom (Porter & Gowthorpe, 2004). Porter (1993) argues that the recent increase in criticism of and litigations against auditors is due to the failure of auditors to meet society’s expectations.
