What is the expectations gap in auditing?

What is the expectations gap in auditing?

The audit expectations gap is the difference between what an auditor actually does (and is required to do by legislation and auditing standards) and what stakeholders and commentators think that the auditors’ obligations might be and what they might do.

What is the reasonableness gap in auditing?

Reasonableness gap: gap between what society expects the auditors to achieve and what they can be reasonably expected to accomplish. Unreasonable expectations are those where cost to the auditor of fulfilling the expected responsibility would outweigh any benefit attained by the user.

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.

What is expectation performance gap?

Expectation gap examples Performance gap – this describes the difference between the types of tasks the public believes the auditor is required to perform and the level of work that auditing standards actually require.

What causes audit expectation gap?

The expectation gap is mainly due to the general public and financial statement users not fully understanding the work performed by auditors during an audit, referred to in the DP as the knowledge gap. Hence, the public may over-expect what auditors actually do during an audit of financial statements.

Why is the audit expectation gap important?

Introduction. The audit expectation gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility, earning potential and prestige associated with the work of auditors.

Why is audit expectation gap?

The majority of research studies indicate that the audit expectation gap is mainly due to users’ unreasonable expectations of audits as well as their unrealistic perceptions of the audit profession’s performance.

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.

Can auditors close the great expectation gap for good?

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 I reduce my 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 …

Who needs to close the expectation gap?

Everyone closely connected to the audit profession, from regulators to the general public, will need to work together in order to close the expectation gap.

What are the two major components of the audit expectation gap?

Salehi [60] stated that “the audit expectation gap refers to either or both of these two: (1) differences in opinion on actual performance and expected performance of auditors (2) existence of these opinion differences between the auditors and users of accounts independently and comparatively”.

What is the audit expectation gap (AEG)?

The term “Audit Expectation Gap” was first introduced to the audit literature by Liggio in 1974. He defined the Audit Expectation Gap (AEG) as the difference between the levels of expected performance as envisioned by users of financial statement and the independent accountant.

What is the ‘expectation gap’?

The audit ‘expectation gap’ broadly measures public concern about audit. Since the term was first used, there is little evidence that the gap has narrowed. The persistence of the expectation gap reflects, in part, the fact that public expectations of audit can grow in line with what auditors can accomplish. responses from each.

What is the expectation gap between auditors and users?

Audit expectation gap exist between auditors and users of financial information because of the perception of the latter, on the roles and duties of the former, and what they (auditors) actually do.

Do the public and the auditors have different expectations about audit?

There is concern that auditors and the public hold different beliefs about the auditors’ duties and responsibilities and the messages conveyed by audit reports. In recent years, some spectacular and well-publicised corporate collapses and the subsequent implication of the reporting auditors have highlighted the audit expectation gap.