- 5 Marks
Question
In recent years, some well‐publicized corporate failures and its subsequent implication of the reporting auditors have highlighted the audit expectation gap. Public misperceptions are a major cause of the threat of legal challenges facing the accounting profession. One of the key challenges facing assurance providers is understanding and tackling the expectation gap in assurance.
Required:
Discuss what factors account for the expectation gap.
(5 marks)
Answer
The expectation gap results from the public’s wrong perception of what they think auditors should do as opposed to what the auditor actually does in accordance with legal and professional requirements. Factors that account for the expectation gap are:
- Performance gap
- Some auditors may perform below the expectations of users.
- Liability gap
- Many users do not know to whom the auditor owes a responsibility and therefore may want to sue the auditor when they are not supposed to do so.
(5 marks)
- Topic: Audit Failure and Expectation Gap
- Series: NOV 2020
- Uploader: Dotse