The audit expectation gap is the difference between what the general public expects from an audit and what an audit can actually achieve. This gap can lead to a loss of trust in the audit profession, as well as to increased liability risks for auditors.
There are a number of factors that contribute to the audit expectation gap. These include:
- A lack of understanding of the role of auditors. Many people do not understand the limitations of an audit. They believe that auditors are responsible for ensuring that the financial statements are completely accurate and free from fraud. However, auditors can only provide reasonable assurance that the financial statements are free from material misstatement.
- The use of misleading language in audit reports. Audit reports often use language that is misleading to the layperson. For example, the phrase “present fairly, in all material respects” is often used to describe the auditor’s opinion on the financial statements. However, this phrase does not mean that the financial statements are completely accurate. It simply means that the financial statements are not materially misstated.
- The media’s portrayal of auditors. The media often portrays auditors in a negative light. This is often due to the fact that auditors are often blamed for corporate failures, even when the auditors did not find any evidence of fraud or material misstatement.
How to Overcome the Audit Expectation Gap
There are a number of things that can be done to overcome the audit expectation gap. These include:
- Educating the public about the role of auditors. This can be done through public awareness campaigns, as well as through school and university programs.
Using plain language in audit reports. Audit reports should be written in plain language that is easy for the layperson to understand. - Being more transparent about the limitations of an audit. Audit reports should make it clear that auditors cannot guarantee that the financial statements are completely accurate.
- Working with the media to portray auditors in a more positive light. The audit profession should work with the media to ensure that auditors are portrayed in a fair and accurate way.
Conclusion
The audit expectation gap is a serious problem that can have a negative impact on the audit profession. However, there are a number of things that can be done to overcome this gap. By educating the public, using plain language in audit reports, and being more transparent about the limitations of an audit, the audit profession can help to close the audit expectation gap and restore public trust.
In addition to the above, there are a number of other things that can be done to overcome the audit expectation gap. These include:
- Enhancing the auditing standards. The auditing standards should be updated to reflect the latest developments in auditing and to address the concerns of the public.
- Strengthening the enforcement of auditing standards. The regulatory authorities should take a more proactive approach to enforcing auditing standards. This will help to ensure that auditors are held accountable for their actions.
- Improving the quality of auditing education. Auditing education should be improved to ensure that auditors have the knowledge and skills they need to perform their duties effectively.
By taking these steps, the audit profession can help to close the audit expectation gap and restore public trust.