What is the expectations gap quizlet?
Expectation gap is the gap between what users expect of an auditor and the actual services that auditors provide, as perceived by the public.
What is meant by the term expectation gap provide some examples of the expectation gap?
Definition: The term Expectation gap refers to the fact that the public perception of the role and responsibilities of the external auditor is different from his statutory role and responsibilities. The expectations of the public are often set at a level higher than that at which the external auditor actually operates.
What causes 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.May 11, 2021
What are the examples of expectation gap?
The communications gap is caused by public expectations being unreasonable; for example, users of accounts may expect all fraud to have been discovered by a statutory audit, whereas the auditor is only expected to plan the audit to prevent and detect fraud to comply with Statement of Auditing Standards 110, Fraud and ...
Why is audit expectation gap important?
The expectation gap in audit is a topic that attracts attention. It broadly measures public concern about audit. Historically, some in the profession might have portrayed the gap as being due to the public's lack of understanding rather than being a legitimate concern.May 9, 2019
How do you close expectation gap?
Written documents of this nature explain that detecting and preventing fraud is the role of company management, as auditors will only find the irregularities that materially impact financial statements. Overall, clear communication is the best way to close the expectation gap.
How do you narrow your expectation gap?
Narrowing the audit expectation gapA holistic approach is required to narrow the expectation gap on fraud and going concern.Forensic specialists and skills have a role to play in addressing fraud.Addressing going concern requires changes to both financial reporting and auditing.Oct 20, 2021
What are expectation gaps?
As we’ve touched on above, a few different situations could be used as expectation gap examples: 1 Knowledge gap – this describes situations when the entity being audited doesn’t understand what happens during an audit and is unaware of the usual policies and procedures. 2 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. 3 Liability gap: this type of expectation gap describes misunderstandings regarding an auditor’s legal liability, as in the case of detecting fraudulent activity.
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What is expectation gap?
Expectation gap is the difference between public perception of an auditor’s role and responsibilities regarding audit engagements and what the auditor’s legal responsibilities actually are. Users of financial statements often believe that auditors are responsible for preventing and detecting all frauds and that they test transactions ...
What is the purpose of an auditor's report?
For example, that responsibility to prevent and detect fraud mainly rests with management of the company whereas auditors are expected to detect only those frauds which materially impact financial statements.
What is the expectation gap?
Definition: The term Expectation gap refers to the fact that the public perception of the role and responsibilities of the external auditor is different from his statutory role and responsibilities. The expectations of the public are often set at a level higher than that at which the external auditor actually operates.
What is general purpose financial statement?
General purpose financial statements are prepared for general use of the users so special nature of decision making should not be made. Audit report should mention the nature of work auditor carried out and that their opinion is based on the information provided to them and to the best of their knowledge and belief.
What are some examples of misunderstandings?
Some examples of the misunderstandings inherent in the public’s expectations are as follows: 1 The public believes that the audit opinion in the audit report amounts to a ‘certificate’ that the financial statements are correct and can be relied upon for all decision-making purposes. 2 The public also believes that the auditor has a duty to prevent and detect fraud and that this is one reason for an audit. 3 The public assumes that, in carrying out his audit work, the auditor tests 100% of the transactions undertaken during the accounting period.
