Answered: Accounting & Finance - Auditing…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Accounting & Finance - Auditing

Question 5:

Discuss the audit expectation gap. Your answer should include the following: the main causes of the expectation gap; its main components; and procedures that can be taken to reduce the expectation gap.

Expert Solution

Step 1

The expectation gap is the dissimilarity among the actual and real roles and responsibilities of auditors and the expectations or viewpoint of general users of financial statements of responsibilities of the audit while performing the audit.

Following are the main causes of the expectation gap-

the auditor is not certified to provide the service of audit
absence of sufficient standards
misinterpretation of users
dependency and self-interest of auditor
lack of knowledge of responsibilities of auditors

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