Expectation Gap In Auditing

1. What is an expectation gap and why is it a controversial issue facing the auditing Function?

• Definitions of the Expectations Gap:

There are many definitions of the audit expectations gap. Audit expectations gap is when external auditor’s understanding and knowing everything about their role and duties is compared against the expectations of the general public and users of financial statements. The first use of the term 'expectations gap ' originated from the United States, where the term has until recently been given much more popularity. In 1974, Liggio define the expectation gap as the difference between the actual and the expected performance. This was later improved by the Cohen Commission’s terms of reference on auditor’s responsibilities

2. What is the most critical function of auditing and how does the concept of expectation gap affect this function?

The most critical function of an auditor is that they have to follow all the auditing standards and the performance of auditors in the prevention of fraud

Audit expectation gap: The relevance of the role theory is that every individual in an organization has a part or role to play in fulfilling their job requirements. Roles also indicate specific forms of behaviors required by specific tasks to be performed

The main beliefs are directly related to the internal auditor and the issue of fraud prevention. The model is expected to act within socially acquired rules which are the social expectations of the public from the auditor to prevent fraud. The rules have indicated in clear terms that the internal audit is that arm of management that is responsible to prevent fraud in an organization which is in line with the users of audit reports

In the past these ethical standards holds the futures of ethical guidance issued. But now has added more features and generally more stringent than preceding guidance. For example: the Internal Financial Accounting Code (IFAC), they base on principles rather than rules and highlight objectivity from the point of view of logical and knowledgeable third party. They fulfill with ethical principles issued by the European Commission (EC). Separately from the five ESs, APB also issued a statement of Provision Available for Small Entities