Is the audit expectation gap a major issue facing the audit profession?

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Is the audit expectation gap a major issue facing the audit

profession?

Yes, the audit expectation gap is perceived to be one of the major issues facing the audit profession .The users of company reports expect auditors to detect and report material fraud and irregularities amongst other issues. In return, the profession argues that the users misunderstand the duty of auditors, and that fraud detection and reporting is not a central audit objective. Papadakis (2003) says that the auditing profession ignores, at its peril, the debate about its ability to deliver what the market wants, thus the users worldwide expect auditors to detect fraud and actively search for it. For example, If a survey were carried out within the general public and members of the public were asked to give a “true” or “false” answer to the statement : “The role of the auditor is to detect fraud and error in financial statements”, most people would say true. If users of financial statements and the general public were educated to think that the auditor's role embraces the detection and prevention of fraud, especially in relation to material items, the fraud and error detection role of an audit could be relatively objective. However, absolute objectivity cannot be guaranteed since “materiality” and “material significance” are subjective concepts which require furthe clarification by the Auditing Practices Board. A return to the primary role of detection and prevention would also be welcomed since there are at present, not sufficient measures to hold the auditor liable for negative consequences of his actions. Some sources of academic literature assume that the meaning of an audit is not objective/fixed whilst other sources such as contents of audit reports assume that the meaning of an audit is fixed. In relation to the latter assumption, there is the belief that the expectations gap could be significantly reduced – if not possible to eliminate.

Is it Possible to Eliminate the Expectations Gap? According to Sikka et al, the nature of the components of the expectations gap make it difficult to eliminate. Perceived performance of auditors is an element which is difficult to measure and changes constantly. It is however possible to substantially reduce but not totally eliminate.

The structureof the audit expectation gap is deptcted in the next figure:

http://www.infotechaccountants.com/forums/picture.php?albumid=19&pictureid=57

Structure and composition of the audit expectation gap

Analysis of the audit expectation-performance gap reveals that it has two major components (porter 1991, 1993

first, The reasonableness gap - the gap between the duties society expects auditors to perform and those it is reasonable to expect of auditors. this component comprises the duties that society unreasonably expects auditors to perform.

second, The performance gap - the gap between the duties society reasonably expects of auditors and what it perceives auditors actually accomplish. This component may be subdivided into:

a- the deficient standards gap - the gap between the duties reasonably expected of auditors and auditors' existing duties as defined by the law, auditing standards, other regulations and professional promulgations;

b- the deficient performance gap - the gap between the standard of performance of auditors' existing duties expected by society and auditors' performance of those duties as perceived by society.

تم تعديل 26 أكتوبر 2008 بواسطة MBA ACCOUNTING