Question

The audit report was recently expanded from the previous six paragraph format. The new format includes a section on key audit matters. This was an attempt to narrow the expectations gap. Discuss the expectations gap and whether you think the new audit report is likely to have any significant effect.

Answer 1

As per ACCA, the expectation gap terms out to be what people think auditors do and what actually they want the auditors to do which infers with the public policy during an audit. The expectation gap has been a historical concept and has been passed on for years reason being the lack of understanding about the subject by the people. Taking from another view, this public understanding of audit can be improved. The expectation gap is further divided into three categories-

1) The Knowledge Gap

2)The Performance Gap

3)The Evolution Gap

The new audit report has worked separtely on these three to narrow down the expectation gap in the revised format all together. These are stated as under-

a) Strategies developed in order to improve the communication on updates to the existing audit requirements by the standard which can be easily accessible by the general public to reduce knowledge gap.

b) Regulators and standard setters inform the public about any changes to any existing audit regulations and also explain the rationale behind such changes

c) Letting the media take in the key role in informing the public and try describing the audit requirements in a professional manner.

d) Ensuring that audit quality is achieved and maintained with the thorough understanding of the areas that are persistent to low performance.

e) Supporting any form of innovation by audit firm to enhance audit quality

f) Making auditors more responsible in identifying or reporting fraud or preventing any company failure.

All the key stakeholders that are closely connected to the audit profession such as regulators, standard setters, audit firms, committees, investors, governments, media and general public require to collaborate in order to make the significant effect of the expectation gap of the revised format.