Question

what is your perception of the expectations gap and how is the accounting profession attempting to close the gap. Also, discuss the concept of independence and included if there is different in the concept of the independence between the internal and external auditors? Please support your response and give examples if possible

Answer 1

The auditing "expectation gap"means the difference between the :

1. The perception of the users of the financial statement and the public as to what are the auditor’s responsibilities and 2) the belief of the auditors as to what is their responsibility.
2. Various studies show that currently the “ expectation gap “ exists as the investors have greater expectations for various aspects and /or the assurances of the audit than what the auditors themselves feel.
3. The audit expectation gap is mainly concerned with the presence of the differences in the perceptions between the audit profession and the public regarding the nature, purpose and functions of those who engage in these audit activities
4. There is ample evidence to show that the accounting profession is engaged in taking suitable measures to reduce this expectation gap.

The Accounting function is one of the important components of any economic enterprise as they play a significant role in contributing to the effectiveness and efficient functioning and performance of business functions and operations, the capital markets, and the economy in general by adding credibility to financial statements. In order to reduce the gap the accounting function keeps proper track of the transactions that have taken place as a basis for providing information about the organisation through the activity financial reporting to users of the information.

The concept of auditor independence is an step towards bringing about an objectivity. The person performing an audit should have no relationship to the party that is being subject to audit in a bid to eliminate the possibility of bias entering into the audit findings. In corporate settings there Governmental rules, professional ethics policies and industry standards that are followed in order to promote auditor objectivity.

nal auditors are those employees who are directly hired by the company or employees who have been hired on a contractual basis by the company being audited. Because they must keep management happy to get paid, their overall objectivity might be questionable. Rules to minimize bias focus on eliminating conflicts of interest. Auditing something with which the auditor feels aligned introduces a conflict of interest that can call the audit findings into question. Internal auditors cannot audit their own work or processes, functions or groups for which they have or have recently held responsibility.

External auditors work for firms contracted by the company being audited. Like internal auditors, these auditors also must adhere to strict rules. Unlike internal auditors, the rules prevent external auditors from having financial relationships or other types of association with the company being audited. If the auditor previously has been employed by the company being audited, or is in discussions with the company for employment opportunities, a resulting conflict of interest can jeopardize the integrity of the audit results.