A wide expectation gap appears in the following areas.
- The public assumes that the auditors’ opinion provides an assurance as to future viability of the enterprise. Professional standards require that when planning and performing audit procedures and evaluating the results thereof, the auditor considers the appropriateness of the going concern assumption. However, the audit report does not provide an assurance as to future viability of the enterprise.
- The public generally believes that the” auditor’s prime duty is to detect frauds. Professional standards require that the auditor should design audit procedures to obtain reasonable assurance that misstatements arising from frauds that are material to financial statements are detected. However an audit is subject to unavoidable risk that some material misstatements of the financial statements will not be detected even if the audit is properly planned and performed in accordance with International Standards on Auditing. It is not the auditors duty to search for frauds.
- Some people believe that an unqualified report implies that the
internal controls are satisfactory. Professional standards require the auditor should make aware management of material weaknesses in the internal control which have come to his attention as a result of his audit. However, the examination of internal controls is not designed to determine adequacy of internal control for management. purposes. It is quite possible that the auditor gives a clean opinion by extending substantive procedures while there may be material weaknesses in the internal control system.
- Public assumes that auditors are liable to detect non compliance of all laws and regulations. The auditing practices do not provide for searching of non compliance of laws and regulations.
- It is generally assumed that as audit provides an absolute assurance, while the audit actually provides a high level but not an absolute assurance.