May 9, 2019
Everyone closely connected to the audit profession, from regulators to the general public, will need to work together in order to close the expectation gap.
– The public sees audit as part of the solution for preventing company failure.
– The public demands more responsibilities for auditors in identifying and reporting fraud
– The public believes audit should evolve in a way that prevents company failure.
What is the expectation gap in audit?
Although the expectation gap in audit was defined in a number of different ways throughout the years, it is most commonly known as ‘the difference between what the public expects from the auditing profession and what the auditing profession actually provides’. However, ACCA defines the expectation gap in audit as ‘the difference between what the general public thinks auditors do and what the general public would like auditors to do’. The expectation gap in audit is a topic that attracts attention. It broadly measures public concern about audit. Historically, some in the profession might have portrayed the gap as being due to the public’s lack of understanding rather than being a legitimate concern. We do not agree. Even though there might be a gap in knowledge, that doesn’t cancel the calls for auditors to do more or better.
The gap doesn’t seem to have narrowed since the term was first used. The persistence of the expectations gap reflects, in part, the fact that public expectations of audit can grow in line with what auditors can accomplish.
The three gaps
While it’s common to refer to ‘the expectation gap’, in truth there are several gaps. We suggest a new approach to addressing the expectation gap. We propose thinking about the gap as having three components: the knowledge gap, the performance gap and the evolution gap. We then propose addressing each of these separately.
A wide knowledge gap can make it harder to understand the true evolution gap. For example if they are unaware of policies that are already in place. The performance gap focuses on areas where auditors do not do what auditing standards or regulations require. This could be because of insufficient focus on audit quality or differences in interpretation of auditing standard between practitioners and regulators.
Addressing the expectation gap in audit
There is an urgent need for audit to evolve and to listen to the public’s legitimate concerns about audit. It’s vital to ensure that the knowledge and performance gap components are addressed as part of properly addressing the evolution of the audit profession.
Closing the expectation gap in audit will support a more constructive discussion about how audit can evolve to meet society’s expectations of it. We call upon all stakeholders connected to the audit profession, including professional accountancy bodies, audit firms, regulators, journalists and politicians to contribute towards reducing the expectation gap in audit.