The audit expectation gap – what users expect from the auditor, the financial statement audit and the reality of what an audit is – needs to be narrowed for the public benefit, our latest joint report with ACCA, CPA Canada and the Canadian AASB says.

A holistic approach is especially needed to narrow the expectation gap related to fraud and going concern, where all stakeholders play a vital role in meaningful change.

With audit quality a concern in many countries, the report offers recommendations based on research with key players of the financial reporting ecosystem – including financial statement preparers, auditors, regulators, boards, audit committees and investors.

Participants commented on how gaps in knowledge, performance and the evolution of audit all act to create the audit expectation gap.

The main recommendations of the report include:

• Encouraging forensic specialists to be involved in risk assessment where a high risk is identified but allowing auditors to still apply their professional judgment when determining how to respond to identified fraud risks as mandatory use of forensic specialist may widen the expectation gap.
• Encouraging the IASB and the IAASB to explore supplementing the current binary approach to disclosing material uncertainty on going concern with additional going concern disclosures.
• Suggesting that the IAASB and national standard setters consider areas in which the auditing standards could be enhanced to guide audit practitioners in the application of professional skepticism rather than introducing an additional ‘suspicious’ mindset.