Auditing Theory and Practise Letter 2022

Running head: AUDITING THEORY AND PRACTICE
Auditing Theory and Practice
Name of the Student
Name of the University
Authors Note
Course ID

AUDITING THEORY AND PRACTICE1
MEMO
To: William Albanese
From: The Audit Manager
Date: 4th August, 2019
Subject: Audit Expectation Gap and Auditors Independence Threat
The primary reason behind this memorandum is to bring forward the essential information
regarding two noteworthy auditing engagement aspects relating to audit of Blatchington Ltd
(Bletchington).
Audit Expectation Gap: Audit expectation gap is referred as the term which is used to
portray the difference in anticipations of uses of financial report and the anticipations of audit
relating to audited financial reports (Yee et al., 2017). Even though it is all about the
anticipations however it still has scope and meaning which has been defined in numerous
ways. It may refer to the difference in understanding relating to the nature of audit
involvement such as what is believed by the users and what audit actually stands (Carson et
al., 2016). Differences in audit expectation can originate relating to performance such as the
level of performance what users anticipate from auditors and how the auditors have actually
performed.
In the current case of Blatchington Ltd, SBF formed it’s one of the biggest audit
client. On carefully analysing the gap, one of the most vital reason was the critical widening
of gap and the lack of understanding regarding the different related factors. The gap not only
lacks on the part of users of financial report but also for the auditors as well (Laing & Hoy,
2018). The case study brings forward that the company has certain users of financial report
that mainly comprises of government of those countries in which it deals, investors, creditors,
borrowers, shareholders and suppliers.

AUDITING THEORY AND PRACTICE2
With reference to above explanation audit expectation gap can be addressed as the
difference between the efficiency of audit engagement what the users believe and what is
believed by the auditors. Expectation gap in respect of audit can be considered as the
difference amid the anticipation of users and the auditors regarding their responsibilities
(Knechel & Salterio, 2016). The identical audit aspect can take place in the process of audit
engagement for Blatchington Ltd since the users of financial reports of the business might
demand for more which is provided by the auditor. In the opinion of financial statement users
they may consider Blatchington Ltd reports to be unrealistic in their opinion and therefore the
audit engagement partners might have to shoulder the unfeasible audit expectation gap. The
expectations of financial statements are outlined below;
 The auditors of Blatchington Ltd provide complete assurance
 Guarantee regarding the future viability of the Blatchington Ltd is also provided by
the auditors
 The auditors would lay down the unqualified audit opinion which implies that
Blatchington Ltd accounts reflects true and fair view.
 Undeniably the auditors would identify any existence of errors and frauds given it is
present in the financial report of Blatchington Ltd.
 The auditors have performed an in depth assessment of every transactions
As a general rule, the auditors have failed to fulfil the above mentioned expectation gap
in financial reports for users and the auditors are responsible for the below outlined points;
Threat to Independence and Safeguards: Information obtained from Blatchington Ltd
report suggest that there are certain circumstances which may result in audit independence
threat. The threats are outlined below with probable safeguards;