Advice on Expectation Gap and Audit Independence

Running head: AUDIT
Audit
Name of the Student
Name of the University
Author’s Note

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MEMO
To: William Albanese
From: Audit Manager of Samway Baker Fitzgerald (SBF)
Date: 01.09.2019
Subject: Advice on Expectation Gap and Audit Independence
There are certain aspects that the audit engagement officer is required to take into
consideration at the time of undertaking the audit. Two of these crucial areas are the
Expectation Gap and Threats to Audit Independence along with their Safeguards. Advice
about these two aspects are mentioned below.
Audit Expectation Gap
Audit expectation gap is considered as an important consideration that needs to be covered by
the audit engagement partners. The presence of a difference can be seen between the
expectation of the users of the financial statements regarding the responsibility of the auditors
and the actual responsibility of the auditors. The audit expectation gas occurs when the
expectations of the users of the financial statements does not match with the outcome of
audit. The presence of certain users of the financial statements can be seen which extract
information from the financial statements in order to make different decisions (Humphrey,
Samsonova & Siddiqui, 2013). According to the provided information, Bletchington Limited
(Bletchington) is an innovative defence industry manufacturing company and one of the
largest clients of SBF in terms of fee revenue. Bletchington does business with the companies
that have recognized democratically elected government and its product is highly specialized
in nature. For this reason, these governments are the main customers of Bletchington who

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have immense interest in the company’s financial statements. Other users of the financial
statements of Bletchington are the management, investors, lenders, suppliers and employees.
Now, these users of the financial statements have certain expectations from the auditors
related to the audit of the financial statements. This expectations lead to the development of
audit expectation gap where the beliefs of the users of the financial statements do not align
with the audit performance. This can also be happened with the audit engagement of SBF
with Bletchington due to the presence of the desire to want more from the auditors. These
users of the financial reports of Bletchington can bring unrealistic demand from the auditors.
For this reason, the audit partner of Bletchington may have to face impractical demand from
these users (Cordoş & Fülöp, 2015).
For example, as per the unrealistic demand of the users, the auditor music provide the
guaranteed future viability of the business of Bletchington. After that, complete assurance
must be provided from the side of the auditors. Moreover, it is the job of the auditors to state
that the fact that all the financial accounts are wholly appropriate through providing the
unmodified audit report. Each financial frauds must be detected by the auditors in the
financial reports. Lastly, the auditors are responsible to check every financial transaction of
the companies. In actual, this is not the case as the above are not the responsibility of the
auditors (George-Silviu & Melinda-Timea, 2015). As per the auditing rules related to the
auditors’ responsibilities, it is the responsibility of the auditor to provide only reasonable
assurance, not complete assurance; and they are not responsible for providing the guarantee
of the future feasibility of the company. As per the audit rules, the auditors are only allowed
to issue unmodified audit opinion when all the financial accounts are correct which is proven
by audit test. It is not the respobslity of the auditors to provide guarantee on the aspect that
financial statements are free from fraud, but they are responsible for unfolding the frauds in
the financial statements with the assistance of required audit tests. Moreover, testing the