Auditing: Importance, Legal Requirements and Appointment of Auditors

Running head: AUDITING
Auditing
Name of the Student
Name of the University
Author’s Note

1AUDITING
Table of Contents
Requirement 1............................................................................................................................2
Requirement 2............................................................................................................................2
Requirement 3............................................................................................................................3
Requirement 4............................................................................................................................4
Requirement 5............................................................................................................................5
Requirement 6............................................................................................................................5
References..................................................................................................................................7

2AUDITING
Requirement 1
a. Audit expectation gap can be considered as the difference between the expected and
actual performance of the auditors. The main reasons for the occurrence of audit
expectation gap are complex nature of audit, complicated and conflicting role of
auditors and others (Ruhnke & Schmidt 2014). The role of the auditors is to express
the truthfulness of the financial statements by evaluating necessary audit evidence and
compliance of the audit client with the required financial reporting standards. Hence,
as per the concept of audit expectation gap, the concern of the shareholders are correct
as the audit fails to ascertain the correctness of the company’s financial statements.
b. In order to address this concern of the shareholders, the Board of Directors of EML
can change the existing auditors with the aim to appoint new auditors who will
address these concerns of the shareholders. Apart from this, the Board of directors of
EML can include an expanded audit report that will provide the scope to the users to
know what the auditors actually do, expanding the roles and responsibilities of the
auditors in the areas of illegal acts, frauds and others with the aim to strengthen the
auditor’s independence (xrb.govt.nz, 2019).
Requirement 2
1. The audit of EML helps the managements of the company to recognise the loopholes
in their accounting system so that improvements can be brought.
2. In the presence of correct auditing, the Board of Directors of EML can know that the
business is running as per the information they are receiving (Carey, Knechel &
Tanewski, 2013).
3. From the correct audit operations, EML can receive effective advices on how the
business can be run and what the margins can be.