Auditing Assignment 2022

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

AUDITING1
MEMO
To: William Albanese
From: Audit Manager
Date: 02.09.2019
Subject: Advice on Audit Expectation Gap and Audit Independence
At the time of auditing of the financial statements, there are certain factors that need the
attention of the auditors because of their ability to influence the audit outcome. Among all
these aspects, two crucial factors are the expectation gap and auditor independence. These
two aspects can create significant threat in the whole audit process. This memo aims at
advising the audit engagement partner on these two aspects.
The Expectation Gap
There are many situations where a difference or gap can be observed between the actual
responsibility of the auditors and what the users of the financial statements consider the
responsibility of the auditors; this particular difference or gap between the perception of the
users of the financial statements and auditors is called the Audit Expectation Gap (La Rosa &
Caserio, 2013). It is visible in the case of Bletchington Limited (Bletchington) that the
business of the company only occurs with those countries where there are recognized as well
as demographically elected government and thus, these countries are the customers of
Bletchington. These countries can be considered as the special users of the financial
statements of Bletchington in the presence of the aspect that these countries need to gain
understanding about the financial standing and performance of Bletchington which can be
obtained from the firm’s financial reports.

AUDITING2
It is natural that the users of the financial statements expect certain things from the auditors,
but the presence of audit expectation gap creates a barrier between the auditors and the users
of the financial statements that leads to the misalignment between the expectation of the users
and the responsibility of the auditors. Unrealistic demand or expectation of the users of the
financial statements is the main reason for the development of expectation gap (Aronmwan,
Ashafoke & Mgbame, 2013). It is common for the audit engagement partner of SBF to face
this challenge while performing the audit of Bletchington. Some examples of these audit
expectations gaps are shown below.
According to the expectation of the users, complete assurance on the client must be provided
from the auditors after the completion of audit engagement. In reality, the auditors are only
responsible for providing reasonable assurance about the client and this difference leads to
the expectation gap (Alzeban & Gwilliam, 2014). The users also think that the auditors are
responsible for providing guarantee on the fact that the client will be operating well in the
near future. In reality, it is not mentioned anywhere that the auditors will provide guarantee
on feasibility. One crucial aspect is that the auditors are responsible for the issue of
unmodified opinion each time stating the fact that all the accounts of the clients are
completely accurate. In reality, the auditors do not have such responsibility to provide
unmodified opinion each time, but they have the responsibility of providing reasonable
assurance only after taking the needed audit steps and only then unmodified audit opinion can
be provided (Alzeban, 2015). Another unrealistic expectation of the users is the detection of
every fraud in the financial statements of the audit client. In reality, it is not mentioned
anywhere about this reasonability, but the auditors must take the necessary steps to uncover
ant fraud in the financial statements of the clients. Lastly, another unrealistic expectation of
the users regarding the auditor’s responsibility is the checking of every financial transaction
by the auditors. In reality, the responsibility of the auditors is to undertake sample testing of