The expectation gap is often the reason an auditor may be sued by stakeholders such as investors because they suffered a loss by relying on audited financial statements. Users of financial statements often believe that auditors are responsible for preventing and detecting all frauds and that they test transactions and balances more comprehensively than what actual practice is.
Although its about expectations but still its scope and meanings have been defined in number of ways.
And this is not only a lacking on part of users of financial statements but also the auditor sometimes. But what is reasonable? Auditor must not rule out everything on the basis of lack of knowledge on part of users. Although auditor and management is required to produce financial statements in a way that are easy to understand but users are also expected to have certain degree of relevant knowledge on how to use and interpret financial statements.
It can also refer to difference in understanding regarding nature of audit engagement i.
There is a chance that a sample chosen does not truly represent the population to which it relates. Another approach to bridging the expectation gap is by engaging in open and clear communication with those charged with governance i.
Financial statements are not for everyone to read and act upon.