1 Answer | Add Yours
Research studies have shown and confirmed that there is a gap between the expectations of the public and financial statements users and the expectations of auditors. The gap includes a difference in expectations regarding the responsibilities of the auditor. Studies show that investors have high expectations of what the audit and auditor can achieve and assure, while auditors have lessened expectations of what the audit can achieve and assure.
The ABS (Accounting Board Standards) ethical standard requires ethical values like integrity, objectivity and independence, which are projected as means by which the expectations gap can be lessened.
Financial statements are used by many people from suppliers to investors to banks for making financial decisions relevant to the financial condition of entities. The primary purpose of a financial statement is to provide the owners (e.g., stock holders) and financial statement users of the financial entity with information on the state of affairs and performance of the entity and to assist in assessing the stewardship of chief officers and directors who are stewards of the entity the are entrusted with.
The ethical values like integrity and objectivity ensure that the auditor will provide thorough and honest unbiased information about the state of affairs of the entity. While the ethical value of independence ensures that the auditor will remain free of outside opinion, coercion or duress that might sway and compromise the audit in any one person's or group's favor. Integrity enters in again to ensure that the auditor won't yield to unethical and dishonest requests for the sake of personal gain.
In 1988, the American Institute of Certified Public Accountant's (AICPA) Committee, the Auditing Standards Board (ASB), sought to reduce the expectation gap with a series of Statements on Auditing Standards (SASs), SAS No. 53 through SAS No. 61, collectively referred to as the "expectation gap" SASs. (Auditors' and Investors' Perceptions of the "Expectation Gap" by Stanley C. Martens. 2001.)
We’ve answered 319,840 questions. We can answer yours, too.Ask a question