Which of the following statements describes the expectations gap as it relates to audited financial statements?
A)Investors believe that an unqualified audit report guarantees that an investment in the audited company is risk- free.
B)Investors believe that an unqualified audit report is an insurance policy against losses from a risky investment.
C)Investors believe they are entitled to recover losses on investments for which the auditor provided an unqualified opinion on the financial statements.
D)All of the above.

Question

Quizplus · Accepted Answer

The expectations gap refers to the difference between what the public and financial statement users believe auditors are responsible for and what auditors actually believe their responsibilities entail. All the listed options (A, B, C) reflect common misconceptions about the role of auditors and the assurance provided by an unqualified audit report, thus contributing to the expectations gap.

Which of the Following Statements Describes the Expectations Gap as It