What is one expectation gap related to fraud that relates to auditor responsibilities?

The expectation gap related to fraud and auditor responsibilities often stems from a misunderstanding of the extent of an auditor's role in relation to fraud detection. While it is reasonable for stakeholders to expect auditors to identify and report instances of fraud, the reality is that auditors cannot be expected to detect and identify all levels of fraud.

Auditors conduct their work based on the principle of reasonable assurance, meaning they provide a high, but not absolute, level of confidence that the financial statements are free from material misstatement, whether caused by fraud or error. This means that while auditors are trained to recognize conditions and behaviors that may suggest fraud, their primary responsibility is not to uncover every instance of fraudulent activity.

The role of auditors is to plan and perform the audit in a way that reduces the risk of failing to detect material misstatements due to fraud to an acceptably low level. However, this does not extend to guaranteeing the detection of all fraudulent activity. Factors such as the inherent limitations of an audit, which include the nature of financial reporting and the possibility of collusion, make it impossible for auditors to assure that they will identify every case of fraud.

With this understanding, the notion that auditors should detect and identify all levels of fraud is unrealistic and is a prevalent