Audit in Nowadays Business Managing the Expectation Gap

3). Basically, the statutory audit can be defined as the legal requirement to review and determine the accuracy of the financial statements of a company or government (including its agencies). Kumar and Sharma (2005, p. 41) notes that for audit to be considered proper there are certain thresholds that should be attained key among them the independence of auditors and the presentation of the opinion in accordance with Generally Accepted Accounting Principles (GAAP). In the light of these thresholds, concerns have been raised by certain stakeholders as to the relevance of statutory audits in today’s business environment. Their concerns are informed by the argument that the independence of auditors is sometimes compromised and some of GAAP flouted to attain certain objectives by the entities’ management, resulting to untrue and unfair representation of financial statements (Drent, 2002, p. 50). It is for this reason that it is necessary to probe into the statutory audits’ true fulfilment of societal mandate of offering true and fair opinion of audited entities’ financial statements (European Commission, 2010, p. 3).In order to ascertain the relevance of audits in today’s business environment, this discussion will cover the following aspects: What does it mean to express an opinion on the truth and fairness of financial reports? How relevant is this expressed opinion in today’s business environment? What are the limitations of an audit and to what extent, and how, are these limitations compensated for? In addition, the discussion will briefly discuss the following aspects: when are statutory audits required? What does “fitness for purpose” mean within the auditing realm? What is the expectation gap and how is this managed in practice?What does it mean to express an opinion on the truth and fairness of financial reports? Auditing entails independent examination of the financial statements of public- interest entities with the view of expressing an opinion on whether those statements represent the true and fair view of the financial position of the audited entity (Gray and Manson, 1999, p. 8).