EXPECTATION GAP Definition

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EXPECTATION GAP, in accounting, is the gap between an auditors actual standard of performance and the more rigorous public expectation of what an auditors performance should be. The users of financial statements should be allowed to expect that the auditors materiality levels correspond with their own. If this is not the case an expectation gap will arise. Especially if the financial statements contain non-corrected known errors or omissions classified as immaterial by the auditor, but classified as material by the users. The unknown material errors and omissions are still a part of the audit risk.

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AUTHORIZATION SCHEDULE is the guideline under which the subject activity is controlled and authorized. For example, expenditure spending may be controlled by amounts and the managerial level required authorizing or approving a preset trigger amount. As the amount increases over certain preset levels, higher managerial authority is required for approval.

OWNERS EQUITY RATIO see RETURN ON STOCKHOLDERS EQUITY.

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