Ever since Lord Nelson famously signalled on the eve of the battle of Trafalgar that England expected every man to do his duty, people have been arguing about expectations. Nowhere is this more true than among auditors and accountants in business who have to face the ?expectation gap? almost daily. But this simple phrase is deceptive because it disguises the fact that the main reason a gap exists at all is that many of the expectations shareholders have of auditors are just plainly unrealistic.
Statutory audit has always, and only ever, been about checking the business and its internal controls against a clearly defined set of criteria. The image of the auditor as guardian of all the shareholders? interests has always been a false one. Of course, the auditor has clear duties to report, and manifest failures are rightly condemned and punished by professional regulators.
But investors too have a duty to keep themselves informed and to watch the performance of the businesses in which they hold shares.
Last week?s call by APB chairman Ian Plaistowe for a clear statement of what auditors are and are not supposed to do is a welcome breath of common sense. But by making it clearer to shareholders where they stand, auditors will pass the burden of explanation to the companies. The challenge of closing the expectation gap will then pass to the accountants who work in those companies.