Ways to Reduce Expectation Gap in External Auditing Service Experienced by General Investors in Dubai
Though audit firms in Dubai have become more advanced and efficient than before in terms of providing attestation services to local and global firms operating there, the expectation gap is still there in a new form.
Users of companies’ financial statements rely mostly on the opinion given by external auditing firms in Dubai without analyzing the relevant information by themselves. Their overconfidence in audit companies in Dubai influences them to make wrong decisions while they should have known that auditors in Dubai do not provide a guarantee of the fairness and accuracy of their clients’ financial reports.
Here are some mechanisms that need to be adopted by investors, business organizations, and audit firms in Dubai to minimize the existing level of the expectation gap.
Specification of auditors’ scopes and responsibilities in the auditors’ report: Audit companies in Dubai must elaborately demonstrate their roles and responsibilities that they had to perform in their client firm. It will provide investors in Dubai with useful insights into the level of reliability and assurance they should put on their investing companies.
Clear specification of auditors’ roles will also point out the areas where auditors performed in-depth analysis and then investors will be able to rely only on those areas’ accuracy and compliance. In the end, investors in Dubai will not build up over expectation from auditing services.
Investors’ assessment on management’s fairness: It is the core responsibility of the management of a business not the auditing companies in Dubai to present fair and true information to the public. So investors should analyze whether the management board of their concerning businesses is reliable enough. If the answer is affirmative, then they can expect the publicly available information will also be reliable.
Improvement of auditors’ professionalism act: Often it is the inefficiency of audit companies’ employees in Dubai that contribute to the widening expectation gap. They do fail to conduct proper testing on their clients’ financial statements due to their lack of professionalism while communicating and approaching their client business.
By regulation, auditors should be trained and updated continuously to ensure that they respond right in performing their duties that have a significant impact on investors in Dubai.
Auditors’ ethical consideration: Audit companies in Dubai should in no situation give a positive review on their audited companies when there is found material misstatement just because they will receive an audit service fee from their clients.
The main purpose of them behind this profession is to protect investors by assuring whether the pubic data on their client is reliable or not. And it is only possible by firm determination, honesty, and sincerity of auditors to their profession.
Widening the scope of auditors: Accounting standard boards and concerned audit regulatory authorities in Dubai should introduce policies to extend the services audit firms offer for Dubai’s companies.
If audit firms in Dubai get access to any department or any document of their client, if they can assess the effectiveness of administrative and management procedures of their client firms, they will be able to identify the actual scenario and inform this to the intended platforms. It will reduce the expectation gap at a significant rate.
Transparent communication with the users of financial statements: One of the reasons for creating an expectation gap in auditing is the miscommunication among business organizations, their prospective and existing stakeholders, and the audit companies in Dubai engaged by the businesses.
Management discussion and analysis is a mandatory segment that Dubai’s public limited companies are instructed to present in their annual reports. In this segment, management takes all the responsibilities for preparing and publishing all of the information including financial in the report. Clear mentioning pf taking claims for all of the possible odds will make investors in Dubai think rationally and reduce theirs over expectation from audit firms in Dubai.
Another communication medium for the investors is auditors’ report. If audit companies in Dubai mention articulately the limited scopes and restraints within which they had to conduct the assessment, it will minimize the expectation gap.
Ensuring full independence of auditors: One significant reason why in Dubai, auditing companies cannot reduce expectation gap and misperception of general investors is their limited independence within their client’s business environment through by regulatory, it has been stated that companies must give full access to any resources or proof that auditors ask for strengthening their basis to develop a final opinion.
Auditing regulatory organizations and Company acts that are now enforced in Dubai should emphasize on this issue and instruct strictly to all of the companies in Dubai that are required to take external auditing services for giving enough scope to the auditors.
Educating general investors regarding the actual services offered by audit companies in Dubai: Audit companies in Dubai do not bear the sole responsibility to widen the expectation gap. Often it is the misconception of general investors about external auditors’ activities. That thousands of daily transactions of a business daily are recorded in the companies’ books assessed and guaranteed by auditing firms in Dubai only within some months.
General investors should be educated about all the limitations that external auditors experience and it will affect them in subsiding their expectations on auditors.
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