Abstract

This study surveys the expectation gap for the external audit and proposes the solutions to mitigate the expectation gap. The study is conducted through a survey via online and offline, whose subjects are members of Listed Companies Association(KLCA and KOSDAQ) and KAA (Korean Accounting Association), students, financial institution employees. According to this study, there are expectation gaps between accounting information users and external auditors for the external audit. Meanwhile, this paper proposes the following solutions as a way to mitigate the expectation gap between accounting information users and external auditors for the external audit. First, there is a need to establish a specific local guidelines when selecting a key audit matters. Second, the audit report should be written clearly so that accounting information users can surely recognize the legal responsibility of the management and the auditor, and there is a need to educate it to the ordinary people. Third, in order to relieve the expectation gap relating to other information, the audit report should include that the responsibility of making business report as well as financial statements is attributed to the management. Fourth, there is a need to improve audit quality through enhanced monitoring of the external auditors(eg. audit reports supervision, audit quality control inspection). Fifth, as the current way of contracting audit service can hinder audit quality by undermining the independence of the auditor, it is necessary to take into account the designation of auditors by SFC(Securities and Futures Commission). Sixth, the confidence level of review opinion by auditors on the current internal accounting control system is a limit to collect sufficient and appropriate information about the internal control system of the company. Thus, there is a need to apply auditing procedures on the internal control system of the company rather than review ones. Seventh, there is a need to disperse December settlement corporation through attracting institutional incentives(for example, tax credits). Finally, it is necessary to switch to long－form audit report to describe as a separate paragraph what has been deemed significant or key audit matters(KAM) in the external audit process.

Keywords

• International Standards on Auditing(Reporting)
• Key Audit Matters(KAM)
• External audit
• Expectation gap
• Audit quality

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