Seasoned auditor Hilary Galea-Lauri on Sunday stated that there is a gap between the actual roles and responsibilities of auditors when compared to what the public sphere expects them to do.

Mr Galea-Lauri is vastly experienced in assurance, audit quality and readiness, among other skills. He worked at KPMG Malta for close to 38 years, and was recently appointed Independent Non-Executive Director and Audit Committee Chair at dLocal, a major global payment gateway platform focused on the African, Asian, and Latin American regions.

In a social media post, he noted that the expectations gap in the audit space is something that has been a “topic of concern” within the accounting profession for many years, stretching back from his earliest days as a student in auditing in the 1980s.

To best explain this gap, Mr Galea-Lauri divided into the “performance gap” and the “reasonableness gap.”

“The performance gap refers to the difference between what the public expects auditors to do and what auditors actually do, while reasonableness gap refers to the difference between what the public perceives as a reasonable assurance and what auditors can reasonably provide,” he added.

He remarked that state of the expectations gap between auditors and their stakeholders has been a subject of “ongoing debate and concern.”

While there have been efforts to narrow this gap in the past through increased transparency, communication, and regulatory changes, Mr Galea-Lauri said that it “continues to exist” due to different factors. He then proceeded to list four key elements that are allowing this gap to persist.

He started off by remarking that the public perception is a crucial factor. Mr Galea-Lauri acknowledged that there is often a “lack of understanding” among the public about the limitations of an audit and the specific responsibilities of auditors.

This issue with public perception can lead to “unrealistic expectations about what an audit can achieve,” he added.

Additionally, given that the business environment is constantly changing and evolving with new complex financial instruments, transactions, and structures, remaining up to date is vital.

However, “keeping up with these changes and addressing the associated risks can be challenging for auditors,” Mr Galea-Lauri said.

Regulatory changes have also had a hand in maintaining this expectations gap, according to Mr Galea-Lauri.

“While these changes are often intended to enhance transparency and accountability, they can also contribute to increased expectations from stakeholders,” he explained.

Lastly, he also pointed towards high-profile corporate failures and accounting scandals as potentially impacting factors. These instances can lead to “heightened public expectations” regarding what auditors can do in detecting and preventing such issues in the future.

As he wrapped up, Mr Galea-Lauri said that the expectations gap remains a “complex and multifaceted issue.”

“Efforts to address the gap can be a combination of education, communication, regulatory reform, and ongoing dialogue between auditors, regulators, and the public,” he explained.

He also said that this can be tackled by appointing the “right compositions of Directors” on the Board of Directors, who can then serve as a “crucial bridge” to narrow the gap.

Main Image:

Hilary Galea-Lauri / LinkedIn

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Written By

Fabrizio Tabone

Fabrizio has a passion for the economy and technology, especially when it comes to innovation. Aside from this, he also has a passion for football and movies, and so you will often find him either with a ball to his feet or at the cinema checking out the latest releases.