Which of the following best defines the “expectations gap”?
(1) The difference between auditors and shareholders in their understanding of the financial statements of a specific company.
(2) The difference between what the company’s directors know about the current affairs and future plans of the company and what information is shared with the auditors.
(3) The difference between what the company reports to the public and what the auditors state in their report.
(4) The difference between what the public believes the auditors performed as part of the audit and what actual work was conducted following the auditing standards.