In the course of audit work of one of your clients, the following issues are pending as the date of issuing the audit report.

The property balance was revalued during the year by an independent expert valuer and an error was made in relation to the assumptions provided to the valuer. The auditor was denied permission to consult the valuer.

Receipts from customers being diverted into employees personal accounts and statements issued to such customer intercepted. A senior manager is involved in the fraud schemes.

The allowance for credit losses are below the industry average, if adjustment is done the profit will reverse into losses.

Required:

1. Explain the term misstatement and describe the auditors responsibility in relation to misstatements. (5 Marks)
2. Briefly explain the type of audit opinion you would issue in each of the above case.

(9 Marks)

3. Briefly explain what is referred as audit expectation gap (6 Marks)