Sunlight Technologies Inc. is a biotechnology company whose shares traded on the TSX. They completed their IPO in 2010 and their share price rose 1000% over the 2 years following. Then, Sunlight announced that they stopped many of their research activities on its major projects due to unsatisfactory scientific results, and the share prices started to decline dramatically. You are talking to two of your friends who say the following:

Jessie: I lost a bundle on the Sunlight shares. The price went up with every press release. It seemed like the company was going to solve every medical problem in the world. I thought the auditors had a responsibility to investors and the capital markets for information released to the public.

Walt: I don't understand how audited financial statements are the least bit useful. Sunlight was investing huge amounts of money in researching new pharmaceutical products, yet the financial statements provided no information on whether its research would develop into viable products. Couldn't the auditors take some responsibility for evaluating the research that companies are doing?

Required:What is the auditor's responsibility for information released to the public? Explain the expectation gap and what the auditors can do to reduce this gap.