### Investors’ Role in Bridging the Audit Expectation Divide

At the 2019 International Corporate Governance Network (ICGN) conference in Tokyo, a pivotal conversation unfolded on the perennial issue of the audit expectation gap. This gap reflects the difference between the scope of audits as defined by standards and what stakeholders believe audits encompass.

The discussion highlighted how investors can play a crucial role in addressing this divide. Despite auditors’ efforts to provide better insights through expanded reports and enhanced data analytics, the expectation gap persists. Investors are encouraged to deepen their understanding of the audit process and actively engage with auditors and companies.

Key takeaways from the conference included:

1. **Understanding Perceptions**: Yoshio Okubo, Chairman of the International Advisory Committee of the Japan Securities Dealers Association, emphasized that perceptions of audit coverage vary widely. Investors often have expectations that exceed the actual scope of audits, leading to a misalignment that needs addressing.

2. **Demand for Forward-Looking Assurance**: Anne Molyneux, Vice Chair of the ICGN, stressed the growing investor demand for assurance on forward-looking information. Investors should engage with companies to seek transparency on future strategies and risks, and ask Audit Committees for insights into key audit matters.

3. **Enhanced Engagement**: Increased dialogue between investors, auditors, and companies is crucial. Investors should actively participate in discussions at AGMs and other settings to understand the audit process and its limitations better.

Ultimately, bridging the audit expectation gap requires collaborative efforts across the financial ecosystem. By fostering stronger relationships and clearer communication, stakeholders can work together to narrow this gap and enhance the reliability of financial reporting.