This mixed-methods study investigates the mismatch between student use of AI for academic tasks and teacher awareness in Saudi Arabian higher education. Surveys of 78 teachers and 243 students in English for Specific Purposes courses at public and private universities included Likert-scale items and an open-ended question on AI tools' benefits, challenges, and impact on learning and academic integrity. The study reveals a significant gap between teachers' perceptions of students' AI skills and the reality of AI integration, leading to discrepancies in judging student knowledge and assessment authenticity. To address these challenges, the manuscript proposes strategies, including targeted professional development for teachers, swift adoption of best practices for ethical use of generative AI in classrooms, and fostering open dialogue within institutions. This research provides insights to inform teaching practices, curriculum development, and policy-making in higher education's evolving landscape. Future research could benefit from more comprehensive sampling to enhance generalizability.