Reference: Ahmad 4/403. See also Al-Albani, Sahihul-Jami’ As-Saghir 3/233 and Sahihut-Targhib wat- Tarhib 1/19.

Shaikh Zaid Al-Madkhalee clarifies this Du’aa as Expiation of Minor Shirk

Question: Noble Shaikh, from that which is well-known and agreed upon, is that verily all of the sins and disobediences [that one does puts him/her] under the Mashiyyah [Will] of Allaah. If Allaah wills, He may forgive him and if Allaah wills He may punish him except for Shirk; for verily Allaah does not forgive it [the sin of Shirk] due to the statement of the Most High: “Indeed Allaah does not forgive that you join partners in worship with Him but He forgives what is lesser than that for whomever He wills.”  [4:48] But I read in a book entitled Zaadul Muslim Al-Yaumee [The Muslim’s Daily Provision] that verily whoever says in a day: “Oh Allaah! Indeed I seek refuge with You that I associate in worship with You while I know and I seek Your Forgiveness For what I don’t know.”That Allaah shall cause the Major Shirk and the Minor Shirk to depart from him, so is the one who says this du’aa everyday forgiven for his sins?

Answer by Shaikh Zaid Bin Muhammad Bin Haadee Al-Madkhalee (hafidhahullaah):

The Taubah (repentance) wipes out that which preceded it. Seeking forgiveness and having regret is Taubah (repentance).
The hadeeth mentions the expiation of minor shirk, which is Riyaa` [doing acts of worship to be seen of men].

Source: Al-Iqdul Munaddad Al-Jadeed Fil-Ijaabati Ala Masaa’il Fil Fiqhi wal Manaahij wa Tawheed,
Compiled by: Fawwaaz Bin Alee Bin Alee Al-Madkhalee pg. 28-29
Translator: Abu ‘Ukkaasha Shaakir