Audit Expectation Gap: An Empirical Review of the Literature

By
Muhammad Tanko
Department of Accountin
!aduna "tate univer"ity
A#"tract
The studies in the area of audit expectation gap mostly use survey questionnaires to
identify the nature of the gap or where the gaps are; while others see the impacts of
the gap; and how to reduce the gap. Different respondents have been used in the
literature to elicit their opinion, for example, auditors, lawyers and judges (lowe,
!!"#, jurors (fran$ and lowe !!"#, investors (%pstein and gregor !!"#,
shareholders (bec$ !!"# various groups (&umphrey !!'# chartered accountants,
financial directors, investment analyst, ban$ers and financial analyst. The conclusion
of the researches is that the gap does exist and it affects the auditing profession
negatively. Therefore, measures should be ta$en to ensure it is minimi(e or reduced.

$ntroduction
The word )audit expectation gap* was first used in the literature by +iggio in early
!,-s. .ut, the issues related to expectations gap, appeared to exist since late !th
/entury (&umphrey et al.!!0#. 1t present, there is no generally accepted definition
of the meaning of the audit expectations gap. 2everal accounting researchers and
professional accounting bodies have offered their definitions. 3n the issue of its
existence, the literature has explicitly accepted the existence of the problem of
expectation gap. Datu$ (0--,# for example observed that )there has been disparity in
the public*s expectations of the duties of auditors* and scope of audit, and auditor*s
own ideas of their roles. The responsibility of any wrong doing in any company is on
the auditors among others. 4urthermore, 5ahim (0--,# also opined that )there are
misconceptions that, it is the auditor*s role to prepare the company*s set of accounts
and that the onus is upon directors and management of a company to ensure that the
financial statement is prepared in compliance with accounting standards and statutory
requirements. The auditor*s responsibility is to express an opinion as to whether the
set of accounts gives a true and fair view of the company in accordance with the
financial reporting framewor$*. +ee (0--!# also concluded for 6alaysia )that if the
audit profession is to survive in the long term, remedies are desperately needed to
restore the image of the auditing profession as a credible, independent, objective,
professional evaluator of financial transactions and reports. Thus, the effort to re7
establish the image of the auditing profession through narrowing the audit expectation
gap is as crucial*.
+oggio (!,"# defined the term audit expectation gap as the difference between the
levels of expected performance as envisioned by both the user of a financial statement
and the independent accountant. 4urthermore, &umphrey and Turley (!!0#, sees the
expectation gap as the difference between the levels of expected performance as
interpreted by the independent accountant and the user of financial statements. 8ierce
and $ilcommins (!!9#, also observed that the audit expectation gap exist when the
external auditor*s understanding of their role and duties is compared against the
expectations of user group and the general public. Tric$er (!:0# viewed the
expectation gap as the result of a natural time lag in the auditing profession
identifying and responding to continually evolving and expanding public
expectations. 3ther authors argued that it was the consequence of the contradictions in
a self7regulated audit system operating with minimal government intervention as
evidenced in &opwood (!!-# and &umphrey (!!#.
The audit expectations gap centres on several issues, most notable among them are;
the auditor*s roles and responsibilities as opined by 8orter, (!!'#; 4a(dly and
1hmad, (0--"#; and Dixon et al., (0--9#. The nature and meaning of audit report
messages opined by 6onroe and ;oodliff, (!!"#; and <ay et al., (!!:#. 1udit
independence as opined by 2weeney, (!!,#; +in and /hen, (0--"#; and 1lleyne et
al., (0--9#. 4urthermore, &umphrey (!!,# classified the issues on the audit
expectations gap into four main areas= audit assurance, audit reporting, audit
independence and audit regulation.
;hile most of the researches conducted in the area of the expectation gap are based
on the private sector, the research in the public sector has received little attention by
researchers. 8endlebury and 2hreim (!!#, /howdhury and >nnes (!!:# and
/howdhury et al. (0--?# are some of the prominent researches conducted in the area
of public sector. @ust as the private sector, research has indicated that the audit
function in the public sector also changes over time. +ee et al (0--!# opined that the
public sector audit was concerned with regularity, legality and probity of government
expenditures. The focus is to see that the budgetary allocations to the various
government agencies are expended according to the purpose to which they have been
set up and that the accounts prepared by such agencies were properly presented in
conformity with the provisions of the law. <lynn, (!:?#; 8ollitt et al., (!!!#; and
+ee et al (0--!# are of the view that the traditional audit functions have been
expanded to include wider monitoring functions over government agencies. They
contended that )the auditors* tas$ now, is to examine whether programmes
implemented by government agencies have been implemented economically,
efficiently and effectively. This is widely $nown as 8erformance 1udit or Aalue for
6oney (A46# audit*. <uthrie and 8ar$er, (!!!# further opined that the objective of
the auditors wor$ is to ensure that the government agencies are accountable not only
for the resources they used but also for the effectiveness with which they used those
resources. 1ccordingly, the public sector audit is now concerned with terms such as
)accountability*, )output*, )efficiency*, and )value for money*.

1lthough studies have been documented in the area of expectation gap for both the
public and private sectors in the developed economies, there is the absolute scantiness
and inadequacy of such literature documented for the developing economies. >t should
be noted that, while in the developed economies there is a developed system in the
public sector auditing, the composition of public sector administration in the
developing economies is still in its infancy. 4urthermore, Dye and 2tapenhurst,
(!!:#; .erglof and Thadden, (!!!#; /hang, (0--#; 2andholt( and Boet(le, (0---#,
opined that the developed countries are usually characterised by a high7level of
accountability, a clean and efficient bureaucracy and judiciary and a transparent
administration, these characteristics significantly contrast to developing countries.
Baufmann, (!!,#; <ray and Baufmann, (!!:#; 2andholt( and Boet(le, (0---#
further identified the problem of the possibility of fraud, corruption and economic
mismanagement in the public sector in developing countries as compared to the
developed economies. 2imilarly, as for the private sector, the developed economies
have more developed, integrated and independent private sector as when we
compared with what is obtainable in the developing economies.
1dditionally, researchers also claim cultural factors of one country could have
implications on the attitudes and perceptions towards accounting and auditing
systems. 1gacer and Doupni$ (!!#; and 8atel et al. (0--0#, among others, argued
that the adoption of accounting and auditing systems of developed countries in
developing countries might face many cultural obstacles such as in the interpretation
of standards, audit procedures and codes of conduct. 1mong the possible cultural
factors are the level of transparency (<ray, !::#, conservatism and collectivitism
(<ray, !::; 2chwart(, !!"# and power distance (&ofstede, 0--; Ding et al., 0--?;
1li, !!!#. >n a high power distance society, for example, researchers such as 8atel et
al. (0--0#, &ofstede, (0--# and Ding et al. (0--?# suggest that individuals would
respect and value the views or orders of elders, superiors and authority. /onsequently,
they would )accept a hierarchical order in which everybody has a place which needs
no further justification* (2alter and 4rederic$, !!?#. Thus, it is possible this factor
will significantly influence the perceptions of the users and auditors on the functions
of performance audit and auditors wor$.
1ll these factors can certainly change the outcome of research conducted in the
developed economies as compared to the developing economies li$e Cigeria. 1part
from the scantiness of the research in the area of audit expectation gap in the
developing countries, the term as it is may be detrimental to the financial reporting
and auditing process. +ee and 1li (0--:# opined that audit expectation gap is
detrimental to the financial reporting and auditing process, as the public may perceive
the wor$ performed by external auditors as unsatisfactory. Therefore, the audit
expectation gap is crucial to the audit profession as they determine the value of
auditing and the reputation of auditors in modern society.
Literature Review
2tudies in the area of audit expectation gap are numerous and cover most developed
economies of the world, especially, the Dnited 2tates and the <reat .ritain. 1lthough,
literature is being developed in the area of expectation gap for developing countries,
only a few countries have documented the existence of the audit expectation gap, this
specifically, includes Cigeria. 4or the review of the empirical literature we intend to
cover studies based on the countries the studies too$ place and the area covered by the
studies. ;e therefore, cover such countries as the Dnited 2tates, .ritain, 1ustralia,
2audi 1rabia, %gypt, >ndia, /hina, 2outh 1frica, 6alaysia, and Cigeria.
>n the Dnited 2tates, .aron et al (!,,# conducted a research with the aim of finding
out the preferences and beliefs of auditors on the one hand and the users of audit
report on the other hand. >n their findings they disclosed that the latter seemed to hold
the auditor responsible for detecting and disclosing irregularities and illegal acts than
the auditors expected themselves to be. They therefore, documented substantial
differences in7terms of the perception of the two groups.
+ibby (!,!# sampled highly experienced ban$ers although not representing the
generality of the user group of financial statement he found that fears of
miscommunication between auditors and users were perhaps unjustified. .ailey et al
(!:'# identified education as the main cause of the audit expectation gap. They
therefore concluded that more $nowledgeable users place less responsibility on
auditors and less sophisticated members of the public. Cair and 5ittenberg (!:,#
found that an expanded audit report has the li$ely chance of changing users*
perception about the relative responsibilities of management and auditors. Therefore
they placed the responsibility of audit expectation gap on the inadequacy of the audit
report and that once it is expanded; it has the tendency of reducing the gap. This was
in line with the outcome of the research conducted by Belly and 6ohrweis (!:!#
who found that users* perception of the purpose and nature of an audit significantly
changed by wording modifications in audit report.
6iller et al (!!-# also investigated the issue of audit reports among ban$ers and
concluded that expanded audit reports are more useful and understandable than the
short form audit reports. +owe and 8arty (!!'# compared the views of potential
jurors with the views of auditors on eight questions that address the $nowledge of
auditing, the auditors* role and general attributes towards the auditing profession.
+owe (!!"# in a study he conducted comparing the perceptions of auditors and the
judicial litigants regarding their expectations of the auditing profession and more
specifically to ascertain the legal implication of audit expectation on the auditing
profession. &e found that there exist expectation gap between the judge*s expectation
and the professions expectation. Therefore, judges were found to expect more from
the auditors than the auditor*s believed. >n an extension to this @ennings et al (!!#
also found that the attitude of judicial litigants towards the gap determined the
outcome of auditor liability. 1 further study in this direction was carried out by
1nderson et al (!!:#. They compared the auditor*s opinion with that of the legal
community and the auditors* attribution of responsibility in relation to fraud
detectability and going concern predictability as identified and highlighted in the
auditing standards and legal proceedings. 4ollowing the same methodology of
@ennings et al (!!# and including mitigating variables such as collusion, materiality,
evidence reliability and timing of unpredicted events related to the detectability and
predictability of financial statements problems in situations involving auditor
litigation. They found out that judges were affected by such variables and
corroborated evidence that judges* attitude played a critical role in the evaluation of
auditors* responsibility. The outcome of this study means that efforts could be made
by the auditing profession to clarify the nature and inherent limitations of the audit to
help shape such attitudes. &owever, they further found that judges did not hold the
auditors fully responsible for losses including that of third parties due to business
failures.
>n a similar vein, 4ran$ et al (0--# examine the perception of judicial third parties,
jurors, accounting students, and auditors; regarding their expectations of the
profession. They found wide divergences in terms of perception particularly in @urors
expectation that auditor should be more responsible for financial statements. They
further found high expectations in terms of auditor*s responsibility to search for fraud
and irregularities regardless of its si(e and that auditor should be an insurer against
large stoc$holder losses.
>n another dimension of measuring the expectation gap, %pstein and <eiger (!!"#
conducted a survey of investors to gather information on various aspects of financial
reporting issues. 6ore specifically, they targeted the level of assurance they believed
auditors should provide with respect to error and fraud. They eventually found out
that investor sought very high levels of financial statement assurance and that an
expectation gap do exist between auditors and investors on the level of assurance the
auditors provide. 6c%nroe and 6artens (0--# further investigated the wording of the
audit opinion and certain dimensions of the attest function in the area of disclosure,
internal controls, fraud and illegal operations. They found that the investing public
required more from the auditors in the issuance of an unqualified opinion especially
as it relates to the variables mentioned. They further found that pronouncements such
as the expectation gap statement on auditing standards that were release about a
decade earlier were not effective in reducing the public*s expectation of the auditing
profession in terms of the extent to which the auditor presents an unqualified report
based on inabilities in disclosure, internal control, fraud and illegal operations. They
therefore found that investors always expect the auditor to act as a public watchdog.
1rrington et al (!!"# in their study critici(e the auditors in terms of their ability to
detect fraud, and to predict failures of companies they have audited. +ibby (!,!#
found that fears of miscommunication between auditors and users were unjustified.
&owever, the research has restricted respondents that are highly experienced in ban$
operations and therefore, may not reflect the generality of the users. >n the same
manner .arley et al (!:'# found that larger gap might exist between auditors and less
sophisticated members of the public as his sample of those respondents combined
more $nowledgeable and sophisticated respondents with those less $nowledgeable.
>n terms of content of the audit report, Cair and 5ittenberg (!:,# found that an
expanded audit report has the capacity of changing user*s perceptions about the
relative responsibilities of management and auditors. Belly and 6ohrivers (!:!# also
found that user*s perception of the nature and purpose of an audit were significantly
changed by wording modifications in audit report. 6iller et al (!!-# in their study
that compared the usefulness and understandability of audit report found that ban$ers
found expanded audit reports were useful and understandable than the previous short
form audit.
The earlier studies in the Dnited Bingdom on audit expectation gap date bac$s to the
!,!s. +ee (!,-# for example, on his survey study of three audits oriented groups.
&e found conflicting views as to the expectation gap among the respondents. These
respondents were the auditors, the audit client and the audit beneficiaries. ;ith the
auditors group including the qualified and non7qualified staff of audit firms and audit
partners while the audit beneficiaries group included the private investors,
institutional investors and other interested parties such as the ban$ers. The audit
included company directors, their secretaries and accountants. >n all the study found
lac$ of understanding by both the auditors and the two groups. The .eattie et al.,
(!::# study examined a large set of "? economic and regulatory factors that could
impair or enhance auditor independence, using questionnaire surveys of DB audit
partners, finance directors and financial journalists. 1t a level of ?- per cent of audit
fee, the corresponding threat ran$ings were fifth, tenth and seventeenth and at the
level of 0? per cent of audit fee they dropped to fourteenth, eighteenth and twentieth
ran$s. C12 fees also increased economic dependence among the top threat factors.
&olt and 6oi(er (!!-# examine audit expectation gap between accountants and a
group he termed sophisticated users. The sophisticated users were individuals who
wor$ed in stoc$ bro$ing firms, insurance companies, investment trusts, self investing
pension funds and ban$ers. >n their findings they documented differences in
perceptions of the meaning of audit reports between the two groups of accountants
and the sophisticated users. &etherly et al (!!# investigated the audit expectation
gap on the change in the standard form of audit*s report. They sampled 6.1 students
in the Dnited Bingdom and found that changing the wording of the standard short
form audit*s report resulted in different perceptions of the meaning of audit reports for
the 6.1 students. &owever, the study found that perceptions of managements and
auditor*s responsibilities were not significantly influenced by the modified wordings.
&umphrey et al (!!'# developed a mail survey with respondents as the chartered
accountants that are in practice, investment analyst, corporate finance director*s ban$
lending officers and financial journalist. The mail survey mainly centered on audit
expectation issues such as the role of auditors, the prohibitions and regulations
imposed on auditors and the decision that the auditors are expected to ma$e. &is
findings of their study show that there exists the expectation gap in such functions of
the auditor that relates to his role in the detection of fraud, his responsibilities to third
parties, the intensify of continuing threats to auditors* independence and the conduct
of auditors* performance. /oncerning the gap in the conduct of the auditors*
performance, the study found significant gap in the area of the auditor*s ability to
cope with ris$ and uncertainty and the nature of his performance on balance sheet
valuations.
>n another perspective on the study of the audit expectation gap in the DB, 6anson
and Eaman (0--# investigated the perception difference among three respondents
group that included the auditor*s the directors as the preparers of financial statement
and users of the financial statement. They found significant differences existing on
the reporting pattern of auditors on the company*s going concern status and the
auditors* findings in relation to fraud and illegal acts. They also found that auditors
are reluctant to going beyond the present commitment in expressing audit opinion in
financial statement.
Dewing and 5ussel (0--0# conducted a survey study with DB find mangers as the
primary sta$eholders. The study included the definition of the term expectation gap,
and its constituents. >t also covers the extent to which the expectation gap could be
narrowed by audit regulation. The study also concentrated on the auditor*s role as to
the existence of gap in respect of the auditor*s responsibility to going concern issues.
They found that there is the need for straitened auditor independence, extended audit
scope and responsibilities of the audits and greater independence in the monitoring of
auditors wor$ and less restriction on auditors liability in disagreement. Therefore,
they suggested the establishment of an independent body that will control the audit
and institute disciplinary process in the audit process; however, they do not provide
the scope and coverage of the body.
>n 1ustralia, low (!:-# too$ the sample of auditors and non7auditor group and
studied the extent of the auditors* detection and disclosure responsibilities in relation
to error, irregularities and illegal acts. &is findings reveal the existence of an
expectation gap in the perception of the auditors and non7auditor groups. These
findings are consistent with the findings of .ec$ (!,"#. <ay and 2chellunch (0--9#
investigated the wording changes in the standard audit report and the subsequent
revised standard increased user understanding of audits and the financial reporting
process. The study found that audit reports worded in the revised standard
significantly increased user*s understanding of the audit process, the auditor*s role,
the nature and limitations of financial reports. >t was also found that there are lesser
impact with director*s responsibility for material errors and the basis of the audit
opinion. 6onroe and ;oodliff (!!'# investigated the influence of education on
undergraduate students* beliefs about the messages communicated through audit
reports. The study found evidence of an expectation gap between audit reports
preparers and undergraduate students with no auditing experience. >t was concluded
that education has significantly affected the students* beliefs.
6onroe and ;oodliff (!!"# too$ the sample auditors and financial statement users
such as the auditors, accountants, creditors shareholders and students in the business
area. >n their survey, they investigated the roles played the auditors and what the
nature of audit should be. They found that apart from the expectation that auditors
should be responsible to detect fraud and illegal acts, auditors were also expected to
be responsible for preventing fraud and to indicate the degree of confidence that the
audit opinion expressed is correct. >t was also found that auditors were expected to
ta$e on an expanded role as the society*s corporate watchdog. This was consistent
with the findings of Bertherly et al (!!# that investigated vacuum that existed
between the auditor and the other respondents.
2chellunch (!!9# considered the perception of auditors, company secretaries,
accountants and shareholder on long form audit reporting covering areas such as the
relative responsibilities of auditors and management and the reliability and decision
usefulness of the financial statement. &is findings shows that there exist expectation
gap in the areas of responsibility and reliability of the statement, clarity of
communication of the extent of audit wor$ performed and the credibility of the
profession. &e also affirms that the expectation gap on long firm audit report appears
to be reducing since its start up.
<ay et al (!!,# also surveyed the users* perceptions of auditor*s responsibilities for
the prevention, detection and reporting of fraud and other irregularities such as illegal
acts and errors. These findings showed that users may have reasonable expectation of
auditors in respect of their duties in the area of prevention of fraud and the detection
of illegal acts. &owever, they also found the existence of deficient standard gap
existing in relation to immaterial fraud. The study further found that, certain
characteristics among the respondents eliminate the degree and intensity of the
expectation gap. 2uch characteristics include users who had considerable business
experience, and they are familiar with financial reports, had investments experience
and undertoo$ auditing as a subject in their tertiary studies.
2chellunch and <ay (0--9# considered auditors and other respondents as company
secretaries, accountants and shareholders. They investigated the implications of the
expectation gap on forecasting of financial information centering on statement
reliability, responsibilities of auditors and management and future prospects of the
entity. The findings of the report revealed that auditors perceived forecasts to be more
reliable and that auditors had a higher level of responsibility and accountability than
that perceived by the other respondents.
>n Cew Eealand 8orter (!!'# carried out a research to determine the nature,
composition, and extent of the audit expectation gap. 8orter sees the gap as it relates
to the duties of auditors, their performance standards and the duties that the auditors
ought to perform. The respondents used included auditors, auditing academics,
lawyers, financial journalists and members of the general public. The auditor used
mailed questionnaires. The findings of the study revealed that there exists audit
expectation gap and that the gap is as result of the following factors in different levels
of percentages. Deficiency in standard ?-F unreasonable expectation auditors '"F,
and perceived substandard performance by auditors 9F, perceived substandard
performance by auditors 9F. /ameron (!!'# also conducted a study on
relationship between public accountants and their small business clients. &e restricted
his respondents to public accountants, small business and associated third parties such
as ban$ers, business consultants and enterprise agencies. The research tested the
concern as to auditors* expected performance as against their actual performance. The
study found that their actual performance. The study found that there are high
expectation as to the auditor providing compliance services general business and
accounting related advise and above all show concern and enquire into clients*
financial health and problems. Therefore, it was concluded that the auditor has fallen
below expected performance.
>n %gypt Dixon et al (0--9#, using a questionnaire method, with respondents as
auditor*s ban$ers and investors investigated the auditors* responsibilities in the audit
of financial statement. They found that there was substantial evidence of an expected
gap especially on issues of the auditors* responsibilities for fraud prevention and
detection, the auditor*s responsibility for maintenance of accounting records, exercise
of judgment in the selection of procedure, soundness of internal control and the
auditors* and objectivity. /onsistent with studies of 2chellunch (!!9#, .est et al
(0--# and 4ad(ly and 1hmad (0--"# they documented the reliability and usefulness
of the audit and audited financial statement.
>n 2audi 1rabia, 5os(aini and 6uhammad (0--,# tested whether there is expectation
gap with cultural context in the $ingdom specifically with the roles specified in the
statutory pronouncements and those roles that can reasonably be expected by the
auditors. They use both mailed survey questionnaire and semi7structured interview on
auditors, credit manager, financial analysts, shareholders, financial directors and
representative of government bodies. The findings of their study documented four
areas in the auditing environment that brought about performance gap licensing
policy, recruitment process, the political and legal structure and dominant societal
values. 4urthermore, they found the influence of institutional and cultural settings as
contributing to the problem of the audit expectation gap. They therefore
recommended the inclusion of >slamic principles in auditing standards and code of
ethics is measures to reduce the expectation gap.
>n 2outh 1frica, 2tobie (!,:#, sampled the opinion of investment analysts, directors,
private and institutional investors, management consultants, financial editors, ban$s,
stoc$bro$ers and public accountants on issues pertaining to audit functions and audits
reports. The research concluded that a expected gap do exist in the standards short7
form audit report as it is unacceptable due to its communicative deficiencies,
furthermore, the gap exist in terms of the inadequacy of information in the audit
report. /ommunication of the attest function insufficiency of the paper recommended
the support for an expansion of audit to new areas of coverage.
<loec$ and @ager (!!'# sampled the opinion of two groups, the auditors and non7
auditors. They found expectation gap existing in the area of the independence of the
auditor especially as it relates to fraud and going concern issues and the compulsory
audit of small owner7managed companies.
>n /hina, +in and /hen (0--"# conducted an investigation with mail questionnaire.
The respondents included audit beneficiaries such as investee, creditors, government
officials, business management and academics on the one hand and the public practice
on the other hand. The findings revealed that audits play vital role in improving the
/hinese economy thereby enhancing the truthfulness and reliability of financial
statements. &owever, the gap existed among the respondents in the areas of audit
objectives, auditor*s obligation to detect fraud, third party liability of auditors and the
impact of government sponsorship on the credibility of audit services, in an attempt to
find the reason for the gap, they documented that it existed because of the unique
institutional setting of auditing in the republic of china where auditing functions were
subjected to government intervention and were mainly employed for compliance
audit. +oung and /hau (0--# conducted a study to investigate the effect of the
expanded auditors* report as a strategy in narrowing the audit expectation gap in &ong
Bong. They surveyed the auditors and ban$s through a draft questionnaire. They
found that the revised auditors* report was able to achieve more consensuses between
the auditors and ban$ers. They also documented the existence of expectation gain the
area of technical details of an audit, the perceived usefulness of an audit and audited
financial statement. The report also shows high expectation in the area of auditor*s
duty to detect fraud and perform extensive audit related wor$s by the ban$s.
>n 2ingapore, low (!:"# in his study of the expectation gap reported a significant
difference in the perception of the auditors responsibilities especially on areas
regarding the extent of assurance over fraud detection and reliabilities of information
presented in audited financial statements. 4urthermore, low et al (!::# sampled
auditors and financial analyst as respondents in his study of the expectation gap as it
relates to the objectives of company audit. The two groups investigated were found to
have agreeing view that one of the primary objectives of audit was the traditional
expression of audit opinion on the financial statement. The respondents however,
shows divergence view as to the concerns of audit serving as a seal on the accuracy of
the financial accounts of the company. The report also shows that financial analysts
had higher demands of auditors in relation to auditor*s responsibilities with respect to
fraud detection and prevention as compared to those which auditors believed they
should posses.
.est et al (0--# employed the survey instrument questionnaire and tested the
difference in the views of users of audited financial reports and auditors perception of
their role. >n an attempt to find ways of reducing the magnitude of the expectation
gap, they compared the outcome of their findings with that of low et al (!::# and
2chellunch (!!9# on the issue of continued use of short term report produced by the
auditor. >t was found that the short form audit report in 2ingapore exhibited wide
auditor expectation gaps in two areas that include the auditors* responsibility in
preventing and detecting frauds and errors and errors and the auditors* responsibility
in maintaining accounting records.
>n 6alaysia, 6ohammed and 2ori (0--0# used mailed questionnaire with auditors,
clients as respondents, they also conducted interviews with auditors. The areas
covered in the research included the selection of auditors, level of satisfaction, client
intention to charge auditors, client expectation, client expectations on fraud and ris$
issues and auditors responses. They found that audit expectation gap do exist in
6alaysia and a detail investigation of the root if the gap shows that it pertained to
uncertainties concerning the actual roles of the auditors, clients dissatisfaction with
auditors* services and lac$ of independence and objectivity of audit firm.
4urthermore the issue of auditors been seen as guarantors of the accuracy of a
company*s financial statements and their role in the detection, discovery and reporting
of the transaction contained therein to authorities contributed to the expectation gap.
4ad(ly and 1hmad (0--"# surveyed auditors and major users of financial statements
comprising of the ban$ers, investors, and stoc$bro$ers. Their study concentrated on
whether there exists unreasonable expectation among the groups surveyed. The study
found that an audit expectation gap exists in 6alaysia particularly on issues
concerning auditors* responsibility, more specifically the following areas were found
to record high expectation gap. >nternal controls, accounting records, preparation of
financial statement and the auditor*s responsibilities for fraud detection and
prevention.
>n >ndia, 2aha and .aruaj (0--:# using questionnaire mailing survey with four groups
of respondents examine the audit expectation gap in the >ndian environment. The
groups included in the respondents included the chartered accountants not in practice,
ban$s involved in corporate lending, financial officers and financial journalists. The
study cover such areas as the dependence of the users of financial statements on the
auditors and the auditing process, auditors role with respect to the audited company
financial reports, the responsibility of auditors responsibility of auditors to user group
financial statements and their attest function and the subjectivity of the audit firm to
the appropriate prohibitions and regulation of their audit practice. >t is the findings of
the study that in between auditors in practice and other audit user groups there were
significant differences in their views and opinions as to the precise nature of auditing
and the very wor$ that auditors performs. Therefore they concluded that audit
expectation gap do exist in >ndia. 4urther analysis as to the reasons for the gap
revealed that areas such as the nature of balance sheet valuation, growing concern
assumptions or prediction of future, detection and prevention of fraud errors and
irregularities, reporting on material misstatement, auditor independence, auditors
ability to cope with ris$ and uncertainty, audit committees requirements and auditors
relationship with management.
2utton (0--0# suggest that the auditing profession has, in the past, ta$en the following
chronological approach to addressing expectation gaps
i. Deny the existence of deficiencies (as it relates to deficient standards#
ii. %ntertain suggestions for improvements
iii. 1gree to accept some proposed suggestions
1 survey ta$en up by +in (0--"# in /hina with respect to audit objectives, auditorGs
obligation to detect and reporting frauds and third party liability of auditors. The study
evidenced the emergence of the expectation gap in /hina and the majority of audit
independence by reducing governmental control or intervention and moving towards
self7regulation of the profession. This study has a limitation in the sense that it should
cast light on understanding of the institutional setting and updated development of
independent audits in /hina and may also serve as an annotation to the recent
accounting reform debates in the western world. This study investigated the views of
natural shareholders regarding the role of the effects on independence due to the audit
firm also providing non7audit services to their audit client. 1 total of 9?
questionnaires were received with an overall response rate of ',.?- per cent.
2hareholders were as$ed whether they agreed that the independent audit enabled them
to rely on financial information of profits, dividend yieldHpayout ratios and
assetsHliabilities. The responses of shareholders generally confirmed that the
independent audit was important in their use of financial accounting information.
2imilarly, the reliability factors for the audit report of the independence of auditors
and audit firm reputation were tested. .oth were believed to add credibility to the
auditors* report.
4urther discussion involved shareholder perception of audit independence in three
separate instances= audit firm receiving substantial consultancy fees; the auditor
holding shares in the audit client and the same auditor had been retained for over
seven years. 2hareholder opinions revealed that auditor independence was perceived
to have been impaired by the substantial consultancy fees paid, but to a lesser extent
by share ownership. +ong7term audit contracts were not perceived to impair auditor
independence. This study also refutes the idea that auditors could maintain their
independence when receiving substantial consultancy fees. 3verall, the findings of
this research suggest that natural shareholders place a strong reliance on regulatory
matters such as the accounting standards and the corporation*s law for accounting
information.
1lleyne et al., (0--9# investigated the appearance standard by empirically exploring
both auditors* and users* perceptions of auditor independence in .arbados. 4irstly, the
study contributed to the existing body of $nowledge in terms of providing a better
understanding of the nature of auditor independence in small developing countries.
2econdly, this study could inform policy ma$ers, governments and professional
accounting bodies as to how auditor independence policies and framewor$s could be
structured to ensure adequate regulation of the capital mar$et. Thirdly, their study
would serve to educate users and auditors about the contextual factors surrounding the
role of auditor as well as the possible threats and enhancements factors affecting
auditor independence. The survey instrument was divided into two sections= section
one dealt with demographic factors and section two focused on '! audit7related issues
categori(ed under a number of generic factors. The sampling respondents identified
comprised several groups such as auditors, financial directors, credit managers,
investment analysts, fund managers, shareholders and government departments. The
sample respondents comprised 99 auditors and ": users. The findings of the study
revealed that economic dependence of auditor on the client, the provision of non audit
services, high competition, small firm si(e, being a sole practitioner, lengthy tenure
and the si(e and closeness of .arbadian society were found to negatively affect
perceptions.
>n &ong Bong, ;a and 2elva (!!'# conducted the study using questionnaire survey
method. They investigated the perceptions of audit client firms on their external
auditors. The study finds significant differences in expectation with regards to
auditors* duties and responsibilities between auditors and auditees in &ong Bong.
This shows that the auditees firm believes that the auditors are responsible for
detecting fraud and irregularities. Their perception is in abeyance to the fact that they
sign agreement letters with the external auditors and have ab7initio $nown that it is
not the responsibility of the external auditor to detect errors and irregularities as
enshrined in the engagement letter signed by the two parties.
>n Cigeria, few studies attempted to document the problem of the expectation gap, for
instance, the study of chu$wunedu (0--!#. The study presented the opinion of a small
number of the members of the institute of chartered accountants of Cigeria, to be
specific 90 accountants were examined. Dnfortunately the study used a small si(e
number of the sample si(e, apart from the restriction of the sampled respondents to
only one part of the sta$eholders on the problem. The study also used a wea$ tool for
the analysis of the data collected by employing percentages and chi7square. 3$oye
and 3$aro (0-# studied the accounting academics on the issue of whether the
injection of forensic accounting techniques, on a costHbenefit basis, in an audit is
capable of increasing the ability of the auditor to discover fraud and thus help in
bridging the audit expectation gap in Cigeria. 1gain the analysis in the study was
wea$ and restricted to only accounting academics. 4inally, 1deyemi and Dadiale
(0-# attempted to investigate the audit expectation gap using +agos state as the base
for the respondents. 1part from the restriction of the study to the +agos state as the
base for the sample selection, the respondents used were very few and do not cover
the major sta$eholders of the expectation gap. 4urthermore, 1deyemi and
3lowoo$ere (0-# using the same methodology and the restricted respondents in
+agos examined the perception of a group of 0?- respondents and restricted their
opinion to the auditors* responsibility to fraud prevention and detection. They found
no generally accepted description of the auditor by the respondents that are basically
+agos residents. 1$inbuli (0--# provided an x7ray as to the literature on the problem
of expectation gap. The study centres on providing theoretical explanation of the term
and the implication of the problem of the expectation gap, such as the high rate of
litigation that awaits the audit profession and an alarming increase to the liability
against the auditor. The study finally recommended that the auditor improve his
performance to reduce the audit expectation gap.
Therefore, it is against this bac$drop that this research wor$ has been underta$en with
the aim of documenting whether or not the audit expectation gap exists in the
Cigerian society with the perception of diverse views of the various sta$eholders in
the area of the audit expectation gap.
%onclu"ion
/onclusively, we can understand from the literature that the problem of audit
expectation gap is a phenomenon that has being widely recogni(ed. Therefore, an
attempt to document the extent of its existence and the way forward for its correction
in Cigeria will be a welcome idea. The studies mostly use survey questionnaires to
identify the nature of the gap or where the gaps are; impacts of the gap; and how to
reduce the gap. Different respondents have been used in the literature to elicit their
opinion, for example, auditors, lawyers and judges (lowe, !!"#, jurors (fran$ and
lowe !!"#, investors (%pstein and gregor !!"#, shareholders (bec$ !!"# various
groups (&umphrey !!'# chartered accountants, financial directors, investment
analyst, ban$ers and financial analyst. 4urthermore, we tabulated the researchers
presented base on the country the studies were underta$en and those involved in the
researches.
There is the need for continued sensiti(ation of the public, by both the auditing
profession and other sta$e holders on the role and duties of the auditor to avoid
unreasonable expectation by the public. The study found auditing education to be
highly correlated to reducing the expectation gap, as such; the course should be
expanded to all levels and across disciplines to have wider coverage. 1ttributed to the
expectation gap, is the issue of the content of the audit report. The tax authorities
could reduce the expectation gap by expanding the content of the audit report to have
an elongated audit report. 1 system of monitoring the performance of the auditors in
their audit wor$ should be encouraged by the professional firms. 1lthough there is
mandatory professional training and points are earned by the auditors and professional
members, there seems to be no enforcement or sanction on the part of the professional
bodies on those members that do not comply. There should be improved
communication and feedbac$ system by the auditing profession on how the public
view its activities. 2pecifically, the communication between and within the auditing
environment will greatly assist in monitoring and reducing the possibilities of the
audit expectation gap created by the deficient performance audit. The professional
bodies can also monitor the reduction of the expectation gap through its licensing
procedures. 1s auditors apply for license to practice, the professional bodies could
ensure their competence and possibly organi(ed a wor$shop for them to help explain
and educate them on gray areas and procedures in the audit that possibly have direct
impact and or cause the expectation gap. The shareholders association also has a role
to play in educating its members on the role of the auditor and the expectation and
coverage of the audit report. ;hat the shareholders or investing public should expect
from the audit report and possibly its bounds on the extent of its reliability. The
judiciary also should be sensiti(ed as to the role of the audit and the responsibility of
the auditor in terms of the coverage of his audit report and his liability to third party.
This will go a long way in reducing the gap created by the outcome of court cases on
the issue of the expectation gap between the public and the auditor. There should be
minimum standard on the charges that clients pay for audit; as this will help to control
the action of the auditor for accepting low rate that may result to deficient audit
performance.
Table 0= 2D6615I 34 %68>5>/1+ 5%2%15/&
D21 @a$ubows$i et al (0--0#; 1lmer and .rody (0--0#; 6c%nroe J
6artens (0--#; 4ran$ et al (0--#; 1nderson J ;right (!!:#;
DeEoort J +ee (!!:#; <ramling et al (!!9#; %pstein and <eiger
(!!"#; 1nderson et al (!!', !!:#, @ennings et al (!!#; 4ran$ et al
(0--#; +owe and 8arty (!!'#; +owe (!!"#; &etherly et al (!!#;
.aron et al (!,,#; +ibby (!,!#; .ailey et al (!:'#; Cair and
5ittenberg (!:0#; 6iller et al (!!-#; Belly and 6ohrivers (!:!#;
.eattie et al (!::# J&olt and 6oi(er (!!-#
0 DB Dewing and 5ussell (0--0#; 6anson and Eaman (0--#; 8orter and
<owthorpe (0--"# and &umprey et al (!!'#; 6anson and Eaman
(0--#; and Deving and 5ussel (0--0#.
' 1ustralia 2chelluch and <ay (0--9#; Deegan and 5an$in (!!!#; 2chelluch
(!!9#; 6onroe and ;oodliff (!!"#; <ay et al (!!,#; +ow (!:-#;
Bertherly et al (!!#; and .ec$ (!,"#.
" 2audi 1rabia &aniffa and &udaib (0--,#
? +ebanon 2idani (0--,#
9 %gypt Dixon et al (0--9#
, >ndia 2aha and .aruah (0--:#; 2utton (0--0#
: .angladesh /howduey et al (0--?#
! /hina +in and /hen (0--"#; +eung and /hau (0--#; +in (0--"# and
1lleyner et al (0--9#
- Thailand 3ngthamma$ul (0--"#
2ingapore .est et al (0--#; Boh and ;oo (0--#
0 6alaysia 4ad(ly and 1hmad (0--"#; +ee et al (0--,#; lee et al (0--!#
' 2outh 1frica <loec$ and De @ager (!!'#
" Cew Eealand 8orter (!!'#; &umphrey et al (!!'#.
? &ong $ong ;a and 2elva (!!'#
9 Cigeria 1deyemi and Dadiale (0-#; 1$inbuli (0--#; 3$oye and 3$aro
(0-# and /hu$enedu (0--!#
2ource= 1uthors compilation
Table '= 5esearches by <overnmental 3rgani(ations
D2 /ohen /ommission (!,?#. 2tatement of >ssues= 2cope and 3rgani(ation of the
study 1uditors* 5esponsibilities.
Treadway commission (!,:#. 5eport of the national commission on
fraudulent financial reporting
0 /anada 1dam committee (!,:#. 5eport of the special committee to examine the role
of the auditors
6acdonald commission (!,:#. 5eport of the commission to study public*s
expectations
' DB The >nstitute of /hartered accountants in %ngland and ;ales (!:9#. 5eport of
the wor$ing party on the future of the audit
" 1ustralia The 1ustralian society of certified practicing accountants and the institute of
chartered accountants in 1ustralia. (!!"# a research study of financial
reporting and auditing Kbridging the expectation gap
The institute of chartered accountants in 1ustralia (0--'#. 4inancial report
audit. 6eeting the mar$et expectation
2ource= 1uthors compilation
B$BL$&GRA'()
1dams 1. /. and %vans 5. (0--"#= 1ccountability, /ompleteness, /redibility and the
1uditing %xpectation <ap. Greenleaf Publishing, @// " 2ummer.

1dams /ommittee. (!,,#= 5ole of the 1uditor, Toronto= /anadian >nstitute of
/hartered 1ccountants.
.eattie, v., .randt, 5. J 4earnley, 2. (!!!#= L)8erceptions of 1uditor >ndependence=
DB %videnceM, Journal of International Accounting, Auditing and Taxation, Aol.:,
Co., pp= 9,7-,.
.est 8 @, .uc$by 2 J Tan /. (0--#= L%vidence of The 1udit expectation <ap in
2ingaporeM Managerial Auditing Journal, Aol .9, Co .' pp= '"7"".
/arey,+. (!,-#= The 5ise of the 1ccounting 8rofession= To 5esponsibility and
1uthority, !',7!9! (Cew Ior$,#.
/heno$, 8... (!!"#= 8erception vs. 5eality, Journal of Accountancy. pp= ",7?.
/howdhury, 5, >nnes,@ and Bouhy, 5. (0--?#= LThe 8ublic 2ector 1udit %xpectation
<ap in .angladeshM, Managerial Auditing Journal,Aol.0-, Co.:,pp= :!'7!-:.
/howdhury,5 ,@nnes , @ J Bouhy , 5. (0--?#= LThe 8ublic 2ector 1udit %xpectation
<ap in .angladeshM, Managerial Auditing Journal.Aol.0-,Co.:,pp=:!'7!-:.
/ohen /ommission. (!,:#= 5eport of the /ommission on 1uditor 5easonability*s=
/onclusions and 5ecommendations. Cew Ior$= 1merican >nstitute of /ertified 8ublic
1ccounts.
/ross /ommittee. (!,,#= 5eport of the /ommittee Dnder the /hairmanship 5. &on
the +ord /ross of /helsea, 1ccountancy, 9-, pp= :-7:9.
/>/1 (!!:#= /anadian >nstitute of /hartered 1ccountants
De1ngelo, +.%. (!:#= L1uditor 2i(e and 1udit NualityM, Journal of Accounting and
Economics, Aol.', 1ugust, pp= :'7!!.
Dunmore 8.A E J 4al$, &. (0--#= @oint 8rovision of 1udit and Con7audit 2ervices,
1udit 8ricing and 1uditor >ndependence, ;8.
4ad(ly ,6. E J 1hmad,E (0--"#= 1udit %xpectation <ap= The case of 6alaysia.
Managerial Auditing Journal, Aol. !. Co. ,.

4ad(ly ,6 J 1hmad,E (0--'#= LThe 8erceived Aalue of 4inancial 2tatement 1uditM ,
8roceeding of The >nternational /onference on Nuality 4inancial 5eporting /orporate
<overnance, $uala +umpur,6alaysia.
4%% =( !!?#= 1uditor >ndependence and 3bjectivity, 8osition 8aper. .ruseels.
4lint, D. (!::#= 8hilosophy and 8rinciples of 1uditing, 1n >ntroduction. 6acmillan.
+ondon
4ried, D, J 2chiff, 1. (!:#= L/81 2witches and 1ssociated a 6ar$et 5eactionsM,
The Accounting Reie!, 1pril, pp. '097'".
<ill <, and /osserat <.. (!!9#= 6odern 1uditing in 1ustralia, 4ourth %dition ;iley
and 2ons 1ustralia.
<reenside /ommittee, (!,:#= L5eport of the @oint /ommittee 1ppointed to /onsider
the /ross report and related 6attersM, "ournal of Accountancy. Aol. 9, pp; 0"7'0
<uy. D. J 2uilivan, @. (!::#= LThe %xpectations <ap in 1uditing 2tandardsM,
Journal of Accountancy.Aol.9?, pp= '97"9.
&ille. (!!'#= L%xpanding the Cew Eealand 1udit reportM, Accountants Journal, pp=
?!79.
&opwood, 1.<.. (!!-#= L1mbiguity, Bnowledge and Territorial /laims= 2ome
3bservations on the Doctrine of 2ubstance over 4orm72 5eview essayM, #ritish
Accounting Reie!, Aol. 00, Co.
&umphrey, /., 6oi(er, 8., and Turley, 2. (!!0#= The 1udit %xpectation <ap in the
Dnited Bingdom, 5eport prepared for the 1uditing 5esearch 4oundation of the
research board of the institute of chartered accountants in %ngland and ;ales,
+ondon, >/1%;.
+iggio, /.D. (!,"#= LThe %xpectation <ap= The 1ccountant*s +egal ;aterlooM.
Journal of $ontem%orary #usiness, Aol.', Co.', pp= 0,7"".
6c%nroe, @. %., 6artens, 2. /. (0--#= 1uditor*s and >nvestors* 8erception of the
L%xpectation <ap. Accounting &ori'ons, Aol. ? no. "
6acdonald /ommission. (!::#= 5eport on the /ommission to 2tudy the 8ublic*s
expectation of 1udits, /anada, /anadian >nstitute of /hartered 1ccountants.
6tcalf /ommittee. (!,9#= The 1ccounting %stablishment, ;ashington D /= Dnited
2tates <overnment 8rinting 3ffice.
6ahdi 2., 6ansoury 1., 1(ary E. (0--!#= 1udit >ndependence and %xpectation <ap=
%mpirical evidences from >ran. International Journal of Economics and (inance Aol.
, Co. .
.arley B, .ylin$i @ and shields 6 (!:'#, L%ffects of 1udit 5eport ;ording /hanges
on the 8erceived 6essageM, Journal of Accounting Research, Aol. 0, Co. 0, pp.'?? K
',-.
.aron / D, @ohnson D.1, 2earfoss D.< and 2mith /.& (!,,#, LDncovering
/orporate >rregurities= 1re we /losing the %xpectation <apO, Journal of Accountancy,
3ctober, pp. "70".
Dewing > 8 and 5ussel 8.3 (0--0#, LDB 4und 6anagers, 1udit 5egulation and the
Cew 1ccountancy 4oundation= Towards a narrowing of the 1udit %xpectations <aOM
6anagerial 1uditing @ournal, Aol. ,, Co, 88. ?'7?"?.
%pstein 6. and <eiger 6. (!!"#, L>nvestor Aiews of 1udit 1ssurance= %vidence of
the %xpectation <apM, Journal of Accountancy, Aol. ,,, Co. , pp. 9-799.
4ran$ B.%, +owe D.@ and 2mith @.B (0--#, LThe %xpectation <ap= 8erceptual
Differences .etween 1uditors, @urors and 2tudentsM, Managerial Auditing
Accounting Reie!, Aol. ', pp. "?7?-.
<ray <, 2chelluch 8. and 5eid > (!!,#, LDsers* 8erceptions of the 1uditing
5esponsibilities for the 8revention, Detection and 5eporting of 4raud, other >llegal
1cts and %rrorsM, The Australian Accounting Reie!, Aol. ,, pp. ?79.
&umphrey /. 6oi(er 8. and Turley 2. (!!'#, LThe 1udit %xpectation <ap in .ritain=
1n %mperical >nvestigationM, Accounting and #usiness Research, Aol. 0', pp. '!?7
".
+ee T. 1 (!,-#, LThe Cature of 1uditing and its 3bjectivesM, 1ccountancy, Aol. :,
pp. 0!070!9.
+owe D.@ (!!"#, LThe %xpectation <ap in the +egal 2ystem= 8erception Differences
.etween 1uditors @udgesM, Journal of A%%lied #usiness Research, Aol. -, Co. ', pp.
'! K "".
6anson 2. and Eaman 6. (0--#. L1uditor /ommunication in an %volving
%nvironment= <oing .eyond 212 9-- 1uditors* 5eports on 4inancial 2tatementsM,
.ritish 1ccounting 5eview, Aol. '', Co. 0, pp. '7'9.
6iller, 5eed 2. 2trawser 5 (!!-#, LThe Cew 1uditor*s 5eport= ;ill it close the
%xpectation <ap in /ommunicationsOM, The $PA Journal, Aol. 9-, pp. 9:7,0.
6onroe < and ;oodliff D (!!"#, L1n %mpirical >nvestigation of the 1udit
%xpectation <ap= 1ustralian %videnceM, Accounting and (inance, Aol. '", pp. ",7,".
Cair 5 and 5ittenbeng + (!:,#, L6essages 8erceived from 1udit, 5eview, and
/ompilation 5eports= %xtension to more Diverse <roupsM, 1uditing, A Journal of
Practice and Theory, vol. ,, pp. ?7':.
Dewing , >.8 and and 5ussell, 8.3 (0--0#. DB fund managerss audit regulation and
the new accounting foundation , Managerial Auditing Journal, Aol. ,, pp. ?', K ?"?.
4a(dly, 6. C and 1hmad, E. (0--"#. 1udit %xpectation <ap= The case of 6alaysia,
Managerial Auditing Journal, Aol. , (,#, pp. :!, K !?.
<aa. @. /. (!!#. The %xpectations <ame= 5egulation of 1uditors by <overnment
and the profession, /ritical 8erceptive of 1ccounting, Aol. 0, pp. :'7-,.
<ray, > and 6anson, 2. (0--0#. The Audit Process) Princi%les, Practice and $ases,
+ondon= .usiness 8ress Thomson +earning.
&umphrey, /., 6oi(er 8. and Turley, 2. (!!0#. The 1udit expectations <ap K plus a
change, plus c*est la meme choseO $ritical Perce%tie on Accounting, Aol. ', pp. ',7
9.
8orter, .. (!!'#. 1n %mpirical 2tudy of the 1udit %xpectations78erformance <ap,
Accounting and #usiness Research, Aol. 0", ;inter, pp. "!79:.
Tric$er, 5.>. (!:0#. /orporate 1ccountability and the role of the 1udit function, in
&opwood, 1. <.6. .roomwich and 2haw, @. (ed#. Auditing Research) Issues and
*%%ortunities, +ondon= 8itman.