This study examines the auditor and the public:
Expectation gap. It was carried out to determine if
exists any significant expectation gap in the Nigeria auditing environment. The
expectation gap developed from the differing expectations of the function of
independent audit between the auditors and the public. The researcher used primary source of data towards obtaining authentic
information on the topic. It was discovered that there is a wide
expectation gap in Nigeria. The propositions made in the study were evaluated
using selected items or statement from the questionnaire. The study concludes
that. The audit function is crucial in providing users the assurance about the
information provided by management in the financial statements and an attempt
to put an end to this wide gap in perception of the users to the auditor’s
functions are being carried out in various part of Nigeria. The study
recommends among others that the existing duties and responsibilities of
auditors should be a clearly defined and widened to include fraud detection.
TABLE OF CONTENTS
Title Page i
Table of Contents
Chapter One: Introduction 1
to the Study 1
of Problem 5
of the Study 6
of Hypothesis (es) 7
of the Study 8
1.7 Scope of
the Study 9
of the Study 10
of Terms 10
Chapter Two: Review of Related Literature 12
Competence and the Components of the
Audit Expectation Gap 23
2.3 Audit Reporting 25
Prevention and the Auditor 28
2.5 Liability of an Auditor 29
2.6 Narrowing the Gap 30
Chapter Three: Research Method and Design 35
3.1 Introduction 35
of Population of the Study 35
of Data Collection 36
of Data Presentation 38
of Data Analysis 38
Four: Data Presentation, Analysis and Hypothesis Testing 41
of Data 41
Five: Summary of Findings, Conclusion and Recommendations 53
5.1 Introduction 53
of Findings 53
Background to the Study
expectation gap first came up in 1974 when Liggio discuss the presence of
expectation gap due to the fact that since the late 1960, the audit profession
had been under attack regarding the quality of its professional performance. He
suggested two reasons for this; “a greater willingness to hold others
especially professionals–accountable for perceived
and the expectation gap as factor of the levels of expected performance as
envisioned by both the independent and by the user of financial statements. The
difference between these levels of expected performance is expectation gap.
during the 1970s in the united States when the American institute of certified
public Accountant (AICPA) set up the commission on Auditor responsibilities (Cohen Commission) to
conduct whether a gap exist between what the public expect or need and what the
auditor can and should reasonably do, the definition for expectation gap was
extended a little. It submitted that the gap which gives rise to criticisms of
auditors is that, between what societies expects from auditors and what it
perceives it receives from them.
(1993) however argued that the definitions used by Liggio (1974) and the Cohen
Commission report were too narrow and they failed to consider the possibility
of substandard performance of auditors. She Stats:
definitions are too narrow in that they do not recognize that auditors may not
accomplish “expected performance. It is therefore proposed that the gap, more
appropriately entitled “that audit expectation that gap between public’s
expectations of auditors and auditors’ perceived performance (PSO)”.
are also definitions from other researchers: for example: Innes, Alvin and
Liggio (2003) define the audit expectations gap as “the difference between what
the public expects from auditing profession and what the auditing profession
can actually provide”. Humphrey (1999) defines it as “a representation of the
feeling that auditors are performing in a manner at variance with the beliefs
and desires of these for whose benefit the audit is carried out”. Humphrey
(1999) extends his definition to include other issuers such as the adequacy of
editing standards and the quality of audit delivery.
underlying expectations have been offered for the continuing presence of the
explanations problem. Trickier (2002) views the expectation gap as the result
of a natural time lag in the auditing profession identifying and responding to
continually evolving and expanding public expectation. Other authors argued
that it was the consequence of the contradictions in or self regulated that it
was the consequence of the contradictions in or self regulated audit system
operating with minimal government intervention as evidenced in Hopwood (2000).
lot has been written about the possibility of an audit expectation gap.
Concerns over ambiguities in the roles and responsibilities of auditors have
led to the establishment of several government and professional investigation
which form an important part of the expectation gap literature. These include
the Cohen commission (1987), in the United States, the cross Committer (1977),
Greenside Committee (1978), Metcalf Committee (1976), and Tread way Commission
(1987); in the United State; the Cross Committee and Greenside Committee (1977)
and Mac Donald Commission (1988) in Canada.
common finding in all these investigation is that there is a gap between audit
performance and expectation exists. Due to the growing expectation gap between
the auditors and the public, the accounting profession has attempted to narrow,
if not eliminate the gap and counteract the negative consequences. Efforts to
this end have included the
standard, revising the audit report and conducting official investigation as
evidenced in the studies of Pound and Fensome (2003), Chenok (2004), ICAA
(2004) and Guy (2008).
to Fadzly and Ahmed (2004), the audit expectation gap is a critical issue in
auditing because of the damage it has brought and continues to bring to the
essence of auditing profession.
Statement of Problem
to date on the audit expectation gap indicates that it exists for several
reasons. Porter and Gowthropew (2004), for example, have argued that the gap
exist due to deficiency in auditor’s performance and auditing standards. Pierce
and Kilcommins (2006) argue that the gap exists due to misinterpretations and
misunderstanding of the meaning of auditing by the users. These studies suggest
that users do not understand the audit functions and role of auditors.
Consequently, they have unrealistic expectations of auditors.
unlike the situation in the private sector, the research into the audit
expectations gap in the public sector has received little attention by researchers.
To date only Chowdhory and Innes (1998), Pendlebory and Shrieim (2001), have
undertaken research investigating the audit expectations gap in the public
recently studies of audit expectation in the context of performance audit have
only been conducted in developed countries. However, due to the recent collapse
of large companies in Nigeria, the existence of expectation gap has been
brought to light. Hence, what are the causes of expectation gap in Nigeria?
1. Is there
any significant expectation gap in the Nigeria auditing environment?
2. Could these gaps be identified?
3. Could these gap areas been eliminated?
4. Could these gap be reduced if, cannot be
5. What are the perception of the auditors and
users of audit reports towards the roles and responsibilities
of the auditor?
Objective of the Study
broad objective of auditor and the public expectation gap in Nigeria. The
specific objectives are;
1. To find out whether there is expectation
gap in Nigeria.
2. To ascertain whether the areas of the gap
could be identified.
3. To check if the identified areas will make
it possible to eliminate the gaps.
4. To check if the expectation gap can be
reduced in cases which can not be completely eliminated.
5. To find out the perception of auditor and
users of audit reports and the responsibilities of the auditor.
Statement of Hypotheses
following null hypotheses were tested in order to provide answers to the
aforementioned questions in the aims and objectives.
HO: Expectation gap does not exist in Nigeria
Expectation gap exist in Nigeria
HO: There is no significant
difference in the perception of respondents groups on existing duties and responsibilities of auditors.
There is significant difference in the
perception of respondents groups on existing duties and responsibilities of
Educating users will not reduce their
perception towards auditors.
Educating users will reduce their
perception towards auditors.
of the Study
the researcher’s point of view, this study potentially contributes to the
auditing literature in various ways.
i. It extends the existing knowledge on the
audit expectation gap by providing evidence of the nature of audit expectation
and their composition in Nigeria.
ii. By examining the nature of performance
audit and audit process, using Nigeria as a case study, this study contributes
to the literature of performance audit in developing countries. This study
demonstrates that the audit institutions of such countries cannot afford to
overlook the importance of compatibility with needs of users to the conduct of
iii. Finally, the finding of this study could
provide a useful framework for studding the audit expectation gap in the public
sector and be useful to academics and other researchers.
Scope of the Study
This study examines the auditor and the public
expectation gap. Geographically, the study was limited to Benin City and the
sample size was limited to 75 potential participants. The
study is motivated by the current state of the auditing profession in Nigeria
as a result of recent financial scandals Therefore the perception of selected
stakeholder were sought tin providing answer to the questions raised in the
study. The focus of the research in term of study group includes external
auditors, (auditor’s public account and management) and audit beneficiaries
(stakeholders and investor).
Limitations of the Study
In the course of this research, some
problems were encountered which include the following:
Biasness on the respondents.
Lack of available information to be
obtained from the sample firms.
Some selected firms were used as case
study hence if the result is generalized, it may not reflect the true position
of other firms due to environmental difference.
This is defined as a systematic and independent examination of data, statement,
record, operations and performance.
Is the difference between the effectiveness of audit engagement what users
believe and what auditors believes.
It means to be able to apply knowledge and skill to achieve intend result in
the financial records.
Is a written opinion of an auditor regarding whether an entity’s financial
statement present fairly its financial position.
This is deliberate deception to secure unfair or unlawful gain.
Fraud prevention to be effective in an organization requires a number of
contributing elements including an ethical organizational culture, a storing
awareness of fraud among employee, suppliers and client on effective internal
This is the obligation of an individual or organization to account for its
activities, accept responsibility for them and to disclose the result in