Expectation Gap

Read Complete Research Material


Expectation Gap

Expectation Gap


The expectations gap largely came into effect with the crumbling of a majority of companies and capital markets especially with the rise of financial crisis. This period was a key period that witnessed an enhanced gap between the audit profession and between the investigators of audit reports. Thus, there was increased attention towards the profession of audit services as a whole. There was increased confusion on the value obtained through audit services that were characterized by illogical auditing benchmarks and the planning of the audit profession as a whole.

There have been many reasons for the lack of credibility among auditors. Since the auditors did not mention clearly about the difficulties faced by companies in the reports, there has been many difficulties in maintaining and enhancing continuity. The aspect of emergence of lawsuits pertaining to the auditors served as a key de motivator that led to a lack of confidence in the auditors. Users of financial statements have been known to bring law suits against auditors as well as increased demands for compensation.

The audit expectation gap has been in existence for decades; it was first introduced during the early 1970's. Collective evidence has gradually shown the existence of the expectation gap. Researchers, Salehi, Ali, Kandasamy, Ojo, Epstein, Geiger, Pierce, Kilcommins, Humphrey, Adeyemi, Uadiale, Monroe, Woodcliff, Jennings, Porter, Sikka, Hassas-Yeganeh , Khaleghi, Dixon, Woodhead, Frank, Lowe, and Smith, have continued to investigate the existence of the expectation gap and its complications. The audit expectation gap exists when the public user and auditors have different beliefs about what an auditor's responsibility should be (Wolfram, 2009, Pp. 11).

In the past few years, auditors have been unwillingly placed in the spotlight. The expectation gap has affected and deteriorated accountants' credibility. The reason to this is that public users have expectations from auditors (Baker, 2006, Pp. 14). These expectations by the public users increase the legal liability and credibility facing the audit profession, and lastly, it lowers their earning potrantion and reputation associated with the work of auditors. Yet, the profession have been trying to decrease the disparity. However, the expectation gap is not something that can be placed on the profession's shoulders alone, since the nature and roles of the auditors are differently perceived by users.

It is obvious that previous research that have been done on the expectations problem is significant. It is not surprising that it has become significant since the gap between auditors and public users has been in presence for the last 100 years although the “expectation gap” was first brought up to the auditing play only during the last three decades or so. The objective of this paper is to examine studies conducted by many researchers and evaluate some of the possible solutions to narrow the gap. The remainder of this paper is organized as follow: background and definition of expectation gap, empirical evidence and ways to reduce the expecation gap.

Background and Definition of the Expectation Gap

The definition of expectation gap varies among different researchers ...