A Review and Identification of Aspects that Contribute towards Creation of Audit Expectation Gap, a Step towards Narrowing This Gap

Abstract

Bridging of something requires a gap, and Audit expectation gap still exists since the time it was identified in 1970s, and to cover a gap requires identification of areas which needs to be covered, specially the areas which are the reason of creation of this gap. This paper attempts to expand the literature by identifying the factors which result in creation of this gap through a comprehensive review of literature, specially focusing the key countries in which studies are made regarding audit expectation gap as well as to highlight the groups among which the audit expectation gap exists, so that all necessary aspects should be taken into necessary consideration, and necessary attempts should be made to cover it. It is revealed that audit expectation gap exists due to difference of opinions about the factors like auditors’ role with respect to company and financial statements, audit knowledge, auditor’s attitude towards their profession, audit process, auditors’ independence, fraud detection, importance of auditing, preparation of financial statements, performance of company, parties to whom auditors are responsible, prohibitions and regulations of audit firm, reliability of financial reports and usefulness of financial statements among auditors, accountants, bankers, brokers, creditors, directors, educators, government, investors, journalists, jurors, shareholder, students and government. Various policy implications are also discussed herewith.

Keywords: fraud, auditors, accountants, auditors’ responsibilities, expectations