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  • Type: Project
  • Department: Accounting
  • Project ID: ACC0698
  • Price: ₦3,000 ($20)
  • Chapters: 5 Chapters
  • Pages: 120 Pages
  • Methodology: Z Test
  • Reference: YES
  • Format: Microsoft Word
  • Views: 948

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This study was carried out with the aim of appraising the audit expectation gap in the 21st century. In order to actualize the objectives of the study, various literature and theoretical issues were discussed. The instrument used for the purpose of this research was gathered through primary source. The mass of information generated from the questionnaires was summarized in form of table and analyzed using simple percentage. The researcher administered one hundred (100) questionnaires to respondents, out of which eighty (80) were retrieved for the purpose of presenting and analyzing responses to issues raise in the questionnaires. The data collected was analyzed using Z-test statistical tool. The findings from analysis revealed among other things that educating users of financial statement will reduce their perception towards auditors. It was recommended that, reduction in the audit expectation gap would only be achieved by giving full details and explanation on issues in the scope section of the report such as the auditor’s responsibility for the prevention and detection of frauds and also management responsibility in preparing and maintaining accounting records and financial statement.   
Background of the Study                 
Statement of the Research Questions            
Objectives/Purposes of the Study            
Significance of the Study                
Statements of Hypothesis            
Scopes of the Study                     
Research Methodology                     
Limitations of the Study                
Evolution of Auditing                    
The History of Auditing                     
The Need for Auditing                     
The Need for an Auditing                
Objectives of an Audit                    
Who is an Auditor?                    
Auditing and other Services                 
Qualities of an Auditor                     
Regulatory Framework of Auditing            
The Auditor and CAMA 1990             
Liability of an Auditor                     
Error/Fraud Prevention and the Role of Auditors        
The Users of Audited Statement            
Theory of Expectation Gap                 
Meaning of Expectation Gap                 
 Existence of Expectation Gap                 
Components of Expectation Gap            
Users Perception                        
The Auditor’s Report                    
Empirical Evidence                 
Research Design                             
Population of the Study                    
The Sample Size                         
Data Collection Method                     
The Research Instrument                     
Data Analysis Method                         
4.1    Introduction                            
4.2    Descriptive Statistics                         
4.3    Test of Hypothesis                     
5.0    Introduction                             
Summary of Research Findings                
There is concern that auditors and the public hold different beliefs about the auditors duties and responsibilities and the messages converged by audit reports and also that the existence of this expectation gap might cause the end users to eventually lose their trust in audit report all-together.
The criticism of and litigation against auditors failing to meet society’s expectation is clearly harmful to the individual auditor and/or audit firm concerned (Porter and Gowthorper, 2004).
The audit expectation gap has become a topic of considerable interest worldwide, for researchers in general and in the advance countries like the US, the UK, New Zealand, Germany, Singapore, Malaysia and Iran in particular for the past thirty years. This is due to the occurrence of series of corporate failures, financial scandals and audit failures in these advance countries and their consequent impact on other countries and their profession (Fatemeh Saeidi 2012).
In recent years, some spectacular and well published corporations collapse, and the subsequent implication of the reporting auditors have highlighted the audit expectation gap. Apparently, public misperceptions are to be seen as a major cause of legal liability crisis facing the accounting profession. The accounting profession argues that one cause of the expectation gap is the public failure to appreciate the nature and limitations of an audit (Epstein and Geiger, 1994). A common response in other to reduce the gap is to set out more auditing and accounting standards (Humphrey et al, 1993). Another alternative is to educate the public about the responsibilities of auditors (Hassink et al 2009). Accordingly, decreasing the gap can increase effectiveness and efficiency of an audit for users.
Auditing as a profession arises primarily because of the separation of ownership from control of business enterprise. The owners of business (shareholders) pull their resources together for the purpose of establishing an enterprise with a common goal of making profit and otherwise. These shareholders may not be available for the day-to-day administration of the business hence, the need to appoint professional managers whose responsibilities are to utilize shareholders fund.
The managers are expected to prepare an account that is a qualitative statement showing how the shareholders resources were utilize during the period being referred to as accounting year. This is also called stewardship account. In other to make shareholders place assured on members of the management as regards the true and fair view of the financial statement the shareholder will appoint an auditor.
The auditor whose appointment is required by law at the Annual General Meeting (AGM) is a professional, an independent person who examines the books, accounts and vouchers of the business as to enable him to report whether he is satisfied that the balance sheet is properly drawn up and also that the profit or loss account shows a true and fair view of the financial position and performance of the financial accounting year to the best of the information given him and as shown by the books and if not to report in what respect he is not satisfied. The auditors report is seen as the end product of any audit process that communicate the auditors findings to the interested users.
The annual financial statement of companies are prepared by the directors (managers) to the shareholders (owners) and other people were not expected to be interested in them in the time past. However, today much wider range of people are interested in the annual report of companies and other organizations. The following people are likely to want to see and use the financial statement.
Actual or potential;
Owners, lenders, employees, customers, creditors etc.
People who advise the above;
Accountants, stockbrokers, statisticians, trade union etc.  
Competitors and people interested in mergers, acquisitions and take over (Adeniji, 2004).
Most of the time, financial statement users consider an auditors opinion to be a clean bill of health. Most users expectation towards auditors are far more than what it should be hence the expectation gap. The term “audit expectation” was first introduced to audit literature by Liggo (1974). He defines it as “the difference between the level of expected performance as envisioned by the users of financial statement and the independent accountant”. Porter (1993) also define the expectation gap as the gap between what society expects auditors to achieve and what the auditor can reasonably be expected to accomplish and what auditor are perceived to achieve.
A study carried out by the Institute of Chartered Accountant of Scotland found that users expect auditors financial report to provide them with assurance (Gill and Cosserat, 1996) that the financial statement are right, the company will not fail; there has been no fraud; the company has acted within the law; the company has been competently managed; and the company has adopted a responsible attitude to environmental societal matters.
Following the massive corporate failure in the United States of America (USA) in the 1970s, the American Institute of Certified Public Accountant (AICPA) set up the commission on auditor responsibilities (Cohen Commission) to consider whether a gap exit between what the public expects or needs and what the auditor can and should reasonably do. The Cohen Commission conformed in 1978 the existence of an expectation gap. Following that, more researcher have been done all over the world with the same outcome which agreed with the existence of expectation gap.
Among these studies are Gay et al (1997) in Australia, Innes et al (1997) in the UK, Hojakov (1998) in Demark; Frank et al (2001) in the United States of America; and others.
What are the statutory roles and responsibilities of an auditor?
What are the various rules and regulations guiding the auditors duties?
What are expectation gaps and various types that exist?
Do expectation gap exist between the auditor and the public?
A significant expectation gap exist in Australia (Gay et al, 1997), it also exist in the UK. One doubt if the same exist in Nigeria.
The objectives of the study are;
To examine the statutory roles and responsibilities of the auditor.
To explore the various rules and regulations guiding the auditors duties.
To explore what expectation gaps are and the various types that exist.
To examine whether expectation gap exist between the auditor and the public.
To examine the users’ perception of audit expectation gap.
To highlight ways to reduce the expectation gap.
a.    Ho:    Auditors are not to detect and correct errors.
    H1:    Auditors are to detect and correct errors.
b.    Ho:    The public are not aware of the statutory roles and duties of the auditors.
H1:    The public are aware of the statutory roles and duties of the auditors.
c.    Ho:    Educating users will not reduce their perception towards auditors.
    H1:    Educating users will reduce their perception towards auditors.
It is envisaged that the outcome of the study will be useful in the following areas;
It will enable various users of the audit report to be aware of what the auditors actually do in practice as required or stipulated by law and auditing standards.
It will help reduce the wrong perception of the public as to what they think the auditors do.
It will also help us know if truly expectation gap exist between the auditor and the public.
The result of this study may affect the audit academic environment. Educating users regarding knowledge of audit and auditors duties. Knowledgeable users placed less responsibilities on auditor than less knowledgeable users. It is important to educate the users to understand the merits and limitations of an audit. Education is seen to be an effective approach to narrow down the expectation gap.
The focus of this study is to check the existence of expectation gap and if any highlight and explain the roles and responsibilities of an auditor and also narrow down the expectation gap. The study covers such areas as;
The public
The auditors report
The auditing profession
The roles and responsibilities of an auditor as requires or stipulated by the law.
Check the existence of expectation gap.
The methods to be used in analyzing the data are simply to be statistical tables as well as percentages since the data to be collected are non-parametric in nature; then they are to be tested using non-parametric statistics. The Z-test is the most suitable here.
The purpose of the test is to determine how well an observed set of data fits into an expected set. It is a statistical tool that enabled the researcher to establish if there is any relationship between two variables in the population.
The formula for Z-test is stated below:
    =    x – npo
        npo (1-po)
    Z    =    Symbol used to denote z-test
x    =    number of positive response received
n    =    number of response analyzed
po    =    critical value of the level of significance
The level of significance used in this test is 5% or 0.05.
Decision rule:
If the calculated value of Z is greater than Z, at table value, we reject the null hypothesis and accept the alternative hypothesis.
The scope of the study was limited to 150 potential participants. More compelling evidences may have been obtained using larger samples. (Smallness of sample size).
Risk of non response/low response rate
Methodological imperfections in computation of data generated.
Adeyemi, S. B. and Uadiale, O. M. (2011), An Empirical Investigation of the Audit Expectation Gap in Nigeria, African Journal of Business Management, 5(19), 7964 – 7971.
Adeyemi, S. B. and Olowookere, J. K. (2011), Stakeholders Perception of Audit Performance Gap in Nigeria, International Journal of Accounting and Reporting, 1, No. 1.

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  • Type: Project
  • Department: Accounting
  • Project ID: ACC0698
  • Price: ₦3,000 ($20)
  • Chapters: 5 Chapters
  • Pages: 120 Pages
  • Methodology: Z Test
  • Reference: YES
  • Format: Microsoft Word
  • Views: 948
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    Type Project
    Department Accounting
    Project ID ACC0698
    Price ₦3,000 ($20)
    Chapters 5 Chapters
    No of Pages 120 Pages
    Methodology Z Test
    Reference YES
    Format Microsoft Word

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