An Investigation of Expectation Gap between Independent Auditors and Users from Auditing Services Related to the Quality of Auditing Services Based on Their Role and Professional Features

Abstract

In this research, using an analytical framework on factors affecting the quality of auditing services, we consider factors that affect an expectations gap in providers and users of auditing services related to factors affecting auditing quality. Effective factors studied in this regard are professional features, including the professional role of individuals in the auditing process (auditors against preparers of financial statements), professional experience of individuals, professional rating and size of auditing firms. The first statistical society consists of certified public accountants (CPAs) working in the auditing organization and audit firms in Iran, and the second statistical society consists of all investment companies that operate under the supervision of the Tehran Stock Exchange Organization. Based on the results of the research, the role of professionals in the auditing process is not effective as an independent auditor or financial statements provider, as well as the professional experience of individuals in the expectations gap from factors affecting auditing quality, while the size and qualities of the auditing firms were influenced by the expectations gap of individuals in the field of auditing regulation.

Detecting anomalies in financial statements using machine learning algorithm

“…First, it shows that there are no overall financial statement level (OFSL) threats and users can feel confident in using these financial statements to make informed financial decision. In other words, the findings reduced OFSL risk, that is, the risk of material misstatement for the financial statement as a whole (see also Behzadian and Izadi Nia, 2017). Second, and partly synonymous with the first, is that the results directly enhance the relevance and reliability of information provided in the financial statements for strategic investment decision making.…”

“…see Fanning and Cogger, 1998; Lyandres and Zhdanov, 2013). These findings provide meaningful insights to financial institutions when determining lending decisions and to investors when evaluating companies’ financials to make investment decisions (Bell and Carcello, 2000; Beneish et al , 2013; Behzadian and Izadi Nia, 2017; Lokanan, 2017).…”

“…Over the past three decades, there has been an increased focus on irregularities in corporate accounting reporting in general and financial statement fraud in particular (Beasley, 1996; Beneish, 1997; 1999; Rezaee, 2005; Hogan et al , 2008; Cooper et al , 2013; Lokanan, 2015; Morales et al , 2014). Generally, the literature on financial statement fraud focuses on the individual factors that affect fraudulent behavior in organizations (Albrecht et al , 2004; Bell and Carcello, 2000; Rezaee, 2005; Dellaportas, 2013); the procedures and expertise of auditors to detect “red flags” of fraud (Albrecht and Albrecht, 2004; Rezaee, 2005; Murphy and Dacin, 2011; Murphy, 2012; Power, 2013; Morales et al , 2014); the effects of fraud risks assessment tools on high risks areas in audit engagements (Johnstone and Bedard, 2001; Rezaee, 2005; Davis and Pesch, 2013; Power, 2013; Lokanan, 2015; Behzadian and Izadi Nia, 2017); and the role of auditing committees to detect red flags associated with fraud (Johnstone and Bedard, 2001; Kranacher et al , 2010; Lokanan, 2014). Together, the academic research offers insights on financial statement fraud and facilitates the development and enhancement of new technologies to detect anomalies in fraud (Hogan et al , 2008; Albrecht et al , 2015; Morales et al , 2014).…”

“…People working in the corporate sector regularly spend a lot of time in financial districts, which, despite the best regulatory efforts by regulators, offer regular opportunities to engage in fraud and/or experience sources of friction, which may lead to fraud (Lokanan, 2015; Morales et al , 2014). An accountant, for example, may address the friction caused from not meeting financial targets by manipulating the financial statements (Behzadian and Izadi Nia, 2017; Lokanan and Sharma, 2018). A chief executive officer may address the friction caused from not meeting financial targets by manipulating his compensation bonuses (Perols, 2011).…”

Impact of Internal Audit Practices on Satisfaction of Administrators: A Case in University of Jaffna, Sri Lanka

“…They found that performance audit growth has continued but not always consistently over time and across audit jurisdictions. Fatah and Naser (2017) found that role of professionals in the auditing process is not effective as an independent auditor or financial statements provider, as well as the professional experience of individuals in the expectations gap from factors affecting auditing quality, while the size and qualities of the auditing firms were influenced by the expectations gap of individuals in the field of auditing regulation. Based on the literature review of the study it can be seen that there are lack of research in this particular study.…”