Self-Regulatory Policy of Accounting and Auditing Profession and Its Effect on Audit Expectation Gap in Nigeria

Abstract

From the very beginning, auditing is pretty much a self-regulated profession and has some ethical rules of thumb to follow in practice. But the plethora of corporate failures and scandals in recent past where auditors" instrumental role is evident in many instances raise question about the validity and suitability of "self-regulation" in auditing, especially in Nigeria and some other parts of the world where auditors need to perform auditing in ever complex risk management process. However, to restore the public confidences within and outside the auditing profession and to raise the overall audit quality, many countries are establishing some super regulatory bodies to set accounting and auditing standards and regulate the activities of auditors with a view to reducing audit expectation gap. The reason for this paradigm shift is because events over the last decades has shown that an inverse relationship appears to be existing between efforts being made to reduce audit expectations gap by accounting and auditing profession and the actual number of audit failures. This study adopted a cross sectional survey design. This was designed to investigate whether there is a relationship between the self-regulation of accounting and auditing profession in Nigeria and audit expectation gap. Pearson Product Moment Correlation Coefficient was used for data analysis. The finding shows a strong relationship between self-regulation and audit expectation gap and the deficient standard gap is not only associated with self-regulation but other legal pronouncements which the respondents considered obsolete and need to be revamped.

The audit expectation gap: A review of the academic literature

“…Beattie et al 1998), mainly related to the strengthening of auditor independence (Toumeh et al 2018), e.g. by a mandatory rotation of audit firms or a ban of non-audit services (Ruhnke and Schmidt 2014), and an improved supervision of the audit profession (Onulaka 2015). Such regulatory changes potentially improve audit quality, shift auditors' duties towards society's expectations, and thereby narrow the AEG.…”

Non-audit fees and auditor independence: Nigerian evidence

“…Onulaka’s (2015) survey identified self-regulation and inadequacy in company law as part of the deficient standard gap in Nigeria.…”

“…Despite adopting a qualitative approach, this study contributes to the debate contained in the literature. Perceptions of auditor independence in Nigeria have been surveyed previously to identify the most significant perceived threats to independence (Adeyemi and Akinniyi, 2011;Adeyemi and Oloowokere, 2012), elements of the audit expectation gap (Oloowokere and Soyemi, 2013;Onulaka, 2015), influence of non-audit fees on independence (Akinbowale and Babatunde, 2017), and the advantages and disadvantages of appointing joint auditors (Okaro et al, 2018). Such studies have attained international significance given the rapid development of the Nigerian economy, with a tenfold increase in GDP between 1997 and 2017 to rank thirtieth largest in the world (World Bank, 2018) and the nation's role as the fourteenth largest producer of crude oil (Fantini and Quinn, 2017).…”

The Role of Legal Practitioners in Mitigating Corporate Risks in Nigeria: A Comprehensive Review of Existing Literature on the Strategies and Approaches Adopted by Legal Practitioners in Nigeria to Mitigate Corporate Risks

“…Legal practitioners play a crucial role in navigating the complexities of the legal and regulatory frameworks, ensuring adherence to established norms and fostering collaborations with regulatory entities. The plethora of corporate failures and scandals in the recent past, where the instrumental role of auditors is evident in many instances, raises questions about the validity and suitability of "self-regulation" in auditing, especially in Nigeria (Onulaka, 2015). To restore public confidence within and outside the auditing profession and to raise the overall audit quality, many countries, including Nigeria, are establishing super regulatory bodies to set accounting and auditing standards and regulate the activities of auditors with a view to reducing the audit expectation gap.…”

“…To restore public confidence within and outside the auditing profession and to raise the overall audit quality, many countries, including Nigeria, are establishing super regulatory bodies to set accounting and auditing standards and regulate the activities of auditors with a view to reducing the audit expectation gap. This paradigm shift is essential as events over the last decades have shown that an inverse relationship appears to be existing between efforts being made to reduce audit expectations gap by the accounting and auditing profession and the actual number of audit failures (Onulaka, 2015). The engagement with regulatory bodies involves a multifaceted approach, encompassing adherence to ethical standards, compliance with legal pronouncements, and active participation in the formulation and implementation of regulatory policies.…”