The audit expectations gap and the role of audit education: the case of an emerging economy

Siddiqui, Javed; Nasreen, Taslima; Choudhury‐Lema, Aklema

doi:10.1108/02686900910966530

Cited by 42 publications

(53 citation statements)

References 25 publications

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“…First, to our knowledge, this is the first study to investigate the expectation gap under the revised ISA 700 in a European country. Prior expectation gap research has focused largely on Anglo‐Saxon countries such as the US, UK, New Zealand, and Australia (e.g., Gay, Schelluch & Reid, 1997; Gay et al ., 1998; Dewing & Russell, 2002; Kirk, 2006; Chong & Pflugrath, 2008) and Asian countries such as Singapore, China, Bangladesh, and Lebanon (e.g., Best, Bucky & Tan, 2001; Lin & Chen, 2004; Sidani, 2007; Siddiqui, Nasreen & Choudhury‐Lena, 2009). 3 Second, we inquired among a substantial range of different groups dealing with financial statements and audit opinions, including experienced auditors, financial analysts as sophisticated users, and business students as unsophisticated or ‘naïve’ users.…”

Section: Introductionmentioning

confidence: 99%

The ISA 700 Auditor's Report and the Audit Expectation Gap – Do Explanations Matter?

2012

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In this paper we test the effectiveness of explanations as mandated by the revised ISA 700 auditor's report in reducing the audit expectation gap. German auditors and financial statement users participated in an experiment where they read a summary of a firm's financial statements and an auditor's report, the latter of which we manipulated as being the auditor's report including the explanations as mandated by ISA 700 versus a mere audit opinion‐only version. We elicited participants' perceptions about auditor versus management responsibilities and financial statement reliability. We find strong evidence for a persistent expectation gap with respect to the auditor's responsibilities. Meanwhile, auditors and users reach a reasonable belief consensus regarding management's responsibilities and financial statement reliability. Most notably, explanations of the ISA 700 auditor's report do not result in a smaller expectation gap. Our findings suggest that the audit opinion alone may signal sufficient relevant information to users.

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Section: Introductionmentioning

confidence: 99%

The ISA 700 Auditor's Report and the Audit Expectation Gap – Do Explanations Matter?

2012

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“…Bailey et al (1983) and Epstein and Geiger (1994) made similar findings in their works when they concluded that more educated users are less likely to seek assurance from the auditor, hence they have high reliability on the audit outcome. Javed et al (2009) also reported that traditional and case-based auditing education has significant reducing effect on AEG in an emerging economy. Pierce and Kilcommins (1996) also found significant reduction in all elements of the misunderstanding gap for those groups who studied a course/module in auditing.…”

Section: Discussionmentioning

confidence: 99%

“…Previous studies (Adeyemi & Uadiale, 2011;Appah, 2010;Rehana, 2010;Javed, Taslima, & Aklema 2009;Pierce & Kilcommins, 1996) report the relevance of audit education in minimizing audit expectation gap by exposing financial information users to, and helping them, appreciate the role of auditors from the statutorily defined perspective. Pierce and Kilcommins (1996) noted the existence of conflicting views in literature regarding the role of auditing education in narrowing this gap and found a significant reduction (at the .05 level) in all elements of misunderstanding gap for those groups who studied either a module or a course in auditing during the period.…”

Section: Auditor (Safeguards For Auditor Independence)… and Coherent mentioning

confidence: 99%

“…Pierce and Kilcommins (1996) noted the existence of conflicting views in literature regarding the role of auditing education in narrowing this gap and found a significant reduction (at the .05 level) in all elements of misunderstanding gap for those groups who studied either a module or a course in auditing during the period. Javed et al (2009) used survey responses of auditors, bankers and students in Bangladesh to provide evidence that audit education significantly reduces the AEG, especially in the area of audit reliability. Rehana (2010) also investigated the role of auditing education in narrowing this gap in Bangladesh and provided evidence that the provision of auditing subjects as part of business degree programmes significantly contributes to narrowing expectation gap resulting from misunderstanding of audit regulations.…”

Section: Auditor (Safeguards For Auditor Independence)… and Coherent mentioning

confidence: 99%

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Role of Audit Education in Minimizing Audit Expectation Gap (AEG) in Nigeria

Ihendinihu

Robert²

2014

IJBM

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Considerable evidence of a gap exists between the expectations of users of financial statements and the accountancy profession as to the definitive scope and usefulness of an audit function. This gap is largely suspected to be associated with ignorance and misconception of the public, and results in widespread misunderstanding and unreasonable expectations being imposed on the duties of auditors. This study was carried out to determine whether the provision of auditing course as part of a third year business degree curriculum could narrow down this gap. The study adopts a quasi-experimental pre-test post-test non-equivalent control group design, using three (3) randomly selected intact groups of University students. A modified and validated five-point likert scale questionnaire was constructed and administered to each of the three groups. Results obtained using Analysis of Covariance (ANCOVA) and Post Hoc Pairwise Comparison reveals that exposure to a course on Auditing significantly enhanced the knowledge of students in the two experimental groups, and accordingly reduced their expectations on the scope, reliability and decision usefulness of audit function. The study however found no significant improvement in their perception of the key components based on industry work experience of the students. The paper, therefore, concludes that audit education has significant effect on AEG in Nigeria and calls on the accountancy profession, educational institutions and regulators to initiate appropriate policy framework for increasing financial statement users' knowledge and awareness of the nature and limitations of an audit through broad-based audit education and enlightenment programmes.

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“…Chowdhury et al (2005) investigated whether there is an audit expectations gap in the public sector between the Comptroller and Auditor General's (CAG) auditors in Bangladesh and the users of the CAG reports namely the Public Accounts Committee (PAC) of the Parliament that investigates the CAG audit reports and the international funding agencies (IFAs) that give external funding in the public sector in Bangladesh. Siddiqui et al (2009) studied the impact of audit education in reducing the audit expectations gap (AEG) in Bangladesh. They reported that audit education could reduce the AEG, especially in the area of audit reliability.…”

Section: Introductionmentioning

confidence: 99%