An Examination of the Audit Expectations Gap in Singapore

Abstract

This study adds to the literature on the audit expectations gap (AEG) by examining the extent to which lower levels of user cognisance of the role, objectives, and limitations of an audit are associated with unreasonable audit expectations and perceptions. Cognisance is proxied by respondents' demographic characteristics including profession, work experience, university qualification, age, and gender. Respondents include 130 Singaporean auditors, prepares, and users of audited financial reports. Results indicate that the AEG prevails where respondents have relatively little business work experience, and no university qualifications. This supports the premise that lower levels of cognisance of the audit function are associated with the AEG The study also argues that in obtaining results consistent with prior AEG studies set in other countries, the AEG is not affected or constrained by political, legal, social, or economic factors. The study recommends that the accounting professions continue to address the AEG by further educating the public on the role and limitations of an audit, extending the auditor's current responsibilities to match users' expectations, and ensuring the existence and monitoring of audit quality.

Audit Expectation‐Performance Gap Revisited: Evidence from New Zealand and the United Kingdom. Part 1: The Gap in New Zealand and the United Kingdom in 2008

“…The studies include those of Lee (1970), Humphrey et al. (1993) and Porter and Gowthorpe (2004) in the UK; Beck (1973) and Monroe and Woodliff (1994) in Australia; Porter (1993) and Porter and Gowthorpe (2004) in NZ; Leung and Chau (2001) in Hong Kong; De Martinis et al . (2000) and Best et al .…”

“…The audit expectation gap has been the subject of research over an extended period and in a variety of jurisdictional and cultural contexts. The studies include those of Lee (1970), Humphrey et al (1993) and Porter and Gowthorpe (2004) in the UK; Beck (1973) and Monroe and Woodliff (1994) in Australia; Porter (1993) and Porter and Gowthorpe (2004) in NZ; Leung and Chau (2001) in Hong Kong;De Martinis et al (2000) and Best et al (2001) in Singapore; Lin and Chen (2004) in the People's Republic of China; Fadzly and Ahmed (2004) and Lee et al (2007) in Malaysia; Gloeck and de Jager (1993) in South Africa; Alleyne and Howard (2005) in Barbados; Garcia-Benau et al (1993) in Spain; Troberg and Viitanen (1999) in Finland; Haniffa and Hudaib (2007) in Saudi Arabia; Dixon et al (2006) in Egypt;and Sidani (2007) in Lebanon. Most of the studies involve surveys designed to ascertain the opinions of different interest groups about the role and/or responsibilities of financial statement auditors in the country concerned.…”

Quantifying Audit Expectation Gap: A New approach to Measuring Expectation Gap

“…Further, Sikka et al (1992) contend that the 'expectation gap' is an outcome of the contradiction of minimum government regulation and the profession's self-regulation, especially, the profession's over-protection of self-interest, which has widened the 'expectation gap', this statement is also supported by Giacomino (1994);and Chandler and Edwards (1996). Martinis et al (2000) view audit expectation gap by examining the extent to which lower levels of user cognizance of the role, objectives and limitations of an audit are associated with unreasonable audit expectations and perceptions. It found that the audit expectation gap prevailed where respondents had relatively little business work experience and no university qualifi cations.…”

Audit expectation gap: Concept, nature and trace

“…Further, Sikka et al (1992) contend that the 'expectation gap' is an outcome of the contradiction of minimum government regulation and the profession's selfregulation, especially, the profession's over-protection of self-interest, which has widened the 'expectation gap', this statement is also supported by Giacomino (1994) and Chandler and Edwards (1996). Martinis et al (2000) views audit expectation gap by examining the extent to which lower levels of user cognizance of the role, objectives and limitations of an audit are associated with unreasonable audit expectations and perceptions. It was found that the audit expectation gap prevailed where respondents had relatively little business work experience and no university qualifications.…”

“…In addition, there was evidence that investors believed that auditors had some responsibility for ensuring an entity of sound internal controls. Martinis et al (2000) made an examination of the audit expectation gap in Singapore. The main objectives of their study were (i) to examine the extent to which lower levels of user cognizance of the role, objectives and limitations of an audit were associated with unreasonable audit expectations and perceptions, and (ii) to identify the extent of the gap with regard to the expectations and perceptions about the duties and responsibilities of auditors, fraud prevention and detection.…”