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

Abstract

PurposeThe purpose of this paper is to investigate the effect of audit education in reducing the audit expectations gap (AEG) in an emerging economy, namely Bangladesh.Design/methodology/approachMann‐Whitney test results of questionnaire survey responses indicate the presence of a significant AEG between auditors, bankers, and students, especially in the area of audit responsibility.FindingsThe paper finds evidence that audit education significantly reduces the AEG, especially in the area of audit reliability. However, results also indicate that although the introduction of accounting scandal cases in the auditing curricula creates interest amongst the students, it also creates some unreasonable expectation regarding audit responsibility.Originality/valueThe paper contributes to the existing literature by presenting evidence of the effects of both traditional and case‐based auditing education on reducing the AEG in an emerging economy context.

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

“…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.…”

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

“…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.…”

“…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.…”

“…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.…”

The expectation gap in auditing

“…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.…”