EXPECTATION GAP

Expectation Gap

Expectation Gap

Introduction

The expectations gap largely came into effect with the crumbling of a majority of companies and capital markets especially with the rise of financial crisis. This period was a key period that witnessed an enhanced gap between the audit profession and between the investigators of audit reports. Thus, there was increased attention towards the profession of audit services as a whole. There was increased confusion on the value obtained through audit services that were characterized by illogical auditing benchmarks and the planning of the audit profession as a whole.

There have been many reasons for the lack of credibility among auditors. Since the auditors did not mention clearly about the difficulties faced by companies in the reports, there has been many difficulties in maintaining and enhancing continuity. The aspect of emergence of lawsuits pertaining to the auditors served as a key de motivator that led to a lack of confidence in the auditors. Users of financial statements have been known to bring law suits against auditors as well as increased demands for compensation.

Although, the audit expectation gap has been present for decades in the auditing field, it first rose into contention in the early 1970's. There has been consensus among many that there has been ample existence of the expectation gap. Many researchers like Smith, Kilcommins, Salehi, Ali, Kandasamy, Ojo, Epstein, Geiger, Pierce, Uadiale, Monroe, Woodcliff, Jennings, Porter Sikka, Hassas-Yeganeh, Khaleghi, Dixon, Woodhead, Frank and Lowe have been continuously analyzing the presence of the expectation gap as well as the challenges and difficulties attached with it. The audit expectation gap has been known to be in high presence when there different set of perceptions between the public user and auditors pertaining to the nature of auditor's responsibility.

In the recent years, auditors have got unfavorable attention from most quarters. The expectation gap has been the major reason for the huge effect on the fluctuating credibility of accountants. The rationale for this is that the public users have certain expectations associated with auditors. For instance Salehi has been known to acknowledge the fact that auditors have two responsibilities that constitute of being a primary and secondary responsibility. The primary responsibility for the auditor is to ascertain the extent to which the financial reports match with the actual state of the organization. Secondly; auditors are also responsible for the accurate detection of errors and frauds. In addition to detection, auditors are also responsible for the prevention of errors and frauds (Salehi 2008, p. 65). Such expectations are of paramount importance as these expectations increase the legal credibility associated with the auditing field (Ojo, 2006). Furthermore, these expectations are also known to reduce their earning potential and market reputation associated with the nature of work pertaining to auditors (Lee, Ali & Kandasamy 2008, p.21). There have been various measures undertake in the context of auditing profession to decrease the discrepancy (Epstein and Geiger 1994, p 60). But the expectation gap cannot be single handedly solved by the auditing profession ...