BUSINESS & ACCOUNTING

Towards Reducing the Audit
Expectation Gap
Possible Mission?
Teck Heang Lee, Dr. Azham Md. Ali & Shamini Kandasamy

18

ACCOUNTANTS TODAY • February 2008

Towards Reducing the Audit Expectation Gap: Possible Mission?

The auditing profession believes that the increase in litigation and criticism against auditors may be due to the audit expectation gap.
The audit expectation gap is defined as the difference between what the public expects from an audit and what the audit profession accepts the audit objective to be. The audit expectation gap is critical to the auditing profession because the greater the unfulfilled expectations of the public, the lower the credibility, earning potential and prestige associated with the work of auditors. The objective of this paper is to review and evaluate some of the possible solutions that can be taken to narrow the gap. The study found the proposed solutions in the literature are unlikely to be implemented in view of the practical issues identified. Hence, the proposed solutions are only likely to be effective on theoretical grounds. It is hoped that this paper will provide some insights into proposed solutions which will enable the audit expectation gap to be reduced in a comprehensive and effective manner.

E

xternal auditing plays an important role in contributing to the effectiveness and efficient functioning of business operations, the capital markets, and the economy by adding credibility to financial statements
(Rezaee, 2004). The reliability of auditing functions and the professionalism of the auditing profession was, however, called into question after some spectacular and well publicised corporations (for example
Enron and WorldCom in the US) collapsed shortly after an unqualified (in other words:
“clean”) audit report had been issued.
The auditing