IDEAS home Printed from https://ideas.repec.org/a/taf/acctbr/v44y2014i5p572-601.html
   My bibliography  Save this article

The audit expectation gap: existence, causes, and the impact of changes

Author

Listed:
  • Klaus Ruhnke
  • Martin Schmidt

Abstract

Recent regulatory initiatives targeting the statutory audit regime support the notion that the audit expectation gap is still a driver of change. This study seeks to analyse causes of the gap as well as the impact of proposed changes to the current statutory audit regime using an approach that differs from those used in prior literature. This approach allows us to attribute the audit expectation gap under the current regime to a failure of the public, the standard-setter, or the auditor. Based on a questionnaire survey conducted in 2011 in Germany, we find the public to have exaggerated expectations of auditors' responsibilities under current standards. Other causes of the gap relate to the public's difficulty in assessing the performance of auditors, but also to deficiencies in auditors' performance. In addition, we find that auditors are not fully aware of their responsibilities. Increasing the information content of the audit opinion is expected to narrow the gap. By contrast, recent proposed changes, such as mandatory rotation and a ban on non-audit services, may reduce the gap only to a lesser extent. Overall, it can be shown that the audit expectation gap is by its nature a persistent phenomenon comprising complex social aspects and interactions with changing accounting requirements, such as increased uncertainties in accounting estimates.

Suggested Citation

  • Klaus Ruhnke & Martin Schmidt, 2014. "The audit expectation gap: existence, causes, and the impact of changes," Accounting and Business Research, Taylor & Francis Journals, vol. 44(5), pages 572-601, October.
  • Handle: RePEc:taf:acctbr:v:44:y:2014:i:5:p:572-601
    DOI: 10.1080/00014788.2014.929519
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/00014788.2014.929519
    Download Restriction: Access to full text is restricted to subscribers.

    File URL: https://libkey.io/10.1080/00014788.2014.929519?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Maria Antonia Garcia-Benau & Christopher Humphrey, 1992. "Beyond the audit expectations gap," European Accounting Review, Taylor & Francis Journals, vol. 1(2), pages 303-331.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Taslima Akther & Xu Fengju & Md Ziaul Haque, 2019. "An Investigation ofAudit Expectation Gap in Bangladesh," Journal of Business, LAR Center Press, vol. 4(2), pages 1-11, February.
    2. Masoud, Najeb, 2017. "An empirical study of audit expectation-performance gap: The case of Libya," Research in International Business and Finance, Elsevier, vol. 41(C), pages 1-15.
    3. Maryamalsadat Mousavi Azghandi & Sahar Jabbari & Hossien Rezaei Ranjbar & Ahmed Al-janabi, 2023. "The Effect of Social Capital on Auditor’s Performance," JRFM, MDPI, vol. 16(2), pages 1-22, February.
    4. Prerana Agrawal & Jacqueline Birt & Lyndie Bayne & Nikki Schonfeldt, 2022. "The use of case studies in developing students’ understanding of the concept ‘material misstatement’," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(S1), pages 1307-1338, April.
    5. Taslima Akther & Fengju Xu, 2020. "Existence of the Audit Expectation Gap and Its Impact on Stakeholders’ Confidence: The Moderating Role of the Financial Reporting Council," IJFS, MDPI, vol. 8(1), pages 1-25, January.
    6. Estibaliz Goicoechea & Fernando Gómez-Bezares & José Vicente Ugarte, 2021. "Improving Audit Reports: A Consensus between Auditors and Users," IJFS, MDPI, vol. 9(2), pages 1-25, April.
    7. Ruhnke, Klaus, 2023. "Empirical research frameworks in a changing world: The case of audit data analytics," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 51(C).
    8. Paul Olojede & Olayinka Erin & Osariemen Asiriuwa & Momoh Usman, 2020. "Audit expectation gap: an empirical analysis," Future Business Journal, Springer, vol. 6(1), pages 1-12, December.
    9. Chiara Demartini & Sara Trucco, 2016. "Does Intellectual Capital Disclosure Matter for Audit Risk? Evidence from the UK and Italy," Sustainability, MDPI, vol. 8(9), pages 1-19, August.
    10. George Silviu CORDOŞ & Melinda Timea FÜLÖP, 2020. "Debates In The Literature Regarding Audit Reporting," Annales Universitatis Apulensis Series Oeconomica, Faculty of Sciences, "1 Decembrie 1918" University, Alba Iulia, vol. 1(22), pages 1-4.
    11. Prabhat Mittal & Amrita Kaur & Pankaj Kumar Gupta, 2021. "The Mediating Role of Big Data to Influence Practitioners to Use Forensic Accounting for Fraud Detection," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 7(1), pages 47-58.
    12. Harber, Michael & Maroun, Warren & de Ricquebourg, Alan Duboisée, 2023. "Audit firm executives under pressure: A discursive analysis of legitimisation and resistance to reform," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 97(C).
    13. Osvaldo Massicame & Helena Coelho Inácio & Maria Anunciação Bastos, 2023. "Audit Expectation Gap in the External Audit of Banks in Mozambique," IJFS, MDPI, vol. 11(4), pages 1-22, November.
    14. Fengju Xu & Taslima Akther, 2019. "A Partial Least-Squares Structural Equation Modeling Approach to Investigate the Audit Expectation Gap and Its Impact on Investor Confidence: Perspectives from a Developing Country," Sustainability, MDPI, vol. 11(20), pages 1-21, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gary S. Monroe & David R. Woodliff, 1994. "Great Expectations: Public Perceptions Of The Auditor's Role," Australian Accounting Review, CPA Australia, vol. 4(8), pages 42-53, November.
    2. Danuta Krzywda & Derek Bailey & Marek Schroeder, 1998. "The development of the role of the statutory audit in the transitional Polish economy," European Accounting Review, Taylor & Francis Journals, vol. 7(3), pages 407-440.
    3. Oriol Amat & John Blake & Jack Dowds, 1998. "The ethics of creative accounting," Economics Working Papers 349, Department of Economics and Business, Universitat Pompeu Fabra.
    4. Constantinos V. Caramanis, 1997. "The enigma of the Greek auditing profession: some preliminary results concerning the impact of liberalization on auditor behaviour," European Accounting Review, Taylor & Francis Journals, vol. 6(1), pages 85-108, May.
    5. Arrunada, Benito, 1999. "The provision of non-audit services by auditors let the market evolve and decide," International Review of Law and Economics, Elsevier, vol. 19(4), pages 513-531, December.
    6. Vicente Montesinos Julve, 1998. "Accounting and Business Economics in Spain," European Accounting Review, Taylor & Francis Journals, vol. 7(3), pages 357-380.
    7. David Hatherly, 1995. "The case for the shareholder panel in the UK," European Accounting Review, Taylor & Francis Journals, vol. 4(3), pages 535-554.
    8. Nieves Carrera & Isabel Gutierrez & Salvador Carmona, 2001. "Gender, the state and the audit profession: evidence from Spain (1942-88)," European Accounting Review, Taylor & Francis Journals, vol. 10(4), pages 803-815.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:acctbr:v:44:y:2014:i:5:p:572-601. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RABR20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.