Bridging the Audit Expectation Gap: The Perception of ICAN Members

Bridging the Audit Expectation Gap: The Perception of ICAN Members.

ABSTRACT

This research set out to find out the perception of Members of ICAN, an important stakeholder group, on the fresh initiatives at bridging the audit expectation gap problem.

Four hypotheses were formulated and tested in the course of this study. A survey design approach was adopted for the study .Out of a population of 23,324, 159 ICAN MEMBERS were randomly selected. The t- test statistic and the Chi square were used to test the hypotheses of the study.

The study found out, among others, that 24 out of the 29 methods on offer for bridging the audit expectation gap and articulated in the questionnaire were acceptable to members of ICAN.

Consequent upon the findings, it was recommended that ICAN should commence the process of implementing some of the methods within its purview and approved by its members as capable of ameliorating the expectation gap problem.

TABLE OF CONTENTS

Title page … … … … … … … … … i
Certification page … … … … … … … … ii
Approval page … … … … … … … … iii
Dedication … … … … … … … … … iv
Acknowledgement … … … … … … … … v
Abstract … … … … … … … … … vi
Table of Contents … … … … … … … … vii
List of tables … … … … … … … … … xi

CHAPTER ONE INTRODUCTION

1.1 Background of the Study … … … … … … 1
1.2 Statement of Research Problem … … … … … 4
1.3 Objectives of Study … … … … … … … 4
1.4 Research Questions … … … … … … … 5
1.5 Research Hypotheses … … … … … … … 5
1.6 Scope and Limitations of study … … … … … 6
1.7 Significance of Study … … … … … … … 7
1.8 Definition of Terms … … … … … … … 8
References … … … … … … … … 9

CHAPTER TWO

2.0 Review of Related Literature and Theoretical Frame work … … 10
2.1 The Nature and Dimensions of Audit expectation Gap Problem  10
2.2 Communication Gap … … … … … … … 10
2.3 Performance Gap … … … … … … … 11
2.4 Causes of Performance Gap or Audit Failures … … … 13
2.5 Fresh impetus to The Audit Expectation Gap Problem … … 14
2.6 Some Current methods in issue aimed at Bridging the Audit Expectation Gap  16
2.7 Fresh Initiatives/Methods aimed at bridging the Audit Expectation Gap 18
2.8 Encouragement of Joint Audit and Audit Competition … … 20
2.9 Introduction of Mandatory Rotation of Auditors … … … 21
2.10 Establishment of Financial Reporting Council … … … 23
2.11 Composition of an active Audit Committee made up of non- executive directors and knowledgeable in financial matters … 24
2.12 Separation of Audit Services from other services … … … 25
2.13 Punish Company Management who mislead their Auditors… … 27
2.14 Establishment of government oversight body to regulate Audit Practice … 28
2.15 Introduce Forensic and Value for Money Audit … … … 30
2.16 Encourage Shareholders to attend annual general meetings and ask difficult questions … 31
2.17 Bridging the audit expectation gap- the perception of Chartered Accountants- experience from other countries … … 31
2.18 Review of Related Literature and Theoretical Framework- A summary … 33
References … … … … … … … … 35

CHAPTER THREE

3.0 Research Design and Methodology … … … … … 36
3.1 Research Design … … … … … … … 36
3.2 Nature and Sources of Data … … … … … … 37
3.3 Population and Sample Size … … … … … … 37
3.4 Data Analysis Technique … … … … … … 39
3.5 Validation and Reliability of Instruments … … … … 41
References … … … … … … … … 42

CHAPTER FOUR

4.0 Data presentation and Analysis … … … .. … 43
4.1 Introduction … … … … … … … … 43
4.2 Presentation and Analysis … … … … … … 43
4.3 Test of Hypotheses 1 … … … … … … … 56
4.4 Test of Hypothesis 2 … … … … … … … 56
4.5 Additional Statistical Test for Hypothesis 2 … … … … 56
4.6 Test of Hypothesis 3 … … … … … … … 60
4.7 Test of Hypothesis 4 … … … … … … … 61

CHAPTER FIVE

5.0 Summary of Findings, Conclusion and Recommendations… … 62
5.1 Summary of Findings … … … … … … … 62
5.2 Conclusion … … … … … … … … 63
5.3 Recommendations … … … … … … … 66
Bibliography … … … … … … … … 68
Appendix [Questionnaire] … … … … … … 74

INTRODUCTION

1.1 Background of the Study

Audit expectation gap is the gap between the role of an auditor as understood by  the auditor and the users of financial statements .

It is a gap between what the auditor is doing and what the society expects him to do creating the impression that the statutory objective of audit is not meeting the social needs of the populace.

The functions performed by the accounting profession are vital to the growth and stability of the financial market, whether at the global level or at the local level (Egbiki, 2006: 56 – 57).

An audit has been defined as an examination of the financial statements of an enterprise by an independent expert (the auditor) with a view to attesting that such financial report (in his opinion) show a true and fair view of the state of affairs of that enterprise for the period under review.

The contribution of the auditor is to provide credibility to information. This means that the information can be believed and that it can be relied upon by outsiders. The outsiders include shareholders and government regulators. Others are creditors and customers.

Usually these third parties use the information to make various economic decisions. An example of this decision is whether to invest in the organization.

Economic decisions are made under conditions of uncertainty as there is always a risk that the decision maker will select the wrong alternative and incur a significant loss.

The credibility added to the information by the auditors actually reduces the decision makers’ risk Therefore auditors reduce information risk, which is the risk that the financial information used to make a decision is materially misstated.

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