audit expectation gap Iran.pdf * Corresponding author. E-mail address: [email protected] (S. Jabbarzadeh Kangarluie) © 2017 Growing Science Ltd. All rights reserved. doi: 10.5267/j.ac.2016.6.001 Accounting 3 (2017) 19–22 Contents lists available at GrowingScience Accounting homepage: www.GrowingScience.com/ac/ac.html The expectation gap in auditing Saeid Jabbarzadeh Kangarluiea* and Abbas Aalizadehb aAssistant Professor, Accounting Group, Oroumieh Branch, Islamic Azad University, Oroumieh, Iran bPhD Student, Assistant Professor, Accounting Group, Oroumieh Branch, Islamic Azad University, Oroumieh, Iran C H R O N I C L E A B S T R A C T Article history: Received December 5, 2015 Received in revised format February 16 2016 Accepted June 3 2016 Available online June 3 2016 There is a concern that auditors and the public may have different beliefs about the auditors’ responsibilities and the messages delivered by audit reports. During the past few years, some spectacular and well‐publicized corporates such as Anderson consulting collapse and the subsequent implication of the reporting auditors have emphasized on the audit expectation gap. It appears that public misperceptions represent a major reason for the legal liability crisis facing the accounting profession. The objective of this paper is to present an empirical investigation on the audit expectation gap for some privately hold firms in Iran. The population of this survey includes two groups of official auditing officials and management of some privately held firms. The results of the survey have indicated that there were some meaningful difference between management and audit group’s perceptions in terms of the auditors’ roles and responsibilities. However, there was no meaningful relationship between management and audit group’s perceptions in terms of the auditors’ independence. Growing Science Ltd. All rights reserved. 7© 201 Keywords: Audit Audit expectations gap Independent auditors Auditor Independence 1. Introduction There is a concern that auditors and the public may have different beliefs about the auditors’ responsibilities and the messages delivered by audit reports. During the past few years, some spectacular and well‐publicized corporates such as Anderson consulting collapse and the subsequent implication of the reporting auditors have emphasized on the audit expectation gap. Chye Koh & Woo, 1998; Gramling et al., 2004). Humphrey et al. (1992) explored the response of the accounting profession to the audit expectations gap in the United Kingdom. Munir Sidani (2007) evaluated the existence of an expectation gap between accountants and non‐accountants in Lebanon. He reported that there was a gap between the auditors' understanding of their profession compared with the perceptions of others. There was also a substantial differen ...

1. audit expectation gap Iran.pdf
* Corresponding author.
E-mail address: [email protected] (S. Jabbarzadeh Kangarluie)
© 2017 Growing Science Ltd. All rights reserved.
doi: 10.5267/j.ac.2016.6.001
Accounting 3 (2017) 19–22
Contents lists available at GrowingScience
Accounting
homepage: www.GrowingScience.com/ac/ac.html
The expectation gap in auditing

2. Saeid Jabbarzadeh Kangarluiea* and Abbas Aalizadehb
aAssistant Professor, Accounting Group, Oroumieh Branch,
Islamic Azad University, Oroumieh, Iran
bPhD Student, Assistant Professor, Accounting Group,
Oroumieh Branch, Islamic Azad University, Oroumieh, Iran
C H R O N I C L E A B S T R A C T
Article history:
Received December 5, 2015
Received in revised format
February 16 2016
Accepted June 3 2016
Available online
June 3 2016
There is a concern that auditors and the public may have
different beliefs about the auditors’
responsibilities and the messages delivered by audit reports.
During the past few years, some
spectacular and well‐publicized corporates such as Anderson
consulting collapse and the
subsequent implication of the reporting auditors have
emphasized on the audit expectation gap.
It appears that public misperceptions represent a major reason
for the legal liability crisis facing
the accounting profession. The objective of this paper is to
present an empirical investigation
on the audit expectation gap for some privately hold firms in
Iran. The population of this survey
includes two groups of official auditing officials and
management of some privately held firms.
The results of the survey have indicated that there were some
meaningful difference between

3. management and audit group’s perceptions in terms of the
auditors’ roles and responsibilities.
However, there was no meaningful relationship between
management and audit group’s
perceptions in terms of the auditors’ independence.
Growing Science Ltd. All rights reserved. 7© 201
Keywords:
Audit
Audit expectations gap
Independent auditors
Auditor Independence
1. Introduction
There is a concern that auditors and the public may have
different beliefs about the auditors’
responsibilities and the messages delivered by audit reports.
During the past few years, some
spectacular and well‐publicized corporates such as Anderson
consulting collapse and the subsequent
implication of the reporting auditors have emphasized on the
audit expectation gap. Chye Koh & Woo,
1998; Gramling et al., 2004). Humphrey et al. (1992) explored
the response of the accounting
profession to the audit expectations gap in the United Kingdom.
Munir Sidani (2007) evaluated the
existence of an expectation gap between accountants and
non‐accountants in Lebanon. He reported that

4. there was a gap between the auditors' understanding of their
profession compared with the perceptions
of others. There was also a substantial difference in perceptions
of the role of the auditor in terms of
fraud detection. Haniffa and Hudaib (2007) shed light into audit
expectations gap, which exists within
a cultural context by investigating whether or not the business
and social environment influence on the
perceptions of audit performance of users and auditors. Using a
combination of mail questionnaires
and some interviews, they disclosed the existence of a
‘performance gap’ in terms of the roles specified
20
in the statutory pronouncements and those that can reasonably
be expected of auditors in Saudi Arabia.
The results stated the ‘performance gap’ could arise from four
factors namely; licensing policy,
recruitment process, the political and legal structure, and
dominant societal values. The study also
disclosed the effect of institutional and cultural settings on the
audit expectations gap and reported that
the inclusion of Islamic principles in auditing standards and the
code of ethics reduces the expectations
gap.
Salehi et al. (2009) investigated about auditor independence and
audit expectation gap and reported
that an independent auditor is important since the separation of
ownership from the management; the
independent factor is the foundation of the public accounting
profession. Shaikh and Talha (2003)

5. investigated different studies that test the extent to which
international auditing boards had
accomplished to reduce the expectation gap in reporting on
uncertainties. This is due to the fact that
there used to be a long‐running controversy between the
auditing profession and the community of
financial statement users on the responsibilities of the auditors
to the users. Lin and Chen (2004)
reported from a survey that the role of public accounting had
been positively recognized by Chinese
audit beneficiaries and auditors, and there were increasing
demands for developing the applicability of
public accounting.
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. Their results also
showed that although the introduction of
accounting scandal cases in the auditing curricula could
generate interest amongst the students. Adams
and Evans (2004) presented a comprehensive study on
accountability, completeness, credibility and the
audit expectations gap.
Hassink et al. (2009) presented the findings of an empirical
study on the audit expectations gap on the

6. role of the auditor in corporate fraud cases. They evaluated the
effect of a reasonableness gap and to
distinguish all three elements of the expectations gap,
respondents required a certain level of expertise
on fraud. The study provided clear evidence of a substantial
audit expectations gap in the context of
fraud, both with respect to the auditor's performance as well as
the auditor's formal obligations as laid
down in existing standards. Garcia-Benau and Humphrey (1992)
investigated the history of auditing
and its regulation in Spain within the context of international
developments in the accounting
profession.
Gay et al. (1998) compared the perceptions of the users and
preparers of financial statements to those
of auditors, concerning messages conveyed by review and audit
reports in terms of the capability of
various groups to differentiate between the levels of assurance.
In their survey, most groups claimed
that review reports gave less assurance than audit reports did. In
addition, users placed less
responsibility on the auditor with a review, while preparers did
not show any difference in the auditor’s
responsibility. According to Frank et al. (2001), “a large
divergence in perceptions of auditors and
jurors regarding their expectations of the accounting profession.
However, accounting students
responded in a manner very similar to practicing auditors”.
2. The proposed study
The objective of this paper is to present an empirical
investigation on the audit expectation gap on some
privately hold firms in Iran. The population of this survey
includes two groups of official auditing

7. officials and management of some privately held firms. The
survey was accomplished in 2013 and the
S. Jabbarzadeh Kangarluie and A. Aalizadeh / Accounting 3
(2017) 21
sample size is calculated as follows,
,
)1( 2 2/
2
2
2/
qpzN
qpzN
n
(1)

8. where N is the population size,
of sample size is calculated as n=318. The survey designs a
questionnaire in Likert scale consists of 32
questions where 25 questions were devoted to role and
responsibities of auditors and 7 questions were
dedicated to auditors’ independence. Cronbach alpha has been
calculated as 0.97%,, which is well
above the minimum acceptable level. There are two hypotheses
associated with the propsoed study of
this paper as follows,
1. There is a meaningful difference between the auditors’ roles
and responsivities in management
and auditors’ point of view.
2. There is a meaningful difference between the auditors’
independence in management and
auditors’ point of view.
Table 1 demonstrates the results of Kolmogorov-Smirnov test to
determine whether or not the data
were normally distributed.
Table 1
The results of Kolmogorov-Smirnov test
First hypothesis: Roles and responsibilities Second hypothesis:
Independence
Statistics Auditors Managers Auditors Managers
N 250 90 250 90
Mean 3.87 1.63 3.35 3.37

9. Standard deviation 0.32 0.28 0.39 0.38
K-S statistics 1.197 0.876 1.353 1.316
Sig. 0.114 0.427 0.052 0.063
Distribution Normal Normal Normal Normal
3. The results
In this section, we present the results of the implementation of
Levene's test to see whether there is any
significant difference between two groups in terms of roles and
responsibilities as well as independence.
Table 2 presents the results of Levene's test for the first
hypothesis of the survey.
Table 2
The results of Levene's test for testing the first hypothesis
Mean Levene's test
Managers Auditors F-value P-value P-value(t-value) Result
Hypothesis st1 1.63 3.87 1.72 0.191 0.000 Confirmed
As we can observe from the results of Table 2, there is a
meaningful difference between the auditors’
roles and responsivities in management and auditors’ point of
view. Therefore, the first hypothesis of
the survey has been confirmed. Moreover, Table 3 presents
details of testing the second hypothesis of
the survey and we can confirm that the second hypothesis is not
confirmed.
Table 3
The results of Levene's test for testing the second hypothesis
Mean Levene's test

10. Managers Auditors F-value P-value P-value(t-value) Result
Hypothesis nd2 3.37 3.35 0.004 0.952 0.661 Not confirmed
22
4. Conclusion
In this paper, we have presented an empirical investigation on
the audit expectation gap on some
privately hold firms in Iran. The population of this survey
includes two groups of official auditing
officials and management of some privately held firms. The
results of the survey have indicated that
there were some meaningful difference between management
and audit group’s perceptions in terms
of the auditors’ roles and responsibilities. However, there was
no meaningful relationship between
management and audit group’s perceptions in terms of the
auditors’ independence.
Acknowledgement
The authors would like to thank the auditing committee of Iran
for cordially cooperating in
accomplishment of this survey. We are also delighted for
constructive comments on earlier version of
this paper.
References
Adams, C. A., & Evans, R. (2004). Accountability,
completeness, credibility and the audit expectations

11. gap. Journal of Corporate Citizenship, 14, 97-115.
Chowdhury, R. R., Innes, J., & Kouhy, R. (2005). The public
sector audit expectations gap in
Bangladesh. Managerial Auditing Journal, 20(8), 893-908.
Chye Koh, H., & Woo, E. S. (1998). The expectation gap in
auditing. Managerial Auditing Journal,
13(3), 147-154.
Frank, K. E., Jordan Lowe, D., & Smith, J. K. (2001). The
expectation gap: Perceptual differences
between auditors, jurors and students. Managerial Auditing
Journal, 16(3), 145-150.
Garcia-Benau, M. A., & Humphrey, C. (1992). Beyond the audit
expectations gap: learning from the
experiences of Britain and Spain. European Accounting Review,
1(2), 303-331.
Gay, G., Schelluch, P., & Baines, A. (1998). Perceptions of
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Gramling, A. A., Maletta, M. J., Schneider, A., & Church, B. K.
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Haniffa, R., & Hudaib, M. (2007). Locating audit expectations
gap within a cultural context: The case
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12. and Taxation, 16(2), 179-206.
Hassink, H. F., Bollen, L. H., Meuwissen, R. H., & de Vries, M.
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Journal of International Accounting,
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Humphrey, C., Moizer, P., & Turley, S. (1992). The audit
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Lin, Z. J., & Chen, F. (2004). An empirical study of audit
‘expectation gap’in the People's Republic
of China. International Journal of Auditing, 8(2), 93-115.
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from Lebanon. Managerial Auditing
Journal, 22(3), 288-302.
Salehi, M., Mansoury, A., & Azary, Z. (2009). Audit
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gap in reporting on uncertainties.
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/HRV (Za stvaranje Adobe PDF dokumenata najpogodnijih za
visokokvalitetni ispis prije tiskanja koristite ove postavke.
Stvoreni PDF dokumenti mogu se otvoriti Acrobat i Adobe
Reader 5.0 i kasnijim verzijama.)
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/NLD (Gebruik deze instellingen om Adobe PDF-documenten

26. te maken die zijn geoptimaliseerd voor prepress-afdrukken van
hoge kwaliteit. De gemaakte PDF-documenten kunnen worden
geopend met Acrobat en Adobe Reader 5.0 en hoger.)
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audit expectation gap Nigeria.pdf
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 152
Stakeholders’ Perception of Audit Performance Gap
In Nigeria
Semiu Babatunde Adeyemi (Corresponding author)
Department of Accounting, University of Lagos, Nigeria.
Tel: +2348035071047, Email: [email protected]
Johnson KolawoleOlowookere
Department of Management & Accounting, LadokeAkintola
University of Technology
Ogbomoso, Nigeria

34. Tel: +2348021324035, [email protected]
Received: August 03, 2011 Accepted: September 08, 2011
DOI: 10.5296/ijafr.v1i1.808
Abstract
The audit expectation gap is critical to the auditing profession
because the greater the
unfulfilled expectation from the public, the lower the credibility
earning potential and
prestige associated with the work of auditors. The study
examined the level and nature of
expectation gap (performance gap) between auditors and users
of financial statements. It
sought to establish whether or not there are differences
between users of financial
statements and auditors’ perception of management
responsibility for the preparation of
financial statements, its reliability and decision usefulness. Chi-
square (χ2) was used to
analyze the data obtained from the study. The data were
obtained through questionnaire.
Two hundred and fifty (250) copies of the instrument were
distributed using purposive
sampling technique. In this study, a cross-sectional survey was
conducted to capture the
perceptions of users of financial statements in Nigeria. The
tests of hypothesis were done
using Statistical Package for Social Science (SPSS) version
14.0. Tests were carried out at a
significant level of 5% and four degree of freedom. The
findings of this study indicated that
there is a wide expectation gap in the areas of auditors’
responsibility for fraud prevention
and detection. There is no generally accepted description of the

35. role of the auditor. Audit
scandals had negative impact on auditor’s credibility. The users
of financial statements
should be enlightened more on the responsibilities of auditors
on the financial statements, the
role of the auditor should be clarified and quality control
measures should be observed in
audit firms.
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 153
Keywords: Auditing, Audit Performance gap, Users of Financial
Statements, perceptions
1. Introduction
1.1. Background to the Study
The criticism of and litigation against auditors failing to meet
society’s expectations of them
is clearly harmful to the individual auditor and/or audit firm
concerned (Porter and
Gowthorper, 2004). Asien (2007) argued that the unqualified
audit opinion is wrongly seen as
a certification that the firm is solvent, liquid and has the
capacity to adopt to the dynamics of
the environment which continuity of existence implies. This
lack of understanding on the part

36. of the public makes it difficult for them to know who has
responsibility for financial
statements preparation and the continued existence of the
enterprise.
Owen (2005:35) defined audit expectation gap as “the gap
between the role of an auditor, as
perceived by the auditor and the expectations of the users of
financial statements. It may be
sub-divided into a gap in communication and gap in
performance”. The expectation gap
occurs when there are differences between what the public
expects from the auditor and what
auditor actually provides.
Ajayi (2007:180) observed that public expectation of the duties
and responsibilities of
external auditors is different from the statutory duties and
responsibilities of these auditors.
The gap between these two is referred to as expectation gap.
Despite the statutory
responsibility of an auditor the corporate failures have been on
the increase in the last few
years. A lot of debates have been going on as to why the
auditors cannot be held accountable
for these failures. The controversy surrounding expectation gap
in auditing remains an
evergreen area of accounting research.
1.2 Statement of the Problem
External auditor reports add credibility to the financial
reporting by ensuring that accounting
statements follow the generally accepted guidelines and are
accurate, but when the auditor’s
performance is below public expectations then his signature

37. together with his brief opinion
will no longer be useful to decision makers. For instance, if the
auditing profession has issued
a standard that says that auditors should observe the client
company’s stock-taking
procedures but the auditor fails to do so then his performance
would be said to be deficient
because he has not behaved in a manner consistent with
professional auditing standards.
For many years external auditors have been subjected to
increasing amounts of criticism and
litigation and the collapse of Enron and WorldComin the US,
and the subsequent worldwide
disintegration of their external auditors(Arthur Anderson) has
demonstrated the fragility of
professional reputations. The most damaging criticisms are
those that suggest that an auditing
firm has failed the society in which it works. So it is vital to
understand, what society expects
of auditors.
The auditing profession believes that the increase in litigation
against and criticism of
auditors can be traced to an audit expectation gap (Lee, Ali
&Gloeck, 2007). The expectation
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 154

38. gap exists because of the perception of inadequate performance
of auditor (Wong,
2009).Aljaaidi (2009) asserted that the issue of audit
expectation gap is still a concern in that
auditors and the public grasp different beliefs about the
auditors’ duties and responsibilities
and the messages they pass across in the audit reports.
Audit literature reveals that the audit expectation gap is a
detrimental issue to the auditing
profession as the greater the gap of expectations, the lower the
credibility, earnings potential
and the prestige associated with the auditor’s work. It has also
been claimed that the audit
expectation gap is harmful to the public, to investors and to
politicians. In this wise, if
auditors fail to identify society’s expectations of them, or to
recognize the extent to which
they meet (or more pertinently, fail to meet) those expectations,
then not only will they be
subjected to criticism and litigation but also, if the failure
persists, society’s confidence in the
audit function will be undermined and the audit function, and
auditing profession, will be
perceived to have no value (Porter &Gowthorpe, 2004).
Therefore, it becomes crucial to
investigate the perceptions of all major stakeholders involved
with financial reporting and the
impact it could have on the audit profession.
1.3 Aim and Objectives of the Study
The broad aim of this study is to evaluate the existence and
nature of an audit performance
gap in Nigeria and what needs to be done to bridge this gap, in
order to enhance the utility

39. value of financial statements in this country. Specifically, the
following objectives have
been identified, namely:
(i) toidentify the users’ perceptions of the external auditors’
role in Nigeria; and
(ii) to assess the users’ perceptions of audit expectation-
performance gap in Nigeria.
1.4 Research Questions
Consequently, this research was undertaken to address the
following research questions:
(i) What are the roles of external auditors in Nigeria?
(ii) What is the perception of the users of financial statements
to audit expectation
performance-gap in Nigeria?
1.5 Research Hypotheses
Based on the theoretical considerations and literature, two
hypotheses were formulated for
the study.
Ho1 The perceived audit performance gap does not significantly
affect the credibility of the
auditing profession in Nigeria.
Ho2 Auditing standards issued by the Institute of Chartered
Accountants of Nigeria do not
always guarantee that the external auditor would issue credible
assurance reports.

40. International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 155
1. Literature Review
Historically, the word ‘auditing’ has been derived from the
Latin word ‘audire’ which means
“to hear”. In fact, such an expression conveyed the manner in
which the auditing was
conducted during ancient time. However, over a period of time,
the manner of conducting
audit has undergone revolutionary change. According to Adeniji
(2010:1), the word audit is
described as:
‘the independent examination of and an expression of opinion
on the financial
statements of an enterprise by an appointed auditor in pursuance
of that
appointment and in compliance with any relevant statutory
obligation’.
The objective of an audit of financial statements is to enable the
auditor to express an opinion
whether the financial statements are prepared, in all material

41. respects, in accordance with an
applicable financial reporting framework (Millichamp& Taylor,
2008).
At present, there is no generally accepted definition of the
meaning of the audit expectation
gap. Several accounting researchers and professional accounting
bodies have offered their
definitions. The expectation gap was originally defined as the
difference between levels of
expected performance as envisaged by auditors and users of
financial reports. It is the gap
between society’s expectations of auditors and auditors’
performance, as perceived by society
(Shaikh&Talha, 2003).
Ajayi, (2007:180) described the gap as, the public expectation
of duties and responsibilities
of external auditors as distinct from the statutory duties and
responsibilities of these auditors.
The gap between these two is referred to as expectation gap and
this is why in a typical
auditor’s report, the respective responsibilities of directors and
auditors are clearly stated as:
The company’s Directors are responsible for the preparation of
the financial statements. Our
responsibility is to form an independent opinion, based on our
audit on those statements and
to report our opinion …”.
According to Humphrey (1997) this definition can be extended
to include other issues such as
the adequacy of auditing standards and the quality of audit
delivery.For the purpose of this
study, the definition of the audit expectation-performance gap

42. proposed by Porter (1993) is
adopted. This gap is defined as that between: (i) society’s
expectations of auditors; and (ii)
auditor’s performance as perceived by society. This gap
comprises two major components:
a) the ‘reasonableness gap’ – the gap between what society
expects of auditors and what
auditors can reasonably be expected to accomplish;
b) the ‘performance gap’ – the gap between what society can
reasonably expect of
auditors and what it perceives they deliver. This may be
subdivided into:
(i) the ‘deficient standards gap’ – the gap between the
responsibilities, as defined
by statue, case law, regulations and professional promulgations;
and
(ii) the ‘deficient performance gap’ – the gap between the
expected standard of
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 156
performance of auditors carrying out these responsibilities and
auditors’ actual
performance of these duties.

43. 2.1 Different Perspectives of the Audit Expectation Gap
A number of causes of the existence of the audit expectations
gap have been put forward over
the years.Humphrey et al. (1992, as cited by Lee and Azham,
2008) pointed out thatan
expectation gap may occur as a result of time lags between the
accounting profession
identifying and responding to continually changing and
expanding pubic expectations. For
example, Ernest and Young (2002) found in the United States
(US) that the fund managers
constantly used non-financial performance measures in decision
making. In this regard, the
public is requesting the expansion of assurance function to
cover not just the financial
measures, but also the entire scorecard of an organization.
Gaa (1991:84) pointed out that the audit expectations gap was a
direct result of the ‘political
game between two contending parties’ between the public and
the auditors. This view is
supported by Sikka, Puxty, Willmott and Coopper (1998:300) in
which they argued that
historical and political contexts can give indication ‘within
which expectations are formed,
frustrated and transformed’. They contend that audit as a social
practice is subjected to
constantly shifting meanings because the social context of
auditing changes continuously
through interaction and negotiation. The conclusion from this
perspective is that the audit
expectation gap will continue to exist. Humphrey, Moizer and
Turley (1992:145) argued that
it is the consequence of the contradictions in self regulated

44. audit system with minimal
government intervention:
“At one level, the profession has emphasised the ‘unreasonable’
nature of the investing (and
wider) public’s expectations of auditors. At another level, it has
sought to reassure the public
and regulators that, despite appearances to the contrary all is
well with the state of
professional auditing and the corporate collapse and notable
audit failure does not signify
any deterioration in the general level of quality and
performance.”
According to these researchers, the conflict is compounded
when it comes to communicating
the results of an audit due to the existence of various parties
with different information needs.
Where at one level, the lack of visibility of audit work can
cause professional concern about
audit quality, any communications which seek to place such
work, and its characteristics
more clearly in the public gaze can serve, in turn, to undermine
audit profitability by
clarifying the probabilistic nature of a product sold on its risk-
education characteristics
(Humphrey et al., 1992).
Another point of view is that the audit expectations gap is a
result of corporate failure. The
corporate failure, in turn, is regarded as audit failure. Corporate
collapse is always
accompanied by scrutiny of the roles of auditors and in some
cases, litigations on the grounds
that they have performed the task negligently (Power, 1994).
Such focus is sharpened

45. when the collapse of a company comes only a short time after
its financial statements are
given an unqualified audit opinion (Dewing and Russel, 2002).
This view is supported by
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 157
the finding of a study by Porter and Gowthorpe (2004) where
they suggested the significant
and unexpected company collapse both in the UK and New
Zealand partly contributed to an
audit expectations gap in these two countries.
Another reason identified is the unreasonable expectations and a
misunderstanding by the
audit reports users ofthe audit functions. As argued by Boyd,
Boyd, and Boyd (2001), user
misunderstanding forms part of the elements that compromise
the concepts of the audit
expectations gap. This view appears to be advanced by the audit
profession as a defense to
the growing criticism on auditors. As stated by Sweeney
(1997:20), ‘the main conclusion of
the profession was that user’s perceptions of the audit were
flawed, rather than with any
significant problem with the audit itself’.
This view is consistent with the finding of Porter and
Gowthorpe (2004). That is,

46. unreasonable expectations by the public at large were the main
factor representing 50% of the
audit expectation-performance gap in the U.K. Humphrey,
Moizer, & Turley (1992) argued
that the audit expectations gap was caused by the public`s
misunderstanding of the audit
function, by over-exaggerated responses to the isolated failings
of individual auditors and
by miss-appreciation of the event to which the profession is
actively responding to public
interest demands and enhancing the quality of audit services.
Clearly, from the discussion above, the audit expectations gap
exists because of various
factors. It is reasonable to point out that the changes in the
auditing environment have
prompted the expectation questions. However, the underlying
reasons for the existence of the
audit expectations gap lie on its main players: the auditors and
the users. On one hand, it is a
direct result of the audit profession failing to respond
appropriately to new issues arising from
changes in the audit environment. For example, the refusal of
auditors to assume
responsibility for fraud detection and reporting exercise; and
their involvement with
non-audit services appear to have extended the audit
expectations gap. On the other hand, the
gap exists due to a misunderstanding or a lack of knowledge of
the users over the audit
functions. This misunderstanding then leads to unreasonable
expectations. Perceived
performance of auditors is an element which is difficult to
measure as it changes consistently.
It is however possible to substantially reduce but not to totally
eliminate it (Olowookere,

47. 2010).
2.2 Theoretical Framework
The study was anchored on a number of theories. These
theories, which are briefly
discussed and related to the study include:
(i) The Agency Theory;
(ii) The Inspired Confidence Theory; and
(iii) The Policeman Theory.
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 158
2.2.1 The Agency Theory: In agency theory, a principal
delegates decision making
responsibility to an agent; in the case of a company the agents
are the directors /managers.
The theory implies entrusting resources to the agent and in turn
these agents must usually
produce a report regarding the use of resources both in
quantitative and qualitative manner.
Those entrusted with decision making authority are generally
regarded as having a duty

48. of ‘accountability’ a duty to demonstrate how they managed the
resources entrusted to them.
Audit serves a fundamental purpose in promoting confidence
and reinforcing trust in
financial information. Agency theory is a useful economic
theory of accountability that helps
to explain the development of the audit. Agency theory posits
that agents have more
information than principals and that this information asymmetry
adversely affects the
principals’ ability to monitor whether or not their interests are
being properly served by the
agents (Gerrit and Mohammad, 2007). Agency theory is based
on this relationship between
investors (principals) and managers (agents).
The Institute of Chartered Accountants in England and Wales,
in November 2006, as cited by
Millichamp and Taylor (2008:1) puts it this way:
In principle, the agency model assumes that no agents are
trustworthy and
if they can make themselves richer at the expense of their
principals they
will. The poor principal, so the argument goes, has no
alternative but to
compensate the agent well for their endeavours so that they
would not be
tempted to go into business for themselves using the principal’s
assets to do so.

49. An audit provides an independent check on the work of agents
and of the information
provided by an agent which helps to maintain confidence and
trust, (ICAEW, 2005). The
simplest agency model assumes that no agents are trustworthy
and if an agent can make
himself better off at the expense of a principal then he
will.Auditing is a means of monitoring
that will lead to an overall reduction of agency costs (Ng,
2002).
2.2.2 The Theory of Inspired Confidence:Limperg (1932)
published a series of essays
which became known as the ‘Theory of Inspired Confidence’.
He argued that the auditor
derives his general function in society from the need for an
expert and independent opinion
based on that examination. The function is rooted in the
confidence that society places on the
effectiveness of the audit and in the opinion of the accountant.
This confidence is, therefore, a
condition for the existence of that function; if the confidence is
betrayed, the function, too, is
destroyed, since it becomes useless.
He went on to argue that, there were two circumstances in
which the confidence could be
betrayed. It could be betrayed if the expectation of society is
exaggerated, that is, it exceeds
what the auditor is capable of performing. Conversely, it can be
betrayed if the auditor
under-performs. He recognized that society’s needs are not
static. They are dynamic and
influenced by changing perceptions and changes in the
environment.

50. International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 159
The central area of Limperg’s work is related to the social
responsibility of the independent
auditor and possible mechanisms for ensuring that audits meet
society’s need. Limperg’s
work highlights the importance of the social significance of
auditing and the implications for
how an audit should be performed. Limperg (1992) emphasizes
the role of the auditor in
relationship with the users of financial statements in the sense
that the independent auditor
acts as a confidential agent for society. Limperg’s framework is
based on the greatest possible
level of satisfaction of users of financial statements with regard
to the auditor’s work. In
achieving this objective, the auditors are to perform enough
work to meet the expectations
they have aroused in society.
2.2.3 The Policeman Theory: An auditor’s job is to focus on
arithmetical accuracy and
on the prevention and detection of fraud. Is an auditor
responsible for discovering fraud, like
a policeman? This was the most widely held theory on auditing
until the 1940’s. Under
this theory an auditor acts as a policeman focusing on

51. arithmetical accuracy and on
prevention and detection of fraud.
However, due to its inability to explain the shift of auditing to,
verification of truth and
fairness of the financial statements; the theory seems to have
lost much of its explanatory
power. Recent financial statements have resulted to careful
reconsideration of this theory.
However, there is an ongoing public debate on the auditor’s
responsibility for detection and
disclosure of fraud drawing stakeholders onto the basic public
perceptions on which the
theory is derived.
Auditing literature did not support this theory. The
responsibility for the prevention and
detection of fraud and irregularities is that of the management
of the enterprise who may
obtain reasonable assurance that this responsibility has been
discharged by establishing an
adequate system of internal control. It is not part of an auditor’s
duties to search for fraud
unless he is required to do so by a specific term of his
engagement. However, if audit is
properly carried out, the work of auditor should expose fraud
and irregularities where they
exist.
2. Methodology
3.1 TheStudy Area
The study was undertaken in Lagos, Nigeria. Lagos was chosen
because it is the
cosmopolitan economic capital city of Nigeria. Lagos is the

52. lever that powers the nation’s
economy in which the numbers of all the various groups of
users of annual account and tribes
in Nigeria reside (Wallace, 1988) and also, owing to the relative
convenience and
administration of the research instrument.
2.2 The Research Design
The study adopted a cross sectional survey design. This was
designed to investigate the
existence and nature of expectations gap in Nigeria and what
needs to be done to bridge this
gap.
International Journal of Accounting and Financial Reporting
ISSN 2162-3082
2011, Vol. 1, No. 1
www.macrothink.org/ijafr 160
2.3 Population ofthe Study
The population of the study from which the sample was drawn
comprised of all the users of
financial statements in Nigeria.
3.4 Sample Size and Sampling Procedure
Purposive sampling was adopted to ensure that only
knowledgeable respondents were chosen.

53. The obvious advantage of purposive sampling is that the
researcher can use his skill and prior
knowledge to choose respondents (Ogunbameru, 2004), based
on the survey instrument
(Best,et al., 2001). This study examined the audit performance
gap among auditors and major
users of financial statements in Nigeria (such as bankers,
investors, stockbrokers, students
and accountants). Two hundred and fifty (250) respondents were
chosen from the population
of study.
3.5 Instrument for Data Collection
Only primary data were used for this study. The primary data
were collected from the
responses received from a structured questionnaire. Based on
the theory, that the best way to
find out what is going on is to ask questions (Patton, 1990). The
research project used survey,
a method that has been used extensively, in previous research
into the perception of
stakeholders in financial reporting.
3.6 Validation of Research Instrument
The question of validity of measuring instruments centres on
whether the instrument
measures what it is intended to measure. In order to ensure that
the content of the
questionnaire and method of administering it were suitable the
researcher carried out a pilot
study on ten (10) members of the target population. Two experts
in the field of accounting
assessed the research instrument.Following their views, changes
were made to the content of

54. the questionnaire. This was pre-tested again and put into its
final form before being
administered to respondents.
3.7 Methods of Data Analysis
Descriptive statistical tools were used for the data presentation,
which includeTables, bar
charts and frequency distribution. The inferential statistical tool
used in testing the
hypotheses formulated in the study was the chi-square
technique. Since the data used in this
study were not in absolute values but in frequency distribution,
chi-square was considered to
be most appropriate. Chi-square measures the difference
between the expected and the
observed frequencies and was calculated as follows:
χ2
( )
∑
=
−n
j j
jj
E
EO
1
2

55. Where
Oj = observed frequency
International Journal of Accounting and Financial Reporting
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2011, Vol. 1, No. 1
www.macrothink.org/ijafr 161
Ej = expected frequency and
n = the number of groups or category
Decision rule at any level of significance is that the null
hypothesis is rejected if the
calculated chi-square (χ2) is greater than or equal to the critical
value from the chi-square
table, otherwise the null hypothesis is retained.
3. Data Analysis
4.1 Hypothesis One
Hypothesis one is designed to address research question one,
using the Chi-Square analysis.
This hypothesis states that there is no generally accepted
description of the role of external
auditor.
In Table 1, the Chi-Square (χ2) calculated is 199.64. The Chi-

56. Square tabulated is 9.488 from
the statistical table. The Chi-Square calculated (199.64) is
greater than the critical value. As
a result of this, the research rejects the null hypothesis at 5%
level of significance and 4
degree of freedom. It can be concluded that the role of external
auditors is to ensure that the
requirements of CAMA, 1990, or other relevant legislations
have been complied with.
From Table 2, the χ2 Calculated =18.51. χ2 tabulated = 9.488
(from the statistical table).
From the result, it shows that the very fact that no different
theory regarding the role of the
auditor exists indicated that there is no generally accepted
description of the role of the
auditor.
From the Table 3, 18 (10.0%) respondents strongly disagree, 25
(15.6%) disagree, 16 (8.9%),
undecided, 75 (41.7%) agree and 43 (23.9%) strongly agree.
Hence, it shows that 65.6% of
the respondents agree with the statement. The result of the
above analysis shows that external
auditors cannot look at every client transactions. They mostly
rely on samples in order to
form an opinion on a particular population.
From Table 4, 17 (9.9%) of the respondents strongly disagree,
27 (15.7%) disagree, 20
(11.6%) undecided, 71 (41.3%) agree and 31 (21.15%) strongly
agree. Hence, it shows that
most of the respondents agree with the statement above.
Table 7indicates that 15 (8.2%) of the respondents strongly
disagree, 42 (22.8%) disagree, 11

57. (6.0%) undecided, 57 (31.0%) agree, 59 (32.1%), strongly
agree. From this it shows that
63.1% of the total respondents agree with the statement. Hence,
the result indicates that the
auditor should not make 100% examination in the audit
procedures.
The χ2 Calculated = 89.40.
χ2 tabulated = 9.484 (from Statistical Table).
Since the χ2 calculated >χ2 tabulated i.e. (89.40 > 9.484) at 5%
significant level and 4 degree
of freedom, we reject the null hypothesis and retain the
alternative hypothesis.
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4. Conclusion
To conclude, researchers and the accounting profession have
responded in different ways to
the audit expectation gap. However, it must be noted that the
expectation gap arises from a
combination of excessive expectations and insufficient
performance.The audit expectation
gap is detrimental to the auditing profession as it has negative

58. influences on the value of
auditing and the regulation of auditors in the modern
society.We established that if auditors
are to retain the public’s perception of them as providing a
valuable service in society, the gap
between the public’s expectations of auditors’ performance
must be narrowed.
5. Recommendations
Consequent on the findings and conclusions of this study, the
following recommendations
were made.
i. Users of Financial Statements should be Enlightened More on
the Responsibilities of
Auditors on the Financial Statement: Formal education of users
also appears to be a
potential tool for reducing the gap, as no significant differences
were find between the
responses of directors who have had some relevant education.
It is important for the
users of financial statements to know the extent to which they
hold the external
auditors responsible for the problems of the organization.
ii. Quality Control in Audit Firms: This is necessary in order to
ensure that all auditors
(be they partners, managers or other audit team members)
perform their work to the
required standard on every audit.
iii. Continuous Training and Development of Auditors:
Education of auditing
practitioners is a key objective of the monitoring process. It is,
therefore,

59. recommended that further education through Mandatory
Continuing Professional
Education (MCPE) be required of all existing auditors in respect
of their
responsibilities under statute.
iv. The creation of an independent government agency to
oversee the implementation of
audit regulations in Nigeria.
v. The Role of the Auditor should be Clarified: Since the origin
and existence of auditing
is based on the requirements of the users of the reporting
process, the role of the
auditor should be redefined, but with due consideration for the
requirements and
expectations of users.
vi. Expansion of auditors’ responsibilities is likely to be a good
way of meeting the
expectation of the public. However, the cost of such services
should be considered
since the public is a free rider of such services. The cost of
these additional services
needs to be borne by the company. Thus, the company may be
reluctant to engage the
services of auditors unless they become a statutory requirement
in Nigeria or the
benefit of engaging such services outweighs the cost.
vii. To reduce the deficient standards gap, the existing auditing
standards should be reviewed
International Journal of Accounting and Financial Reporting

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on a regular basis to ensure the auditing standards encompass
duties that could be
reasonably expected of auditors.
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Figure 1: Diagramatic illustration of Agency Theory
Source: Adapted from Jenson and Meckling (1976)

67. PRINCIPAL
Resources
Tasks
Accounts
Proceeds
AUDITS
AGENT
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Table 1: The Role of External Auditors is not to ensure that the
Requirements of CAMA,
1990 or other Relevant Legislations have been Compiled With
Response Observed N Expected N Residual
Strongly Disagree 3 36.8 -33.8
Disagree 7 36.8 -29.8

68. Undecided 10 36.8 -26.8
Agree 66 36.8 29.2
Strongly Agree 98 368 61.2
Total 184 184 0
Source: Field Survey, 2010
Table 2: The Very Fact that no Different Theory Regarding the
Role of the Auditor
Exist Indicates that there is no Generally Accepted Description
of the Role of the
Auditor.
Response Observed N Expected N Residual
Strongly
Disagree
33 35.8 - 2.8
Disagree 54 35.8 18.2
Undecided 32 35.8 - 3.8
Agree 41 35.8 5.2
Strongly Agree 19 35.8 - 16.8
Total 179
Source: Field Survey, 2010

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Table 3: External Auditors Cannot Look at Every Client
Transaction. They Mostly Rely
on Samples.
Response Frequency Percentage
Strongly Disagree 18 10.0
Disagree 28 15.6
Undecided 16 8.9
Agree 75 41.7
Strongly Agree 43 23.9
Total 100 100.0
Source: Field Survey, 2010
Figure 2: Perception about the approach that auditors take to
accomplish their task

70. External Auditors Cannot Look at Every Client Transaction.
They Mostly Rely on Samples.
Strongly Disagree
Disagree
Undecided
Agree
Strongly Agree
Strongly Disagree
Disagree
Undecided
Agree
Strongly Agree
Source: Field Survey, 2010
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71. www.macrothink.org/ijafr 169
Table 4: Respondents’ views on whether users can have
Reasonable Assurance that
Financial Statements
Contain no Material Misstatements
Response Frequency Percentage
Strongly Disagree 17 9.9
Disagree 27 15.7
Undecided 20 11.6
Agree 71 41.3
Strongly Agree 31 21.5
Total 172 100.0
Source: Field Survey, 2010
Figure 3: Views on the extent of material misstatements in
financial statements
Users can have Reasonable Assurance that Financial
Statements Contain no Material Misstatements
Strongly Disagree
Disagree

72. Undecided
Agree
Strongly Agree
Strongly Disagree
Disagree
Undecided
Agree
Strongly Agree
Source: Field Survey, 2010
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Table 5: The Audited Financial Statements Are not Useful for
Monitoring the
Performance of the Entity
Response Frequency Percentage

73. Strongly Disagree 62 34.4
Disagree 67 37.2
Undecided 15 8.3
Agree 29 16.1
Strongly Agree 7 3.9
Total 180 100.0
Source: Field Survey, 2010
Table 6: External Auditors’ Reports Guarantee that an
Organization whose Financial
Statements have given an Unqualified (clean) Audit Report is
Financially Sound.
Response Frequency Percentage
Strongly Disagree 27 14.7
Disagree 47 25.5
Undecided 24 13.0
Agree 49 26.6
Strongly Agree 37 20.1
Total 184 100.0
Source: Field Survey, 2010

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Figure 4: Extent of Reliability of Audit Reports
Source: Field
Survey, 2010.
Table 7: The Auditor should make 100% Examination in the
Audit Procedures.
Response Frequency Percentage
Strongly Disagree 15 8.2
Disagree 42 22.8
Undecided 11 6.0
Agree 57 31.0

75. Strongly Agree 59 32.1
Total 184 100.0
Source: Field Survey, 2010.
Table 8: The Management of a Company should Bear Primary
Responsibility for
Ensuring the Reliability of its Financial Statements.
Response Frequency Percentage
Strongly Disagree 2 1.1
Disagree 8 4.4
Undecided 6 3.3
Agree 74 40.7
External Auditors’ Reports Guarantee that an Organization
whose Financial Statements have given an Unqualified (clean)
Audit Report is Financially Sound.
Strongly Disagree
Disagree
Undecided
Agree
Strongly Agree
Strongly Disagree

76. Disagree
Undecided
Agree
Strongly Agree
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Strongly Agree 92 50.5
Total 182 100.0
Source: Field Survey, 2010.
Table 9: Past Auditing Scandals with Enron, Parmalat, Cadbury
Nigeria Plc and AP
Nigeria Plc had an Impact on Auditor’s Credibility
Response Observed N Expected N Residual
Strongly
Disagree
7 34.6 - 27.6
Disagree 10 34.6 - 24.6
Undecided 29 34.6 - 5.6

77. Agree 60 34.6 25.4
Strongly Agree 67 34.6 32.4
Total 173
Source: Field Survey, 2010
internet reproting Bangladesh.pdf
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Web-based Corporate Reporting: An Exploratory Study on the
Bangladeshi Companies
Ranjan Kumar Mitra (1)
Dewan Mahboob Hossain (2)
Mohammed Mehadi Masud Mazumder (3)
(1) Ranjan Kumar Mitra
Assistant Professor, Department of Accounting & Information
Systems
University of Dhaka, Bangladesh

78. (2) Dewan Mahboob Hossain
Associate Professor, Department of Accounting & Information
Systems
University of Dhaka, Bangladesh
(3) Mohammed Mehadi Masud Mazumder
Assistant Professor, Department of Accounting & Information
Systems
University of Dhaka, Bangladesh
Correspondence:
Mohammed Mehadi Masud Mazumder
Cell#+88-01816-055454
Assistant Professor, Department of Accounting & Information
Systems
University of Dhaka, Bangladesh
Email: [email protected]
Introduction
Using Internet to communicate corporate information to the
relevant stakeholders has become a common phenomenon
these days. Over the years, because of the immense develop-
ment in information technology Internet based reporting has
gained popularity. According to Lymer (1999), the opportuni-
ties offered by the Internet have affected businesses dramati-
cally. Stakeholders also create explicit and implicit pressures
on businesses to go for web based reporting that is usable
and can avoid time delay (Lymer, 1999). Also, corporate web
sites are now considered as an important public relations tool
(Capriotti and Moreno, 2007). For that reason, web sites are be-
coming an important medium of corporate reporting (Capri-
otti and Moreno, 2007). Moreover, as the Internet is interactive
in nature, it cannot only disseminate information but can also
help in generating a relationship between the stakeholders
and the corporation (Capriotti and Moreno, 2007; Ryan, 2003;
White and Raman, 1999). Moreover, web based communica-

79. tion can also help the organizations to create a corporate
identity and enhance legitimacy of their activities (Coupland,
2006). Corporate web reporting, as a relatively new genre has
received immense attention from academicians over the last
decades (see Capriotti and Moreno, 2007; Lodhia, 2006; Coup-
land, 2006; Debreceny, Gray and Rahman, 2002; Isenmann and
Lenz, 2002; Lymer, 1999). However, most of these studies are
based on developed economies. The web reporting practices
of the corporations of the developing or underdeveloped
Abstract
Web based corporate reporting has received immense
attention from academicians over the past few dec-
ades. However, there are very few studies that address
such an interesting issue in the context of develop-
ing countries. In order to fill the vacuum, this study
explores the current status of web based reporting
practices of Bangladeshi listed companies. A content
analysis was conducted on the web sites of 98 compa-
nies listed on Dhaka Stock Exchange (DSE). The results
demonstrate that companies in Bangladesh, in gen-
eral, report on issues such as company overview, prod-
ucts and services, investor relations, management and
human resources, corporate social responsibility, cor-
porate governance and financial aspects.
Key words: Web Reporting, Corporate Disclosures, In-
ternet Based Reporting, Content Analysis, Bangladeshi
Companies.
Business

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economies did not get much attention in the prior literature.
This study is an attempt to fill this gap.
Bangladesh’s economy is one of the rising economies in the
world, with a growth rate of approximately 6%-7% over the last
couple of years. The main objective of this article is to explore
the web based corporate reporting practices of the compa-
nies in Bangladesh. In order to do that, a content analysis of
the websites of 98 sample companies listed in the Dhaka Stock
Exchange (DSE) was conducted. The study contributes to the
scant literature on web based reporting from the context of
the Bangladeshi corporate sector.
Theory and Literature Review
Developments in information and communications technol-
ogy allow business firms around the world to use web based
reporting to disseminate corporate information. The increasing
tendency of the company to voluntarily disclose web based in-
formation could be explained by two major theories. The first
one is ‘Agency theory’ which explains why a company may vol-
untarily disclose information through the internet. By disclos-
ing information on the web along with traditional paper based
reporting, the management of the firm would like to gain the
trust of the wider ranges of stakeholders (especially sharehold-
ers and creditors) and reduce the agency costs (Jensen and
Meckling, 1976).
Another theory which could explain the tendency of the web

81. based information disclosures of listed companies is ‘Signaling
theory’ introduced by Spence (1973). This theory suggests that
companies go for extensive web based disclosure in order to
distinguish themselves from other counterparts in terms of
quality and performance (Nurunnabi & Hossain, 2012).
The ‘Cost-benefit hypothesis’ is also considered to explain the
disclosing decisions of an organization. According to this hy-
pothesis, managers prefer to voluntarily disclose information
when disclosure benefits exceed its costs (Boubaker, Lakhal &
Nekhili, 2011). Web based reporting is usually considered less
costly and more flexible compared to traditional paper based
reporting.
A number of studies were conducted on web based corporate
reporting over the past few decades. Most of these studies
were focused on the corporate social responsibility reporting
practices of the companies. Moreover, most of the studies on
corporate web reporting were based on content analysis.
Some of the earliest studies on web based reporting include
those by Esrock and Leichty (1998), Williams and Pei (1999)
and
Lymer (1999). Esrock and Leichty (1998) examined how big
corporations (Fortune 500 companies) are portraying them-
selves as responsible citizens by using web pages. They found
that these companies disclosed on community activities, envi-
ronmental issues and education. Another early study on web
based corporate disclosure is that of Williams and Pei (1999).
This study was based on social disclosures and here an interna-
tional comparison was conducted. The sample consisted of 172
companies from four different countries: Australia, Singapore,
Malaysia and Hong Kong. It was found that Australian and Sin-
gaporean companies disclose more on CSR issues in their web
sites. Most of these web based disclosures are in narrative form.

82. Also, companies mostly try to focus on information related to
product and customers. Both of these studies were related to
social and environmental reporting.
The study of Lymer (1999) is another of the earliest studies on
web based reporting. The author introduced the idea of elec-
tronic corporate reporting from a European context. Other
than a detailed literature review, the paper contained some
other matters such as “issues that need to be considered by
companies, accounting regulators and standard setters in de-
termining how this form of reporting should develop in the
future” (Lymer, 1999, p. 289).
Isenmann and Lenz’s (2002) study was based on corporate
web reporting on environmental matters. This study is mostly
theoretical. The authors emphasized that technological devel-
opment can create opportunities for environmental reporting.
Ultimately this will help the companies to disseminate infor-
mation in a better way. Moreover, it will help to improve inter-
nal and external communication. It will also help to identify the
key stakeholder groups to whom the information needs to be
communicated.
Patten and Crampton (2004) also focused on internet based
environmental disclosure. The sample consisted of 62 US firms.
The authors found that companies are reporting some addi-
tional non-redundant environmental information in the web
pages and thus going beyond what is reported in the annual
reports. However, according to the authors, most of this infor-
mation is positive/neutral in nature. This represents the legiti-
macy seeking behaviour of the organizations.
Debreceny, Gray and Rahman (2002), by taking 660 big compa-
nies from 22 countries as a sample, identified the determinants
of internet financial reporting. They found that firm size and
disclosure environment have an effect on reporting.

83. Coupland (2006) conducted a discourse/textual analysis of the
web-based financial and CSR reports of five banking groups
operating in the UK. The author concluded that: “Although it is
evident that organizations are beginning to articulate a stance
with regard to CSR, as increasingly more attention is being
paid to social and environmental issues, simple articulation is
no longer sufficient.” (Coupland, 2006, p. 865).
Lodhia’s (2006) study focused on the perceptions on web
based environmental communication of the environmen-
tal and communication managers of three Australian mining
companies. This was an interview based study. The respond-
ents concluded that World Wide Web is an efficient medium
of communication on environmental issues. The technological
benefits help in disseminating the information to a wide range
of stakeholders.
The study of Capriotti and Moreno (2007) analyzed the infor-
mation on corporate responsibility in the corporate websites.
Business
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The authors focused on the importance that this kind of infor-
mation received in these web sites. The interactivity of this in-
formation was also analysed. The authors conducted content
analysis of the web sites of 35 companies in the Spanish Stock
exchange. It was found that all of these companies reported
on their social responsibility related activities in their web

84. sites. The companies reported on issues such as corporate
profile, governance, products and services, human resources,
social actions, environmental issues, public relations and eth-
ics. According to the authors, the CSR issues received enough
importance from these companies.
Using the sample of the top 100 most active-traded compa-
nies listed in the Egyptian Stock Exchange, Aly, Simon and
Hussainey (2010) found that 56 per cent of firms report a sig-
nificant portion of information on their web sites. They argued
that such reporting can be used as an effective tool for im-
proving stakeholders’ decision?making process.
Uyar (2011) conducted a study on the Istanbul Stock Exchange
(ISE) to investigate the utilization of the internet by the Turk-
ish companies listed for corporate reporting. He found that
Firms, which are listed in the ISE Corporate Governance Index
(XCORP), disclose significantly more information on corpo-
rate web sites compared to the firms that are not listed in the
XCORP.
From this discussion it can be understood that most of these
studies focused on a particular aspect of corporate web based
reporting, i.e., social and environmental reporting. Moreover,
most of these papers are based on developed economies such
as USA, UK, Australia, Spain, Hong Kong, Singapore and
others.
In the context of Bangladesh, Nurunnabi and Hossain (2012)
conducted a study on 83 listed companies in Bangladesh to
investigate the state of voluntary disclosure of internet report-
ing in Bangladesh. They found that only 33.34 percent (28) of
companies provided web based information. However, their
paper was narrowly focused on financial information. The
present study, therefore, rather than focusing on any particu-
lar aspect of corporate web reporting, goes for a holistic ap-