Appraisal of Audit Independence on Reliance of Financial Report of a Selected...ijtsrd
Â
This study thereby determined the auditor's independence on financial statements of Nigerian hospitals. Specifically, the study intended to determines the effect of tenure of an audit firm on reliability of financial reporting of general hospital, Awka and ascertain the effect of audit fees on reliability of financial reporting of general hospital, Awka. Survey research was adopted for this study. Survey and descriptive research design were adopted. The population of the study consist 127 staff of General hospital, Awka. A sample size of 96 was obtained from a population of 127 Staff using Taro Yamane's formula. From the analysis of data collected, the result revealed that the tenure of an audit firm and audit fees have significant effect on reliability of financial reporting of general hospital. The external auditor's fees should be determined by office of the Auditor General for the concerned state rather than by the hospital management being audited in order to guarantee independence of the auditor in question, also that the tenure of audit firms should always be regulated to avoid too much familiarity. Dim Chinwe E "Appraisal of Audit Independence on Reliance of Financial Report of a Selected Hospital in Awka" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26803.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/26803/appraisal-of-audit-independence-on-reliance-of-financial-report-of-a-selected-hospital-in-awka/dim-chinwe-e
Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Â
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and clientâs affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
Appraisal of Audit Independence on Reliance of Financial Report of a Selected...ijtsrd
Â
This study thereby determined the auditor's independence on financial statements of Nigerian hospitals. Specifically, the study intended to determines the effect of tenure of an audit firm on reliability of financial reporting of general hospital, Awka and ascertain the effect of audit fees on reliability of financial reporting of general hospital, Awka. Survey research was adopted for this study. Survey and descriptive research design were adopted. The population of the study consist 127 staff of General hospital, Awka. A sample size of 96 was obtained from a population of 127 Staff using Taro Yamane's formula. From the analysis of data collected, the result revealed that the tenure of an audit firm and audit fees have significant effect on reliability of financial reporting of general hospital. The external auditor's fees should be determined by office of the Auditor General for the concerned state rather than by the hospital management being audited in order to guarantee independence of the auditor in question, also that the tenure of audit firms should always be regulated to avoid too much familiarity. Dim Chinwe E "Appraisal of Audit Independence on Reliance of Financial Report of a Selected Hospital in Awka" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-5 , August 2019, URL: https://www.ijtsrd.com/papers/ijtsrd26803.pdf Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/26803/appraisal-of-audit-independence-on-reliance-of-financial-report-of-a-selected-hospital-in-awka/dim-chinwe-e
Effect of Auditor Independence on Audit Quality: A Review of Literatureinventionjournals
Â
Auditor independence and audit quality are two concepts that work inseparably. Many have argued that auditor independence begets audit quality and as such audit quality cannot be different from the system that produces it. This paper reviews literature related to auditor independence and audit quality in order to determine the effect of the former on the latter. The ex post facto research design is employed. Information for this study was obtained from secondary sources to include journals, text books and other internet materials. Based on the review, findings show that there is a strong relationship between auditor independence and audit quality. The review also revealed four threats to auditor independence, which are client importance, non-audit services (NAS), audit tenure, and clientâs affiliation with CPA firms. However, some studies indicated a positive relationship while others showed contrary due to the type of study design employed, sample size, data collection instruments and analysis techniques used. Most of the studies on auditor independence and audit quality were centered on one or two of the threats and majorly done outside Nigeria. Even the ones done in Nigeria were focused on the banking sector. This review therefore, recommends that more investigations should be conducted in Nigeria taking into consideration the four major threats revealed and extend to other sectors like manufacturing, transport, media, education etc.
audit expectation gap Iran.pdf Corresponding author. E.docxrock73
Â
audit expectation gap Iran.pdf
* Corresponding author.
E-mail address: [email protected] (S. Jabbarzadeh Kangarluie)
Š 2017 Growing Science Ltd. All rights reserved.
doi: 10.5267/j.ac.2016.6.001
Accounting 3 (2017) 19â22
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 auditorsâ
responsibilities and the messages delivered by audit reports. During the past few years, some
spectacular and wellâpublicized 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 groupâs perceptions in terms of the auditorsâ roles and responsibilities.
However, there was no meaningful relationship between management and audit groupâs
perceptions in terms of the auditorsâ independence.
Growing Science Ltd. All rights reserved. 7Š 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 auditorsâ
responsibilities and the messages delivered by audit reports. During the past few years, some
spectacular and wellâpublicized 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 nonâaccountants 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 ...
AUDITORâS FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
Â
The research intensifies effort at determining whether auditorâs independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
Audit Firm Rotation and Audit Report Lag in NigeriaIOSR Journals
Â
Audit firm rotation and audit report lag has been a topical issue to regulators, investors, practitioners and the public at large. Hence, this study is designed to determine the relationship between audit firm rotation and audit report lag in Nigeria. Secondary data gathered from the 2011 annual reports of fifty (50) randomly selected companies, quoted on the floor of the Nigerian Stock Exchange (NSE) were employed in the study. The Ordinary Least Square technique (OLS) was used in the analysis of the relationship between the dependent and independent variables. The study reveals that audit fees, yearâend and audit firm type all have positive relationship with audit report lag. The research also establishes that audit firm rotation and company size have a negative insignificant relationship with audit report lag.
External Auditors Independence on Accounting Quality of Nigerian Manufacturin...ijtsrd
Â
This study examines the effect of external auditorâs independence on accounting quality of Nigerian manufacturing companies. Specifically, the study ascertain the effect of audit fees on discretionary accruals of manufacturing companies and determine the effect of audit firm tenure on discretionary accruals of manufacturing companies. Ex post facto research design was adopted. The population of the study comprise of Consumer Goods manufacturing companies on the Nigerian Stock Exchange NSE . Ordinary Least Square was used to test the relationship between the independent variables and the dependent variable. The empirical results revealed that the study determined the effect of external auditorâs independence on accounting quality of Nigerian manufacturing companies that there is a significant positive effect of audit firm tenure on discretionary accruals of Nigerian manufacturing companies. Also that audit fees has a non significant positive effect on discretionary accruals of Nigerian manufacturing companies. Auditorsâ are responsible for certifying the true and fairness of financial statements. The present study investigates the effect of audit firm tenure, Audit fees, audit firm size, and degree of competition on the level of discretionary accruals as surrogate for accounting quality. The results showed mixed findings. Two proxies audit firm tenure and audit firm size showed a significant positive effect while, audit fees and degree of competition showed non significant positive effect. Based on the empirical results above, the study recommended that firms are advised to consider use of industry specialist auditors against the consideration of ânameâ alone such like the use of Big 4. Ebubechukwu, Jacinta O | Ofurum, Darlington I "External Auditors Independence on Accounting Quality of Nigerian Manufacturing Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33021.pdf Paper Url :https://www.ijtsrd.com/management/accounting-and-finance/33021/external-auditors-independence-on-accounting-quality-of-nigerian-manufacturing-companies/ebubechukwu-jacinta-o
1 2Cheat Sheet on Evidence and DocumentationACC491J.docxhoney725342
Â
1
2
Cheat Sheet on Evidence and DocumentationACC/491
July 3, 2017Cheat Sheet on Evidence and Documentation
Relevance, Reliability and Sufficiency of Evidence
The basic property of an audit report is that it should entail relevance. The report t should be written in a standard format which is usually mandated by generally accepting the set auditing standards. Accounting is an important task since it ensures financial details of a business are kept considerably clean. Going through the terminologies in order to know everything that is involved in auditing is important when auditing the financial records. The first step involves dividing the field into the foremost part known as the financial statement. Soares (1997). All businesses hold their financial statements in high regards since it is a legal requirement to provide and they provide them when they are requested by relevant bodies. These statements represent the picture of the business in reference to its financial robustness. The audited report reports are used to verify that the details given in their statements. For instance, the public corporations are supposed to ensure that their statements are professionally audited in order to secure their investorsâ wealth.
It is important to note that the concept of reliability is of real interest to a wide variety of audit participants. This is due to many quotations and references that are required for well-founded financial information and the role of audit. It has been said that having a genuine financial and economic data should be the principle assumptions of a society. Being reliable increases confidence in and reliance on financial statements. Some of the aspects of reliability include faithful representation, fitness for purpose, robustness as well as the audit firm reliability.
The quantity of audit evidence is in simple words what sufficiency of audit evidence means. The risk of material and the inclusive quality of the evidence presented is what needs to be considered to fulfill the sufficiency needed. One should rely on an eloquent order other than the convincing one. Yang (2007). Impressive evidence shows the scale one way or the other and provides one with a basis beyond a sensible doubt for forming a viewpoint (Loughran, Maire, 2011). Convincing evidence is one which is perfectly reliable. It involves looking for all clients' records in order to achieve this level of assertion. Careful documentation of the work and the audit opinion must be fact-based and should be retractable so that a different review of the audit should depict the same conclusion (Loughran, Maire, 2011).
Confidentiality: Financial statements should be handled with confidentiality. Confidential information should not be disclosed to anyone. The accountant must protect the information from unauthorized disclosure or public release. The auditor should be accountable for any access by unauthorized people. In most times, clients see the auditors as trusted ...
Effect of Audit Quality on the Financial Performance of Deposit Money Banks i...ijtsrd
Â
This study investigated the effect of audit quality on the financial performance of deposit money banks in Nigeria. The Ex-post Facto research design was adopted. The Judgmental sampling was adopted to selected 14 from the 22 listed Deposit Money Banks on the Nigerian Stock Exchange. The data collected from annual reports and accounts of deposit money banks were analyzed using the simple regression and correlation analyses. Findings f revealed that Audit Committee Size ACSIZ has a positive but insignificant effect on the financial performance of deposit money banks in Nigeria. Audit Committee Independence ACIND and Audit Committee Meetings ACM both have a negative and insignificant effect on the financial performance of quoted deposit money banks in Nigeria while Auditors Size BIG4A has a positive and statistically significant effect on the financial performance of quoted banks in Nigeria. Based on this, the study recommended among others that the management of the deposit money banks in Nigeria should employ the services of one of the big audit firms and where this is not possible, go for an audit firm whose character and integrity is beyond question. Muotolu, Peace Chikwemma | E. O. Nwadialor "Effect of Audit Quality on the Financial Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-2 , February 2019, URL: https://www.ijtsrd.com/papers/ijtsrd21557.pdf
Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/21557/effect-of-audit-quality-on-the-financial-performance-of-deposit-money-banks-in-nigeria/muotolu-peace-chikwemma
Effect of Audit Quality on Financial Performance Evidence from Deposit Money ...ijtsrd
Â
This study investigates the effect of audit quality on the financial performance of deposit money banks in Nigeria. The study adopted ex post facto research design, data for the study were collected from annual reports and accounts of quoted Nigerian deposit money banks. Regression analysis and coefficient correlation were employed to test the formulated hypotheses. Findings revealed that there is a significant effect between audit quality and financial performance of Nigerian deposit money banks. Based on this, the study recommends among others that the management of deposit money banks in Nigeria should increase the number of foreign directors that have skills, experience and would like to protect their integrity, reputation and professional competence. Ezejiofor, Raymond A. | Erhirhie, Felix E. "Effect of Audit Quality on Financial Performance: Evidence from Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-6 , October 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18867.pdf
audit expectation gap Iran.pdf Corresponding author. E.docxrock73
Â
audit expectation gap Iran.pdf
* Corresponding author.
E-mail address: [email protected] (S. Jabbarzadeh Kangarluie)
Š 2017 Growing Science Ltd. All rights reserved.
doi: 10.5267/j.ac.2016.6.001
Accounting 3 (2017) 19â22
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 auditorsâ
responsibilities and the messages delivered by audit reports. During the past few years, some
spectacular and wellâpublicized 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 groupâs perceptions in terms of the auditorsâ roles and responsibilities.
However, there was no meaningful relationship between management and audit groupâs
perceptions in terms of the auditorsâ independence.
Growing Science Ltd. All rights reserved. 7Š 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 auditorsâ
responsibilities and the messages delivered by audit reports. During the past few years, some
spectacular and wellâpublicized 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 nonâaccountants 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 ...
AUDITORâS FEES AND AUDIT QUALITY OF DEPOSIT MONEY BANKS IN NIGERIA.pdfOsarenrenAigienohuwa1
Â
The research intensifies effort at determining whether auditorâs independence has any
impact on the audit quality of Nigerian deposit money banks. The study intends to
determine the effect of audit fees on the audit quality of Nigeria deposit money banks.
The study used Ex-Post Facto research design. A total of thirteen (13) deposit money
banks were sampled. Data were taken from the sampled banks' annual reports and
accounts for the years 2010 - 2021. With the help of SPSS version 20.0, simple
regression analysis was conducted to test the assumptions. According to the findings,
audit fees has a direct but insignificant effect on the audit quality of listed Nigerian
deposit money institutions. The researcher therefore recommends that the auditor
should be remunerated on the basis of work experience, qualification, duration of the
audit assignment, and background profile
Audit Firm Rotation and Audit Report Lag in NigeriaIOSR Journals
Â
Audit firm rotation and audit report lag has been a topical issue to regulators, investors, practitioners and the public at large. Hence, this study is designed to determine the relationship between audit firm rotation and audit report lag in Nigeria. Secondary data gathered from the 2011 annual reports of fifty (50) randomly selected companies, quoted on the floor of the Nigerian Stock Exchange (NSE) were employed in the study. The Ordinary Least Square technique (OLS) was used in the analysis of the relationship between the dependent and independent variables. The study reveals that audit fees, yearâend and audit firm type all have positive relationship with audit report lag. The research also establishes that audit firm rotation and company size have a negative insignificant relationship with audit report lag.
External Auditors Independence on Accounting Quality of Nigerian Manufacturin...ijtsrd
Â
This study examines the effect of external auditorâs independence on accounting quality of Nigerian manufacturing companies. Specifically, the study ascertain the effect of audit fees on discretionary accruals of manufacturing companies and determine the effect of audit firm tenure on discretionary accruals of manufacturing companies. Ex post facto research design was adopted. The population of the study comprise of Consumer Goods manufacturing companies on the Nigerian Stock Exchange NSE . Ordinary Least Square was used to test the relationship between the independent variables and the dependent variable. The empirical results revealed that the study determined the effect of external auditorâs independence on accounting quality of Nigerian manufacturing companies that there is a significant positive effect of audit firm tenure on discretionary accruals of Nigerian manufacturing companies. Also that audit fees has a non significant positive effect on discretionary accruals of Nigerian manufacturing companies. Auditorsâ are responsible for certifying the true and fairness of financial statements. The present study investigates the effect of audit firm tenure, Audit fees, audit firm size, and degree of competition on the level of discretionary accruals as surrogate for accounting quality. The results showed mixed findings. Two proxies audit firm tenure and audit firm size showed a significant positive effect while, audit fees and degree of competition showed non significant positive effect. Based on the empirical results above, the study recommended that firms are advised to consider use of industry specialist auditors against the consideration of ânameâ alone such like the use of Big 4. Ebubechukwu, Jacinta O | Ofurum, Darlington I "External Auditors Independence on Accounting Quality of Nigerian Manufacturing Companies" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-4 | Issue-5 , August 2020, URL: https://www.ijtsrd.com/papers/ijtsrd33021.pdf Paper Url :https://www.ijtsrd.com/management/accounting-and-finance/33021/external-auditors-independence-on-accounting-quality-of-nigerian-manufacturing-companies/ebubechukwu-jacinta-o
1 2Cheat Sheet on Evidence and DocumentationACC491J.docxhoney725342
Â
1
2
Cheat Sheet on Evidence and DocumentationACC/491
July 3, 2017Cheat Sheet on Evidence and Documentation
Relevance, Reliability and Sufficiency of Evidence
The basic property of an audit report is that it should entail relevance. The report t should be written in a standard format which is usually mandated by generally accepting the set auditing standards. Accounting is an important task since it ensures financial details of a business are kept considerably clean. Going through the terminologies in order to know everything that is involved in auditing is important when auditing the financial records. The first step involves dividing the field into the foremost part known as the financial statement. Soares (1997). All businesses hold their financial statements in high regards since it is a legal requirement to provide and they provide them when they are requested by relevant bodies. These statements represent the picture of the business in reference to its financial robustness. The audited report reports are used to verify that the details given in their statements. For instance, the public corporations are supposed to ensure that their statements are professionally audited in order to secure their investorsâ wealth.
It is important to note that the concept of reliability is of real interest to a wide variety of audit participants. This is due to many quotations and references that are required for well-founded financial information and the role of audit. It has been said that having a genuine financial and economic data should be the principle assumptions of a society. Being reliable increases confidence in and reliance on financial statements. Some of the aspects of reliability include faithful representation, fitness for purpose, robustness as well as the audit firm reliability.
The quantity of audit evidence is in simple words what sufficiency of audit evidence means. The risk of material and the inclusive quality of the evidence presented is what needs to be considered to fulfill the sufficiency needed. One should rely on an eloquent order other than the convincing one. Yang (2007). Impressive evidence shows the scale one way or the other and provides one with a basis beyond a sensible doubt for forming a viewpoint (Loughran, Maire, 2011). Convincing evidence is one which is perfectly reliable. It involves looking for all clients' records in order to achieve this level of assertion. Careful documentation of the work and the audit opinion must be fact-based and should be retractable so that a different review of the audit should depict the same conclusion (Loughran, Maire, 2011).
Confidentiality: Financial statements should be handled with confidentiality. Confidential information should not be disclosed to anyone. The accountant must protect the information from unauthorized disclosure or public release. The auditor should be accountable for any access by unauthorized people. In most times, clients see the auditors as trusted ...
Effect of Audit Quality on the Financial Performance of Deposit Money Banks i...ijtsrd
Â
This study investigated the effect of audit quality on the financial performance of deposit money banks in Nigeria. The Ex-post Facto research design was adopted. The Judgmental sampling was adopted to selected 14 from the 22 listed Deposit Money Banks on the Nigerian Stock Exchange. The data collected from annual reports and accounts of deposit money banks were analyzed using the simple regression and correlation analyses. Findings f revealed that Audit Committee Size ACSIZ has a positive but insignificant effect on the financial performance of deposit money banks in Nigeria. Audit Committee Independence ACIND and Audit Committee Meetings ACM both have a negative and insignificant effect on the financial performance of quoted deposit money banks in Nigeria while Auditors Size BIG4A has a positive and statistically significant effect on the financial performance of quoted banks in Nigeria. Based on this, the study recommended among others that the management of the deposit money banks in Nigeria should employ the services of one of the big audit firms and where this is not possible, go for an audit firm whose character and integrity is beyond question. Muotolu, Peace Chikwemma | E. O. Nwadialor "Effect of Audit Quality on the Financial Performance of Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-3 | Issue-2 , February 2019, URL: https://www.ijtsrd.com/papers/ijtsrd21557.pdf
Paper URL: https://www.ijtsrd.com/management/accounting-and-finance/21557/effect-of-audit-quality-on-the-financial-performance-of-deposit-money-banks-in-nigeria/muotolu-peace-chikwemma
Effect of Audit Quality on Financial Performance Evidence from Deposit Money ...ijtsrd
Â
This study investigates the effect of audit quality on the financial performance of deposit money banks in Nigeria. The study adopted ex post facto research design, data for the study were collected from annual reports and accounts of quoted Nigerian deposit money banks. Regression analysis and coefficient correlation were employed to test the formulated hypotheses. Findings revealed that there is a significant effect between audit quality and financial performance of Nigerian deposit money banks. Based on this, the study recommends among others that the management of deposit money banks in Nigeria should increase the number of foreign directors that have skills, experience and would like to protect their integrity, reputation and professional competence. Ezejiofor, Raymond A. | Erhirhie, Felix E. "Effect of Audit Quality on Financial Performance: Evidence from Deposit Money Banks in Nigeria" Published in International Journal of Trend in Scientific Research and Development (ijtsrd), ISSN: 2456-6470, Volume-2 | Issue-6 , October 2018, URL: http://www.ijtsrd.com/papers/ijtsrd18867.pdf
Introduction to AI for Nonprofits with Tapp NetworkTechSoup
Â
Dive into the world of AI! Experts Jon Hill and Tareq Monaur will guide you through AI's role in enhancing nonprofit websites and basic marketing strategies, making it easy to understand and apply.
2024.06.01 Introducing a competency framework for languag learning materials ...Sandy Millin
Â
http://sandymillin.wordpress.com/iateflwebinar2024
Published classroom materials form the basis of syllabuses, drive teacher professional development, and have a potentially huge influence on learners, teachers and education systems. All teachers also create their own materials, whether a few sentences on a blackboard, a highly-structured fully-realised online course, or anything in between. Despite this, the knowledge and skills needed to create effective language learning materials are rarely part of teacher training, and are mostly learnt by trial and error.
Knowledge and skills frameworks, generally called competency frameworks, for ELT teachers, trainers and managers have existed for a few years now. However, until I created one for my MA dissertation, there wasnât one drawing together what we need to know and do to be able to effectively produce language learning materials.
This webinar will introduce you to my framework, highlighting the key competencies I identified from my research. It will also show how anybody involved in language teaching (any language, not just English!), teacher training, managing schools or developing language learning materials can benefit from using the framework.
Unit 8 - Information and Communication Technology (Paper I).pdfThiyagu K
Â
This slides describes the basic concepts of ICT, basics of Email, Emerging Technology and Digital Initiatives in Education. This presentations aligns with the UGC Paper I syllabus.
A Strategic Approach: GenAI in EducationPeter Windle
Â
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
Synthetic Fiber Construction in lab .pptxPavel ( NSTU)
Â
Synthetic fiber production is a fascinating and complex field that blends chemistry, engineering, and environmental science. By understanding these aspects, students can gain a comprehensive view of synthetic fiber production, its impact on society and the environment, and the potential for future innovations. Synthetic fibers play a crucial role in modern society, impacting various aspects of daily life, industry, and the environment. ynthetic fibers are integral to modern life, offering a range of benefits from cost-effectiveness and versatility to innovative applications and performance characteristics. While they pose environmental challenges, ongoing research and development aim to create more sustainable and eco-friendly alternatives. Understanding the importance of synthetic fibers helps in appreciating their role in the economy, industry, and daily life, while also emphasizing the need for sustainable practices and innovation.
Operation âBlue Starâ is the only event in the history of Independent India where the state went into war with its own people. Even after about 40 years it is not clear if it was culmination of states anger over people of the region, a political game of power or start of dictatorial chapter in the democratic setup.
The people of Punjab felt alienated from main stream due to denial of their just demands during a long democratic struggle since independence. As it happen all over the word, it led to militant struggle with great loss of lives of military, police and civilian personnel. Killing of Indira Gandhi and massacre of innocent Sikhs in Delhi and other India cities was also associated with this movement.
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...Dr. Vinod Kumar Kanvaria
Â
Exploiting Artificial Intelligence for Empowering Researchers and Faculty,
International FDP on Fundamentals of Research in Social Sciences
at Integral University, Lucknow, 06.06.2024
By Dr. Vinod Kumar Kanvaria
Exploiting Artificial Intelligence for Empowering Researchers and Faculty, In...
Â
Audit Expectation Gap
1. 154 | P a g e
AUDIT REASONABLENESS EXPECTATION GAP: USERSâ PERCEPTION IN NIGERIA
Dr. Austine O. Enofe
Department of Accounting, University of Benin, Nigeria
Dr. Chijioke Oscar Mgbame
Department of Accounting, University of Benin, Nigeria
Edosa Joshua Aronmwan
Department of Accounting, University of Benin, Nigeria
Ivie Eloghosa Ogbeide
Department of Accounting, University of Benin, Nigeria
ABSTRACT
This study sought to examine usersâ perception of reasonableness audit expectation gap in Nigeria. The survey
research design was employed and Information was sought from respondents using a structured likert scale
questionnaire. The hypothesis raised was analyzed using the ANOVA test statistics. The study found that there
exist a reasonableness gap between auditors and users (managers, investors and the public) of audit report as
regarding the responsibilities of auditors. Based on our findings, we recommend education as a method to reduce
unreasonable expectation of the public and even users of audited reports. Such awareness can be created by
enriching the curriculum of Nigerian tertiary institutions and by formal or informal awareness campaign by both
government and auditing profession from time to time through appropriate media not just for their members
alone but also for the auditing community as a whole.
Keywords: Audit expectation Gap, Reasonableness Gap
1.0 Introduction
Auditing as a discipline evolved because of the practice of stewardship accounting. Then, landowners as well as
property owners appointed individuals to manage their resources for a period, after which the stewards present
an accountability report (stewardship account) (Millichamp, as cited in Akinbuli, 2010). Over the years, this
simple concept became complex due to industrialization and emergence of limited liability companies wherein
the divorce of ownership from control and management exist. To ensure that ownersâ resources were safe,
management according to the Company and Allied Matters Act, 1990 as amended is expected to present a report
(financial statement) and this report is examined by an independent third party (the auditor) who expresses an
opinion on the report presented thereby adding credibility to it. Due to recent happenings especially after the
collapse of Enron and loss of confidence in Andersonâs accounting firm, introduction of the Sarbanes Oxley Act of
2002, increase in litigations and criticisms of auditors, there have been many questions relating to the audit
expectation gap, which is opine to be the major reason behind the litigation stories (Lee, Ali, & Kandasamy,
2008). Furthermore, the corporate financial irregularities and related fraud that occurred in Nigeria in recent
times (Wema Bank, NAMPAK, Finbank, and Cadbury) have drawn the attention of investors and regulators alike
to the profession (Adeyemi, & Uadiale, 2011).
Audit expectation gap exist between auditors and users of financial information because of the perception of the
latter, on the roles and duties of the former, and what they (auditors) actually do. According to Fadzly and
Ahamd (2004), it is the vital role an audit plays that has caused many to believe that the level of assurance
provided by the auditor is a âPerfect Assuranceâ therefore anything short of this creates a problem, âAudit
expectation gapâ (AEG).
The term âAudit Expectation Gapâ was first introduced to the audit literature by Liggio in 1974. He defined the
Audit Expectation Gap (AEG) as the difference between the levels of expected performance as envisioned by
users of financial statement and the independent accountant. Furthermore, Owen (2005) defined audit
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expectation gap as the gap between the role of an auditor, as perceived by the auditor and the expectation of
the users of financial statements. In addition, Ajayi (2007) observed that usersâ expectation of the duties and
responsibilities of external auditor is different from the statutory duties and responsibilities of these auditors.
The gap between these two is what he referred to as expectation gap.
According to Gupta, (2005), there is a widespread feeling amongst the users and regulators that independent
audit is not accomplishing its perceived objectives fully. This feeling is particularly accentuated whenever there is
a financial scandal. Whittington and Pany (2004) are of the view that these financial scandals have not only
caused erosion of trust in the capital market but have also created a crisis of credibility for the auditing
profession.
1.1 Statement of the Research Problem
We infer that the expectation of both auditors and users differ and this is degenerating into a credibility problem
for the accounting and auditing profession. While users on one hand expect a perfect assurance from the
auditors that is, having conducted an audit exercise and expressed an unqualified opinion, such report should not
result in an ill situation at all. They believe that as long as the auditor expresses his opinion, such report therefore
is free from fraud and other reporting improprieties since he must have examined all the books. On the other
hand, the auditor feels differently in that having acted within the relevant extant legislation and applicable
standards, he is satisfied that his opinion, as expressed is objective and independent which are the cornerstones
of auditing. Hence a gap becomes inevitable. According to Sikka, Puxty, Willmott and Copper (1998), the audit
expectation gap is so threatening because the greater this gap, the lower the confidence and reliability in the
works of auditors. Therefore, if an attempt to avoid loss of credibility, reliability, and confidence in the work of
auditors in Nigeria must succeed, the issue of expectation gap needs attention.
Lee, Ali and Gloeck (2009) opine many studies and researchers have been made in this area in countries ranging
from the United States, United Kingdom, Australia, India to Egypt, Malaysia and even South Africa all pointing
that audit expectation gap exist between auditors and users of financial statement (called users after now) within
their various environment with little or no studies in Nigeria to the best of our knowledge. It is therefore against
this background that this research seeks to address the issues of audit expectation gap in Nigeria.
It is in light of the above issues that the following research questions are put forward:
Do users expect auditors to legally give absolute assurance?
Is there a difference in perception between users and auditors as regards auditorsâ responsibility for fraud
detection and prevention?
Is there a reasonableness expectation gap between users and auditors?
1.2 Research Objectives
This study seeks to determine if:
Users expect auditors to provide absolute assurance services
Users and auditors differ as regards auditorsâ duty for fraud detection and prevention
Reasonableness expectation gap exist between auditors and users of audit report.
1.3 Research Hypotheses
For the purpose of achieving our objectives, the following hypotheses stated in their null form are put forward:
H1 Users do not expect auditors to give an absolute assurance
H2 Users and auditors do not agree as regards the auditorsâ duty for fraud detection and
Prevention
H3 There is no reasonableness audit expectation gap between auditors and users of audit reports
2.0 Review of Literature and Hypothesis Formulation
2.1 Brief History of Auditing
The origin of auditing can be traced to the ancient Greek and Egyptian civilization. According to Biocon (1962),
early auditing was obligatory and centered on identifying fraud and financial irregularities. In the eighteenth
century, where the role of the auditor was to determine the integrity of individuals charged with fiscal
responsibilities. Then, the kind of audit usually done was the public hearing of the performance results of
government official and the critical evaluation of the charge and discharge accounts with the objective of
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determining the accountability of the individuals. With the emergence of corporate and joint stock companies in
the nineteenth century, one would have expected a shift in perception of users on the objective of an audit but
this did not happen. According to Salelin (2005), there was a functional shift much later in the responsibility of
auditors from âtrue and correct viewâ to âtrue and fair viewâ caused by a paradigm shift in the audit process. He
further opines that this also caused a change in audit opinion from âcomplete assuranceâ to âreasonable
assuranceâ. However, this functional shift cannot be said to have caused a shift in usersâ perception as they
expect the auditors to perform functions such as taking responsibility for any error or irregularity in the financial
statements, perform a 100% check instead of sampling check, audit reports should play the role of early warning
signals or indicators of corporate distress just to mention a few (Koh & Woo, 1998, Okoye & Okaro, 2011).
2.2 Overview of Audit Expectation Gap (AEG)
The concept of expectation gap was first identified in auditing literature in 1974. According to Liggio (1974), as
cited in Lee, Ali and Gloeck (2009), audit expectation gap is the difference in the expected performance of
auditors as perceived by the users of financial information and the auditors. Woodcliff (1995) opines audit
expectation gap as the difference in perception between auditors and the public about the duties and
responsibilities of auditors and the messages expressed by audit reports. In the word of Porter and Gowthrope
(2004), the audit expectation gap is the difference between societal expectation of auditors and the perceived
performance of auditors by the same society. They argued that this gap has two major components:
reasonableness gap and performance gap and thence extended the definition as given by Liggio. While Liggio
believed that the gap is because of the unreasonableness of the society and therefore defined it in that line,
Porter and Gowthorpe (2004) opined differently and therefore defined it from the angle of reasonableness and
performance. In their opinion, the reasonableness gap is a result of the difference in what the society expects the
auditors to achieve and what the auditors are reasonably expected to achieve; the performance gap is the
difference between what the society expects auditors to accomplish and what they are perceived to have
accomplished.
Furthermore, they divided the performance gap into deficiency in standards and deficiency in performance.
Approaching the matter differently, Imen and Cyrstelle (2009) viewed the audit expectation gap as a social
construct created by auditors to justify their inadequacy to meet the publicâs expectations; they argued that the
gap is a result of the lapses from auditors and not necessarily the public.
The American Institute of Certified Public Accountant (AICPA), (as cited in Dixon, Woodhead, & Sohlimen, 2006)
described the gap as the difference between what the public and users of financial information believe the
auditors are responsible for and what the auditors believe they are responsible for. In line with this view, Ojo
(2006) explained the gap as the difference between what the public and users perceive an audit to be and what
the audit profession claims their responsibilities are. In the words of the researcher, auditors render services
therefore, the difference between what the auditors, actually do (accomplish) and what the beneficiaries of the
services both directly and indirectly (users) expect, gives rise to the audit expectation gap.
Many explanations have been given as the causes of the existence of the audit expectation gap from users of the
audit in both past and recent times. Humphrey (1992), (as cited by Lee & Azham, 2008) pointed out that an
expectation gap may occur as a result of time lags between the accounting profession, identifying, and
responding to continually changing and expanding public expectations.
For example, in the United States (US), Ernest and Young (2002) found that fund managers also use non-financial
performance measures in decision-making and 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.
According to Gaa (1991), the audit expectation gap is direct fallout from the political game between two
contending parties viz the public and the auditors. This is also supported by sikka, puxty, willmott and coopper
(1998) in which they argued historical and political contexts can give indications within which expectations are
formed and transformed. They assert that audit as a social practice is subject to constant shifting in meaning
because the social context of auditing changes continuously as a result of interaction and negotiation. The
conclusive end that can be deduced from their argument is that audit expectation gap will continue to exist.
Another reason identified is the unreasonable expectation and a misunderstanding by the auditors and users of
the audit functions. This view is consistent with the finding of Porter and Gowthorpe (2004). That is,
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Auditors perceived
performance
Audit Expectation Societyâs
expectation from
auditors
Performance Gap Reasonableness
Gap
Duties
expected of
auditors
Duties
reasonably
expected of
auditors
Causes Causes
Deficient
performance
Deficient
standard
Unreasonable
expectations
unreasonable expectation by the public at large was the main factor representing 50% of the audit expectation
performance gap in the UK. Furthermore, Humphrey, Moizer and Turley (1992) argued that the audit expectation
gap was caused by the publicâs misunderstanding of the audit function, by over-exaggerated responses to the
isolated failings of individuals.
Clearly, from the discussion above, the audit expectation 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 expectation 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 expectation gap. On the other hand the gap exists due to a misunderstanding or a lack of knowledge of the
users over the audit function. The misunderstanding then leads to unreasonable expectations. Perceived
performance of auditors is an element, which is difficult to measure as it changes consistently. However, it is
possible to substantially reduce but not to totally eliminate (Olowokere, 2010).
2.3 Components of Audit Expectation Gap
Initially, it was argued that the gap was because of unreasonableness of societyâs expectation (Fadzly & Ahmad,
2004) but over time, it has been researched to find that the gap has various components as against initial
reasoning.
Figure 2.3: Structure and Component of the Audit Expectation Gap
Source: Adapted from Porter and Gowthorpe (2004)
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2.4 Reasonableness Gap
This gap explains the difference between what the society expects from auditors and what auditors are
reasonably expected to do. According to figure above, it can be seen that the major cause of this gap is in the
unreasonable expectations of users. Salehi (2011) further opines the probable causes of the reasonableness gap
include misunderstanding and misinterpretation by users, users over expectations of auditorsâ performance,
inadequate knowledge of users in auditorsâ responsibilities. Reasons for this expectation are not farfetched. In
the early 1990, auditors were engaged to render almost âabsolute assuranceâ service, with the detection and
prevention of fraud as a major objective. However, due to changes in the business environment, the âabsolute
assuranceâ services was replaced with âreasonable assuranceâ and with expression of opinion on the truth and
fairness of the report by the auditors as the major objective (Salehi & Rostami, 2009; Fadzly & Ahmad, 2004).
Despite this change, the publicâs expectation remained unchanged thereby accounting for the reasonable gap.
2.5 Performance Gap
This was actually emphasized by Porter in 1993 (as cited in Porter & Gowthorpe, 2004). This gap is defined as the
difference between what is reasonably expected by society, and what is perceived to be achieved. It is further
broken down into deficient standard gap and deficient performance gap.
Deficient Standard Gap
According to Akinbuli (2010), the deficient standard gap is the difference between what auditors are reasonably
expected to do by the society (users) and what the laws, standards etc. require them to do. It is the gap between
the responsibilities expected and the responsibilities expressly defined by statutes. Although some of these
responsibilities expected are unreasonable, few are actually reasonably and therefore show the defect in
standard (Porter & Gowthope, 2004).
Deficient Performance Gap
The failure of auditors to perform up to the reasonable responsibilities expectation of the society is referred to as
a deficient performance gap. That is, when auditors are perceived to perform below standards. Akinbuli (2010)
used the word ârotten auditing gapâ to describe the perceived underperformance of the auditors by the users, a
performance inconsistent with professional standards. Some of the adjudged reasons for this gap are provision of
non-audit service by auditors, dependence of auditors on management, self and conflicting interest of the
auditors... just to mention a few.
2.6 General causes of Audit Expectation Gap
So many reasons have been adduced as the causes of the audit expectation gap experience between auditors
and users. Sharhk and Talha, (2003) opines some of the widely suggested reasons to include the following viz the
probabilistic nature of auditing, the ignorance and unreasonable expectation of users, evolutionary development
of audit responsibilities which creates response time lag to changing expectation, attempts by the profession in
controlling the direction of the expectation gap. Some other reasons as observed in literature are auditorsâ
dependence, unreasonable expectation by users, ignorance in the parts of users as to the responsibilities of
auditors, audit-reporting model, and perceived auditors responsibilities.
For the purpose of this work, we shall limit ourselves to just one aspect of audit expectation gap viz
reasonableness gap. With respect to this, we shall focus on auditorsâ responsibilities and duties as this is used in
extant literatures as proxy for reasonableness gap.
2.7 Auditorsâ Responsibilities and Duties
It should be noted that the duties of an auditor in Nigeria are as defined by statutes i.e. Companies and Allied
Matter Act (CAMA) 1990 as amended, Generally Accepted Auditing Standards (GAAS) and International
Standards on Auditing (ISA). The auditors are not expected to perform any duty outside these, which have been
defined.
Some of the responsibilities as defined by statutes for auditors include:
S.360 & 359 (CAMA 1990 as amended)
Express an opinion in the report prepared by management as to the truthfulness and fairness
Must state in his report if he obtained all necessary information and explanations relevant
If proper books of account have been kept
Proper returns have been obtained from branches not visited
If the account are in agreement with the records
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If the balance sheet and income statement show a true and fair view of the position and performance of the
company
Aside the above, professional and regulatory bodies issues guidelines and standards that should be observed in
the course of carrying out an audit. If the responsibilities expected by the public most times fall outside the scope
of the one defined by statute, then such can lead to the existence of a gap.
2.8 Prior Researches on Audit Expectation Gap
The issue of audit expectation gap is not new; it dates back to 1974 when liggio was considered the first to use
the concept in auditing literature (Sidani, 2007; Koh & Woo, 1998; Fadzly & Ahmad 2004), various researches
have been conducted in different countries over the years.
Koh and Woo (1998) embarked upon a research in which the objective was to identify the nature and structure
of audit expectation gap and proffer ways by which the gap can be reduced. Issues such as expanded audit
reports, education, structured audit methodologies were outlined as possible ways of minimizing the gap. Closely
related to this research is the work by Lee, Ali and Kadasamy (2008) which sought to address the practicality of
the suggested solutions of Koh and Woo (1998). They opined that education, structured audit methodologies,
expanded audit report, and expansion of auditorâs responsibilities are merely theoretical ways of reducing the
gap citing Malaysia as an example.
Best, Buckby and Clarice (2001) also conducted a research on audit expectation gap. They used a questionnaire
survey and the Mann Whitney test in their analysis; they discovered that there existed a wide gap between
auditors and users with respect to auditorsâ responsibilities especially in the area of fraud prevention and
detection maintenance of accounting record and the exercise of judgment in selecting audit procedures.
Furthermore, their finding supported the call for the change of the wordings of the audit report from the short
form to the long form.
Fadzly and Ahmad (2004) extended the research already conducted in Malaysia to include an experiment to
determine the practically of education as a tool for minimizing the gap. They observed the presence of audit
expectation gap between auditors and users (bankers, investors, and stockbrokers) as relating to auditors
responsibilities for fraud prevention and detection, preparation of accounts and internal control. They also
noticed that auditorsâ scope of legal responsibility and culpability were significant contributions to the gap.
Furthermore, observations from the experiment conducted revealed the reduction in expectation gap when
users were educated using reading materials thereby buttressing on the effectiveness of education.
Still, in 2004, some empirical researches were conducted in the United Kingdom and Peopleâs Republic of China
by Porter and Gowthorpe, (2004) and Lin and Chem, (2004) respectively. In the UK, Porter and Gowthorpe
undertook a study to investigate the structure, composition, and extent of the audit expectation performance
gap in both UK and New Zealand; they compared the results both longitudinally and cross-culturally, it revealed
that the audit gap comprised the reasonableness gap, deficient standard gap and deficient performance gap.
Significant contribution to these gaps respectively were; societyâs lack of knowledge despite the introduction of
the long form audit report; auditors not reporting on matters that dealt with reliability of information presented
in the annual report regarding directorsâ remuneration policy and record; inadequate monitoring by regulatory
bodies in order to enhance performance. Similarly in China, using a mailed questionnaire survey and T-test
analysis, it was discovered that the audit expectation gap existed in the areas of auditorsâ responsibility to fraud,
third party liability, and audit objective. It was argued that factors such as clearly stating the responsibilities of
auditors and management towards fraud, improving standards for independence to enhance performance must
be in place for the audit expectation gap to be reduced.
Other scholarly works on audit expectation gap include Dixon, Woodhead and Sohhman 2006); Imen and
Chrystelle (2009); Ojo (2006); Sidani (2007); Salehi, Mansour and Azary (2009) etc. All these studies revealed the
presence of expectation gap. Most of them adopted questionnaire surveys and few extending to include
interviews or experiment as research instruments. Furthermore, the T-test or Mann Whitney test for analysis was
employed.
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2.9 Theories on the Roles of Auditors
The theories that are put forward here are some of the major theories from which the roles and need of auditing
can be informed. These theories may help us appreciate why there are divers perceptions to the roles or
responsibilities of auditors.
Policeman Theory
According to Hayes, Schilder, Dassen and Wallage (1999), this was the dominant theory on auditing until the
1940s. This theory advocates that an auditor play the role of a police officer focusing on arithmetical accuracy
and on prevention and detection of fraud. They further opine that the inability of the theory to explain the shift
of auditing to verification of truth and fairness of the financial statementsâ has made it lose its explanatory
power.
Agency Theory
This theory analyses the relationship between two parties; investors and managers, where managers are seen as
agents, acting on behalf of the principal (investors) for a consideration. According to this theory, managers will
always want to act in self-interest, which most times are contrary to the interest of investors. Therefore, the role
of the auditor is to ensure that the interest of investors is protected (Anderson & Emander, 2005; Fiet, 1995).
Stakeholder Theory
This is an extension of the agency theory. It came up as an argument against the premises that not only investors
have interests in the organization as such the role of the auditors is to ensure that all who have stake in the a
business are protected by acting as watchdogs to the activities of management.
3.0 Methodology
The survey research design was used and it is similar to the ones used in Dixon, Woodhead and Sohliman (2006)
and Fadzly and Ahmed (2004), which was also described by Denscombe (2003) but with slight modifications. This
design was employed as it provided the advantage of effective and efficient collection of information from a large
number of respondents and its ability to use statistical techniques to determine statistical significance.
A sample size of 400 comprising auditors and users (investors, managers and the public was selected from the
population of auditors and users using the simple random sampling technique. The data collection tool is a
structured five point likert type scale questionnaire, which has two (2) sections; Section A and Section B. The
section A contained five (5) questions, while section B contained Eight (8) questions.
The hypothesis was tested using ANOVA test for analysis. This test was informed on the premise that it can be
used to test for differences between means of two or more groups selected from the same population.
3.1 Data Analyses and Testing of Hypotheses
3.1.1 Reliability Test
Table 3.1 Cronbach Reliability Test
Questionnaire Section B Cronbachâs Alpha Number of Items
Responsibility questions 0.978 8
Source: Researcherâs computation (2013)
A critical look at the above table reveals the extent of internal consistency of the scales and questions put
forward to respondents. On the average, the cronbachâs alpha is approximately 98%, which according to the
George and Mallery (2003) is an excellent score for reliability.
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Table 3.2: Demographic Factor and Response Rate
Number of
survey
Number of
response
% of response rate Sex Knowledge of accounting
& auditing
M F Y N
Auditors 100 80 80% 56 24 80 -
Managers 100 76 76% 52 24 64 12
Investors 100 76 76% 36 40 68 8
Public 100 88 88% 44 44 76 12
Total 400 320 80% 188 132 288 32
Source: Researcherâs computation (2013)
From table 5.2, 100 questionnaires each were administered to our groups of respondents. A total of 80
questionnaires were returned by the auditors (80% response rate), 76 from managers (76% response rate), 76
also from investors (76% response rate) and 88 from the general public (88% response rate). Furthermore, based
on sex, most of our respondents were males (188) and a good number of our respondents claimed to have
knowledge in the field of accounting and auditing.
3.2 Hypotheses Testing and Analyses
In this section, we seek to restate our hypothesis, test, and analyze the results. The decision rule is to reject the
null hypothesis if the F-calculated is greater than the F-critical (p-value is lower than 0.05) or accept it if
otherwise.
H1: Users do not expect auditors to give an absolute assurance
H2: Users and auditors do not agree as regards the auditorsâ duty for fraud detection and Prevention
H3: There is no reasonableness audit expectation gap between auditors and users of audit reports
Table 3.2.1: Testing of Hypothesis
Total Audito
rs
Managers Investors Public Users FS PV
Question 6 4.0 4.26* 4.21* 4.68* 4.42* 7.14 1.4E-5
Question 7 4.75 4.37* 4.32* 3.82* 4.12* 24.06 7.1E-18
Question 8 4.65 2.84* 3.63* 3.68* 3.42* 37.14 1.9E-26
Question 9 2.95 4.79* 3.95* 4.59* 4.47* 44.26 8.4E-31
Question 10 4.45 4.21* 4.16* 3.68* 3.90* 16.81 9.3E-13
Question11 2.9 4.16* 3.79* 4.82* 4.35* 41.95 2.0E-29
Question12 2.15 2.84* 3.05* 3.32* 3.12* 11.98 3.2E-9
Question13 4.95 4.68* 4.16* 4.45* 4.44* 19.01 2.8E-14
Total 32.7 35.27 34.32 36.09 35.30 218.93
* Sig diff @ 0.05, FS=F-statistics, PV = Prob. Value
From the above table, we observe that for all the questions asked on the responsibilities of auditors, there were
significant mean differences between the various groups of respondents. In specifies, question 6, which relates to
hypothesis one (type of assurance to be provided by the auditor) reveals that managers, investors and the public
believe the auditors are responsible for perfect assurance and not reasonable assurance. With respect to
question 7, which bothers on managements responsibility for producing the financial report, users and auditors
differ in their perception of who is responsible for preparing the financial statement. This finding is in agreement
with the findings of Fadzly and Ahmad (2004) but contrary to the findings by Best et al (2001). Questions 8, 9, &
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10 relate to hypothesis two (fraud detection and prevention). Interestingly, the rating for auditors is close to
three (midpoint), which may indicate uncertainty over their detection role. Furthermore, the result shows that
users agree within themselves that management is responsible for preventing fraudulent actions. Questions 11,
12, & 13 bother on responsibilities of auditors to shareholders and attendance in annual general meetings. The
results show that auditors and users significantly differ in perception as regarding these responsibilities. As
regards hypothesis three (presence of reasonableness gap), since for all the questions the observed F statistics is
greater than the F critical, we therefore reject the null hypothesis and accept the alternative that there is a
significant difference in usersâ perception of the responsibilities of auditors.
4.0 Summary of Findings
In summation, our findings indicate that Users expect the auditors to give absolute assurance. Users and auditors
are in agreement as regards the auditorsâ duty for fraud detection and prevention. There is the presence of
reasonableness audit expectation gap between auditors and users of audit reports. Our findings are in line with
the American Institute of Certified Public Accountant (AICPA),(as cited in Dixon, Woodhead, & Soliliman, 2006),
Best et al (2001), Fadzly and Ahmad (2004), Porter and Gowthorpe (2004), Ojo (2006)... just to mention a few.
They generally assert audit expectation gap can be a result of discrepancies between what the public and users of
financial information believe the auditors are responsible for and what the auditors believe they are responsible.
4.1 Conclusion
This study sought to examine usersâ perspective of reasonableness audit expectation gap in Nigeria. Information
was sought from respondents using a structured likert scale questionnaire. We basically found out that there
exist a reasonableness gap between auditors and users (managers, investors and the public) of audit reports as
regarding the responsibilities of auditors.
4.2 Recommendations
Based on our findings, we recommend that users be enlightened about the true responsibilities of auditors. We
prescribe education as a method to reduce unreasonable expectation of the public as well as users of audited
reports. Such awareness can be created by enriching the curriculum of Nigerian tertiary with subjects that relate
to auditing. Furthermore, awareness campaign should be organized by both government and auditing profession
from time to time through appropriate media not just for their members alone but for the auditing community as
a whole. These campaigns or seminars can be formal or informal depending on the level and nature of the target
audience.
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