This research set out to find out the perception of Members of ICAN, an important stakeholder group, on the fresh initiatives at bridging the audit expectation gap problem. Four hypotheses were formulated and tested in the course of this study.

1. BRIDGING THE AUDIT EXPECTATION GAP:THE PERCEPTION
OF ICAN MEMBERS
A THESIS SUBMITTED TO THE DEPARTMENT OF ACCOUNTANCYIN PARTIAL
FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTEROF
SCIENCE
(PAGES 82)
ABSTRACT.
This research set out to find out the perception of Members of ICAN, an important
stakeholder group, on the fresh initiatives at bridging the audit expectation gap problem.
Four hypotheses were formulated and tested in the course of this study. A survey design
approach was adopted for the study .Out of a population of 23,324, 159 ICAN
MEMBERS were randomly selected. The t- test statistic and the Chi square were used to
test the hypotheses of the study. The study found out, among others, that 24 out of the 29
methods on offer for bridging the audit expectation gap and articulated in the
questionnaire were acceptable to members of ICAN. Consequent upon the findings, it
was recommended that ICAN should commence the process of implementing some of the
methods within its purview and approved by its members as capable of ameliorating the
expectation gap problem.
TABLE OF CONTENTS
Title page … … … … … … …
Certification page … … … … … …
Approval page … … … … … …
Dedication … … … … … … …
Acknowledgement … … … … … …
Abstract … … … … … … …
Table of Contents … … … … … …
List of tables … … … … … … …
CHAPTER ONE
INTRODUCTION … … … … … …
1.1 Background of the Study … … … …
1.2 Statement of Research Problem … … …

2. 1.3 Objectives of Study … … … … …
1.4 Research Questions … … … … …
1.5 Research Hypotheses … … … … …
1.6 Scope and Limitations of study … … …
1.7 Significance of Study … … … … …
1.8 Definition of Terms … … … … …
References … … … … … …
CHAPTER TWO
2.0 Review of Related Literature and Theoretical Frame work
2.1 The Nature and Dimensions of Audit expectation
Gap Problem … … … …
2.2 Communication Gap … … … … …
2.3 Performance Gap … … … … …
2.4 Causes of Performance Gap or Audit Failures …
2.5 Fresh impetus to The Audit Expectation Gap Problem
2.6 Some Current methods in issue aimed at Bridging the
Audit Expectation Gap … … … … … … 16
2.7 Fresh Initiatives/Methods aimed at bridging the Audit
Expectation Gap … … … … … … … 18
2.8 Encouragement of Joint Audit and Audit Competition … … 20
2.9 Introduction of Mandatory Rotation of Auditors … … … 21
2.10 Establishment of Financial Reporting Council … … … 23
2.11 Composition of an active Audit Committee made up of
non- executive directors and knowledgeable in
financial matters … … … … … … … 24
2.12 Separation of Audit Services from other services … … … 25
2.13 Punish Company Management who mislead their Auditors… … 27
2.14 Establishment of government oversight body to regulate

3. Audit Practice … … … … … … … … 28
2.15 Introduce Forensic and Value for Money Audit … … … 30
2.16 Encourage Shareholders to attend annual general meetings
and ask difficult questions … … … … … … 31
2.17 Bridging the audit expectation gap- the perception of
Chartered Accountants- experience from other countries … … 31
2.18 Review of Related Literature and Theoretical Framework-
A summary … … … … … … … … 33
References … … … … … … … … 35
CHAPTER THREE
3.0 Research Design and Methodology … … …
3.1 Research Design … … … … …
3.2 Nature and Sources of Data … … … …
3.3 Population and Sample Size … … … …
3.4 Data Analysis Technique … … … …
3.5 Validation and Reliability of Instruments … …
References … … … … … …
CHAPTER FOUR
4.0 Data presentation and Analysis … … … ..
4.1 Introduction … … … … … …
4.2 Presentation and Analysis … … … …
4.3 Test of Hypotheses 1 … … … … …
4.4 Test of Hypothesis 2 … … … … …
4.5 Additional Statistical Test for Hypothesis 2 … …
4.6 Test of Hypothesis 3 … … … … …

4. 4.7 Test of Hypothesis 4 … … … … …
CHAPTER FIVE
5.0 Summary of Findings, Conclusion and Recommendations…
5.1 Summary of Findings … … … … …
5.2 Conclusion … … … … … …
5.3 Recommendations … … … … …
Bibliography … … … … … …
Appendix [Questionnaire] … … … …
LIST OF TABLES
2.1 Key Features and advantages of Joint Audit … … … … 20
3.1.5 Point likert Scale … … … … … … … 39
3.2. 3 Point likert Scale … … … … … … … 40
4.1. Questionnaire Administration … … … … … 43
4.2. Experience Distribution of Chartered Accountants … … … 44
4.3. Gender Distribution of Respondents … … … … … 44
4.4 Distribution of Responses in Respect of all the suggested
methods of bridging the audit expectation Gap … … … 45
4.5. Distribution of methods that were over 75% endorsed
by respondents … … … … … … … 50
4.6 Distribution of methods that received between 50% and 75%
endorsement by respondents … … … … … … 53
4.7 Distribution of methods that received less than 50%
endorsem ent by respondents …… … … … … 54
4.8 Responses with negative t- calculated values … … … … 56

5. 4.9 Chi square test result for hypothesis 2 … … … … 58
4.10. Distribution of responses on other 5 Questions on bridging
the audit expectation gap … … … … … … 59
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Audit expectation gap is the gap between the role of an auditor as understood by
the auditor and the users of financial statements .It is a gap between what the auditor is
doing and what the society expects him to do creating the impression that the statutory
objective of audit is not meeting the social needs of the populace. The functions
performed by the accounting profession are vital to the growth and stability of the
financial market, whether at the global level or at the local level (Egbiki, 2006: 56 - 57).
An audit has been defined as an examination of the financial statements of an
enterprise by an independent expert (the auditor) with a view to attesting that such
financial report (in his opinion) show a true and fair view of the state of affairs of that
enterprise for the period under review. The contribution of the auditor is to provide
credibility to information. This means that the information can be believed and that it can
be relied upon by outsiders. The outsiders include shareholders and government
regulators. Others are creditors and customers. Usually these third parties use the
information to make various economic decisions. An example of this decision is whether
to invest in the organization. Economic decisions are made under conditions of
uncertainty as there is always a risk that the decision maker will select the wrong
alternative and incur a significant loss. The credibility added to the information by the

6. auditors actually reduces the decision makers’ risk Therefore auditors reduce information
risk, which is the risk that the financial information used to make a decision is materially
misstated. The legal position is that an audit is carried out to enable an auditor form an
opinion as to the truth and fairness of financial statements presented to him by his client’s
management and to report accordingly. The accuracy of a company’s accounts is the sole
responsibility of the directors. However, the accounting profession in Nigeria and other
climes has been under intense pressure due to rising public expectations.
These expectations have been fuelled largely as a result of demise of some financial
institutions in the late 80’s to early 1990’s and very recently for banks that failed to meet
the statutory minimum recapitalization to the tune of N25 billion .Yet other banks failed
the CBN ” stress” test. In the light of these developments the heat was turned on
accountants as members of the public sought whom to blame. The wide spread news of
financial scandal and false reporting rife in the collapsed institutions have cast the
organizational controls and auditors in very poor light. It has also tended to undermine
the confidence of the public in the profession to detect and prevent corporate abuses.
Audit failures have been blamed, partly, on greed on the part of auditors. In
defense, auditors have often replied that they are not primarily responsible for detecting
frauds and errors. However, shareholders, depositors and most of the general public
remain unimpressed as they query the value of a watchdog that cannot bark let alone bite.
Most people cannot seem to accept the legally defined status. They would wish to see an
auditor’s certificate as an assurance that all that needs to be known about the financial
transactions of a company have been disclosed to the auditor. In the same vein, an
auditor’s signature should be taken to mean that all is well with the health of the
institution concerned and that there has been no fraud or other malfeasance. This,
however, is often not the case.
Two components of the audit expectation gap have been identified –
communication gap and performance gap. Communication gap has to do with what the

7. auditors think is their role and what the members of the public perceive should be the role
of auditors. Performance gap, on the other hand, occurs when public expectations are
reasonable but the auditor’s performance does not fulfill them. This means that there is a
short fall in the auditor’s performance. (Okafor and Okaro, 2009: 11).
In the past, attempts have been made to bridge the gap by the profession. For
example attempts have been made to educate users of the limitations of the modern audit
process. As part of the process of educating the user of audited accounts, the modern
audit report usually tries to delineate clearly the respective responsibilities of the directors
of a company and that of the auditor in respect of audited financial statements. The
profession has also tightened the noose on self regulation bringing to book erring
members of the profession. The mandatory continuing professional education whereby
members of professional accounting bodies are compulsorily required to attend
professional seminars has also ensured that members’ skills are updated and horned up.
However, like a sore thumb, the gap appears to have remained as wide as ever. At
the local level, the recent scandal in Cadbury Nigeria Plc whereby profits were overstated
by a whopping sum of over N13 billion, and the subsequent indictment of the accounting
firm of Akintola Williams Delloite for audit failure, has further aggravated the
expectation gap conundrum.
The international community has not been spared either. The collapse of the energy
giant Enron in the United States of America in 2002 as a result of what was obviously a
case of audit failure and wobbly accounting standards has again ignited a global search
for tools to at least narrow the expectation gap.
The literature is awash with fresh suggestions and initiatives aimed at tackling the
problem of expectation gap. ICAN MEMBERS are a very important stakeholder group in
the search for a solution to the expectation gap problem. Their cooperation or lack of it
can have a tremendous effect on the resolution or otherwise of the problem. This work is
therefore an attempt to document in Nigeria, the perception of ICAN MEMBERS as to

8. the initiatives for bridging the audit expectation gap problem.
1.2 STATEMENT OF RESEARCH PROBLEM
The global search for a solution to the audit expectation gap problem has become
strident. The credibility of the accounting profession appears to be at its lowest ebb. In
the United States of America, the profession has lost its self regulatory status .In this
circumstance, the profession is bestirring itself and the result is a welter of fresh
suggestions and initiatives aimed at solving the expectation gap problem. Some of the
suggestions appear mundane while some others at best appear controversial. One U.K
research study even concluded that expectation gap problem cannot be eliminated. There
is the belief that the accountancy profession has resisted change in auditing for so long
that it was unlikely to change of its own initiative. In the light of the above, what is the
perception of ICAN MEMBERS in Nigeria as to the fresh suggestions and initiatives
aimed at addressing the expectation gap problem?
1.3 OBJECTIVES OF STUDY
This study has the general objective of ascertaining the perception of ICAN
MEMBERS in Nigeria on the vexed issue of bridging the audit expectation gap. The
specific objectives of this study are as follows
1. To ascertain the perception of ICAN MEMBERS in Nigeria as to the suggestions
for bridging the expectation gap.
2. To test the popularity, among ICAN MEMBERS in Nigeria, of the suggestion that
convocation of all stakeholders dialogue to negotiate the issues involved in the
audit expectation gap problem has become necessary
3. To elicit the opinion of ICAN MEMBERS in Nigeria as to whether undue delay
by the Accounting profession in Nigeria may lead unwittingly to government

9. legislative interference.
4. To enquire into the attitude of ICAN MEMBERS in Nigeria as regards enlisting
the co-operation of rival accounting professionals in Nigeria in the search for
solution to the audit expectation gap problem.
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