DOI: 10.5176/2251-1997_AF18.63
Authors: Sajid Bashir, Professor Jim Haslam & Dr. Lei Chen
Abstract:
There have been a number some studies which have contributed to the Audit Expectations Gap (AEG) literature, and the existence of the research area is recognized internationally and remains as one of the important areas in auditing & accounting. Most of the studies have sought to identify whether an expectation gap exists and what the contributing factors are, see Porter (1993), Fazdly and Ahmad (2004), and Dixon et al. (2006). Facilitated learning into auditor independence carries a significant contribution to this subject, see Sweeney (1997), Lin and Chen (2004) and Alleyne et al. (2006). Most of the studies conducted have found that users possess little understanding of the financial statements and the role of auditors. This situation has not improved over time. However, the expectations for the role of the auditors have increased due to some reasons, notably including significant corporate collapses, (Monroe & Woodcliffe 1994). Also, companies need to incorporate Corporate Social Responsibility (CSR) because their behavior may become the subject of bias reviews, (APCO Worldwide 2004). Previous studies have argued that different stakeholder groups have different expectations and organizations are reluctant to provide sensitive information to stakeholders. Over time, an expectations gap has grown significantly, and auditors have been criticised reflecting a loss of confidence in their work. The advent of global corporate collapses has led to questions being asked about the actual role of the auditor and further questions as to their exact responsibilities. The expectations gap impacts negatively on investor’s confidence. Previous research has primarily focused on examining the audit expectations gap and specific issues such as fraud, Hassink et al, (2009) reasons for the existence of the audit expectation gap, Monroe & Woodcliffe (1994), and explaining the theory and practice of a typical audit process, De Martinis & Burrowes, (1996), Turner, Beeler & Daniels, (2004). Several studies have confirmed the existence of the gap in the US, the UK, and other developed countries, as user groups and the public have continuously criticised auditors for not doing enough to detect and report frauds in organizations. In addition to the examination of fraud detection and reporting as part of my research, I will also incorporate and provide a significant amount of understanding into the different characteristics of audit reports in different countries and those who use them – this being the cultural feature to my Ph.D contribution. In my research, I will use the UK, Singapore and, China. These countries contain differences in their accounting policies, for example, Singapore carries greater state intervention of corporate governance. In October 2014, Singapore’s parliament passed over 200 amendments to the Companies Act, and in April 2015, the Accounting and Regulatory Authority announced numerous legislative changes. Corporate governance influences the audit disclosure practices for example, and the accounting rules can thus be open to interpretation leading to wider expectations gap. The interpretation aspect of this audit procedure forms part of the Audit expectation gap in the literature I wish to explore as I believe that this a significant area in which the widening expectations gap exists. Further and more importantly with regards to my research question, these countries have adopted different accounting systems, and it is with this in mind that I am able to examine their cultural differences.
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