The study examined the extent to which auditors’ disposition, skill and performance contribute to audit expectation gap in Nigeria. The specific objective of the study was to examine the extent to which auditors’ disposition, skill and performance contribute to audit expectation gap in Nigeria. The methodology adopted for the study was sample survey.
International Journal of Mechanical Engineering and Technology (IJMET) Volume 10, Issue 12, December 2019, pp 465-483, Article ID: IJMET_10_12_047 Available online at http://www.iaeme.com/ijmet/issues.asp?JType=IJMET&VType=10&IType=12 ISSN Print: 0976-6340 and ISSN Online: 0976-6359 © IAEME Publication CONTRIBUTIONS OF AUDITORS’ DISPOSITION, SKILL AND PERFORMANCE TO THE EXISTENCE OF AUDIT EXPECTATION GAP IN THE PUBLIC SECTOR IN NIGERIA Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke Ph.D Department of Accountancy, University of Nigeria Nsukka, Enugu Campus, Nigeria ABSTRACT The study examined the extent to which auditors’ disposition, skill and performance contribute to audit expectation gap in Nigeria The specific objective of the study was to examine the extent to which auditors’ disposition, skill and performance contribute to audit expectation gap in Nigeria The methodology adopted for the study was sample survey The population of the study consisted of Senior staff of Enugu State Broadcasting Service (ESBS), Enugu State Waste Management Agency (ESWAMA) and Enugu State Water Corporation totaling one hundred (100) in number while the sample size was eighty (80) respondents The analytical techniques adopted for the study were descriptive statistics and ordinary least squares while unit root test was used to ascertain the stationary properties of the variables under study The study found out that auditors’ disposition, skill and performance significantly contribute to audit expectation gap in Nigeria The study recommended that the users of audited accounts should familiarize themselves with the laws, statutes and standards that regulate and stipulate the duties of an auditor so as to better appreciate the scope of duties and responsibilities of the auditor as only such will help to bridge the audit expectation gap Keywords: Audit Expectation Gap, Bridging Audit Expectation Gap, Parastatals, Financial Statements, Management, Users of Financial Report Cite this Article: Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke, Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria International Journal of Mechanical Engineering and Technology 10(12), 2020, pp 465-483 http://www.iaeme.com/IJMET/issues.asp?JType=IJMET&VType=10&IType=12 INTRODUCTION Ojo (2006) defines audit expectation gap as the difference in beliefs between auditors and the public about the duties and responsibilities assumed by auditors and the messages conveyed by audit reports Porter (2011) in his study on the use of audit decision to improve auditor adherence to a ―standard‖, is of the opinion that the audit expectation gap is the difference between what the public expects from the auditing profession and what the profession actually http://www.iaeme.com/IJMET/index.asp 465 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke provides This definition is also adopted by Bostick (2009) in his research on the expectation gap in the legal system The author did an empirical study of the audit expectation – performance gap and defined the expectation gap as the gap between society‘s expectations of auditors and actual auditors‘ performance Alani (2014) states that the audit profession may try to mitigate the audit expectation gap by placing clear controls for audit process required to be adhered to strictly In the public sector in Nigeria, the level of corruption and poor accountability and transparency call to question the whole essence of audit whether by internal or external auditors There is the general believe that auditors simply robber stamp whatever the management or administrators of ministries and agencies might have reported The activities of anti graft agencies such as the Economic and Financial Crimes Commission (EFCC), and the Independent Corrupt Practices Commission (ICPC) in arresting and prosecuting government officials for various monumental financial frauds despite clean audit reports raised on their offices earlier tend to buttress the public opinion that these audits fall short of expectation in the public sector in Nigeria There is the fear that audit expectation gap is huge in the Nigerian society especially with respect to public sector audit Despite the application of public sector audit standards by the office of the auditor general‘s staff and the other professional auditors recommended by the general‘s office to audit government parastatals, this gap is widening by the day Considering that auditors are expected to give an opinion on the fairness of financial statements; give an opinion on the company's ability to continue as a going concern; on the company's internal control system; on the occurrence of fraud; and on the occurrence of illegal acts the question remains: to what extent these opinions when expressed certify the expectations of the financial statement users and if not, why? Specifically, auditors‘ disposition, the complicated nature of the audit function, conflicting role of auditors, unawareness and unreasonable expectations, retrospective evaluation of auditors‘ performance, auditors not being independent, miscommunication of auditors, users‘ over expectation of standards contribute to audit expectation gap in Nigeria? Hence we examine these critical factors that could contribute to the continued existence of audit expectation gap in these government parastatals That is, this paper evaluates the challenges militating against closure of the audit expectation gap in government parastatals in Nigeria with particular reference to three government parastatals in Enugu State of Nigeria It works on the hypothesis that Auditors‘ disposition, the complicated nature of the audit function, conflicting role of auditors, ignorance and unreasonable expectations, retrospective evaluation of auditors‘ performance, lack of independence of auditors, poor auditor communication, significantly engender audit expectation gap in Nigeria The scope is focused on three government parastatals; Enugu State Broadcasting Service (ESBS), Enugu State Waste Management Agency (ESWAMA) and Enugu State Water Corporation while the duration emanated from 2012 to 2016 The paper is organized in five parts: part one is the introduction, followed by part two which is the review of related literature while part three is the methodology adopted for the study Part four is the presentation of findings and analysis while part five concludes the work and shows the recommendations REVIEW OF RELATED LITERATURE 2.1 Conceptual Review 2.1.1 Audit Expectation Gap Monroe and Woodliff (1994) state that an audit expectation gap exists when there are differences in beliefs between auditors and the public about the duties and responsibilities assumed by auditors and the message(s) conveyed by audit report In recent years, the auditing profession has been involuntarily placed in the sport light particularly because of some spectacular and well-publicized corporate collapses and the subsequent implication of http://www.iaeme.com/IJMET/index.asp 466 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria the reporting auditors (Aljaaidi, 2009) Salehi (2011) is of the view that many users misunderstand the nature of the attest function of auditors, especially in the context of an unqualified opinion Some users believe that an unqualified opinion means that the entity has foolproof financial reporting Some feel that the auditor should not only provide an audit opinion, but also interpret the financial statements in such a manner that the user could evaluate whether to invest in the entity There are also users who expect auditors to perform some of the audit procedures while performing the attest function like penetrating into company affairs, engaging in management surveillance and detecting illegal acts and/or fraud on the part of management (Salehi, 2011) It is these high expectations on the part of users of financial statements that create a gap between auditors‘ and users‘ expectations of the audit function In addition, the users also place the responsibility for narrowing the gap on auditors and others involved in preparing and presenting financial statements 2.1.2 Bridging the Audit Expectation Gap The expectations gap is considered to be one of the major issues confronting the accountancy profession Some suggestions have been made to reduce the audit expectation gap These vary from issuing an expanded audit report that will inform users of what auditors actually do, carry out education of the public on the duties of an auditor, broaden the role of auditors in the area of fraud detection and strengthen the independence of auditors (Enyi, Ifurueze and Enyi, 2012) Lee and Ali (2008) suggested that attention should be given to the reasonable expectations of auditors which are not required by existing standards on auditing In addition, enforcement measures are required for regulators so that the audit standards are applied to improve the quality of audit Gloeck (1998) emphasized that these standards are considered crucial as they represent a formal, published record of how the work of an auditor should be conducted Alternative approaches exist for regulatory bodies such as the Securities and Exchange Commission (SEC), the Central Bank of Nigeria (CBN), the Nigerian Stock Exchange (NSE) and the Institute of Chartered Accountants of Nigeria (ICAN) in ensuring that the integrity of the corporate world is maintained and that illegal acts are brought to book 2.1.3 Financial Statement Financial statements are formal records of the financial activities and position of a business, person, or other entity Relevant financial information is presented in a structured manner and in a form which is easy to understand They typically include four basic financial statements accompanied by a management discussion and analysis (Idowu and Oluwatoyin, 2014): A balance sheet or statement of financial position, reports on a company's assets, liabilities, and owners equity at a given point in time An income statement—or profit and loss report (P&L report), or statement of comprehensive income, or statement of revenue & expense—reports on a company's income, expenses, and profits over a stated period of time A profit and loss statement provides information on the operation of the enterprise These include sales and the various expenses incurred during the stated period A statement of changes in equity or statement of equity, or statement of retained earnings, reports on the changes in equity of the company over a stated period of time A cash flow statement reports on a company's cash flow activities, particularly its operating, investing and financing activities over a stated period of time 2.1.4 Users of Financial Reports There are many users of the financial statements produced by an organization The following list identifies the more common users of financial statements, and the reasons why they need this information (Salehi, 2011): http://www.iaeme.com/IJMET/index.asp 467 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke Company Management The management team needs to understand the profitability, liquidity, and cash flows of the organization every month, so that it can make operational and financing decisions about the business Competitors Entities competing against a business will attempt to gain access to its financial statements, in order to evaluate its financial condition The knowledge they gain could alter their competitive strategies Customers When a customer is considering which supplier to select for a major contract, it wants to review their financial statements first, in order to judge the financial ability of a supplier to remain in business long enough to provide the goods or services mandated in the contract Employees A company may elect to provide its financial statements to employees, along with a detailed explanation of what the documents contain This can be used to increase the level of employee involvement in and understanding of the business Governments A government in whose jurisdiction a company is located will request financial statements in order to determine whether the business paid the appropriate amount of taxes Investment analysts Outside analysts want to see financial statements in order to decide whether they should recommend the company's securities to their clients Investors Investors will likely require financial statements to be provided, since they are the owners of the business, and want to understand the performance of their investment Unions A union needs the financial statements in order to evaluate the ability of a business to pay compensation and benefits to the union members that it represents 2.2 Theoretical Framework The theoretical framework of the study is anchored on the agency theory: 2.2.1 Agency Theory According to the agency theory, a company consists of a nexus of contracts between the owners of economic resources (the principals) and managers (the agents) who are charged with using and controlling those resources (Jensen & Meckling, 1976) 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 agents Furthermore, an assumption of agency theory is that principals and agents act rationally and use contracting to maximize their wealth A consequence of this assumption may be the ‗moral hazard‘ problem (Jensen & Meckling, 1976), indicating that in an effort to maximize their own wealth, agents may face the dilemma of acting against the interests of their principals Since principals not have access to all available information at the time a decision is made by an agent, they are unable to determine whether the agent‘s actions are in the best interest of the firm Applying this agency theory to this study, auditors are the ‗agents‘ who are expected to act independently in the best interest of members of the public whose funds the federal parastatals are using They are expected to constantly audit and prepare an objective and critical audit report which would show the ‗true and fairness‘ of the books of the parastatals and in return, can aid improvement in the management of finances of the parastatals The expectation is that auditors owe the masses, regulatory agencies, tax authorities et cetera, the duty of care and perfect fiduciary relationship A specific concern is their failure to challenge or validate the assumptions that underlie significant accounting estimates of the management of the parastatals (NACD, 2010) It is frequently emphasized that management of some firms compromise external auditors at the detriment of the principal in the audit engagement http://www.iaeme.com/IJMET/index.asp 468 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria 2.3 Empirical Review Chinwuba and Otalor (2013) studied narrowing the Expectation Gap in Auditing: The Role of the Auditing Profession The study sought to ascertain the role of the auditing profession in narrowing the audit expectation gap in the private sector in Nigeria Self administered questionnaire was used in the study The data generated from the responses of the subjects were analyzed using descriptive and statistical analysis through the computer (SPSS 16.0) It was found as a corollary, that the public is ignorant of the duties of the auditor and this lack of knowledge is responsible for unreasonable expectations of the public from auditors Based on the findings and conclusion, it was recommended that the public need more education on the duties and responsibilities of the auditor; the standard auditor‘s report should be expanded to include disclaimer clauses clearly showing that it is not a certificate or guarantee of the financial soundness of the Auditee; it should be clearly stated in the audit report that the auditor is not the Compliance Officer of the audited company; and that the auditor‘s report should add that the opinion expressed by the auditor should not be construed to mean a guarantee of accuracy of the financial statements Idowu and Oluwatoyin (2014) studied impact of auditing education on audit expectation gap in Nigeria Survey design was also adopted for this study Copies of the questionnaire were administered to 100 sample respondents Analysis of variance (ANOVA) was used to analyze data collected statistically at 5% or 0.05 level of significance to find out the effect of knowledge and exposure of accounting students in Nigeria Universities on bridging the audit expectation gap Regression analysis was used, with the aid of statistical package for social sciences (SPSS 20.0) soft ware The test showed that Knowledge and exposure of accounting students made a positive impact on reducing existing audit expectation gap However, the researcher noted that education alone is not an adequate response to bridging the audit expectations gap In the same vein, Nikkhah-Azad and Mojtahedzadeh (1999) through a survey study about auditor‘s responsibilities in Iran, surmised that auditors should show greater responsibility in carrying out their work in order to narrow the audit expectation gap Another questionnaire survey also carried out in Iran by Hassas-Yeganeh and Khaleghi (2004) regarding in this regard showed that there is expectation gap between auditors and users on the attestation role of independent auditors The result again showed that auditors and investors significantly differ with regards to reliability and comparability of audited financial statements Investors believe that if the audited financial statements are re-audited by other auditors, a different picture would be presented Idris and Ojemen (2012) studied the existence and nature of audit expectation gap in the Nigerian private sector The data for the study were obtained through questionnaire One hundred and sixty (160) copies of the instrument were distributed using purposive sampling technique In that study, a cross-sectional survey was conducted to capture the perceptions of users of financial statements in Nigeria Tests of hypotheses were done using Microsoft Excel 2010 version Tests were carried out at a significant level of 5% and three degree of freedom The findings of the study indicated that: there is a wide expectation gap in the areas of auditors‘ responsibility for fraud prevention and detection; and Audit expectation gap has negative impact on auditor‘s credibility They argued that users of financial statements should be enlightened more on the responsibilities of auditors with regards to the financial statements and that the role of the auditor should be clarified while quality control measures should be observed in audit firms Agyei, Kusi-Aye and Owusu-Yeboah (2013) assessed the existence of audit expectation gap in Ghana Non probability sampling method was used in carrying out the study while the instrument used for data collection was the questionnaire The study found that there exists http://www.iaeme.com/IJMET/index.asp 469 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke expectation gap in Ghana, particularly concerning auditor responsibility relating to fraud detection and prevention, and soundness of internal control structure of the audited entity The researchers recommended that the audit profession and regulators should formulate such standards, rules and regulations that shall adequately guide the auditors to fulfill the reasonable expectations of various user groups Again, Semiu and Olayinka (2011) did an empirical investigation of the audit expectation gap in the Nigerian private sector Survey research involving sampling was used and it revealed that an audit expectation gap exists in the Nigeria, particularly on issues concerning auditor‘s responsibility It was also observed that there are significant differences in the perception of respondent groups on the existence of the audit expectation gap in Nigeria Therefore, the study suggested educating the public about the objects of an audit, auditors‘ role and responsibilities to narrow the audit expectation gap It is instructive that majority of works done in the field of audit expectation gap are mainly with regards to private sector entities and little is ever done with regards to government parastatals especially in Nigeria Therefore a lacuna appears to exist in this respect and this paper stands to provide literature to fill this gap METHODOLOGY 3.1 The Area of the Study, Design and Population The area of study is Enugu State of Nigeria The study adopted survey research design to evaluate the critical factors that inhibit the bridging of audit expectation gap in government parastatals in Enugu State of Nigeria The population of the study is the management and senior staff in the three selected government parastatals under study as well as selected auditors These are the Enugu State Broadcasting Service (ESBS), Enugu State Waste Management Agency (ESWAMA) and Enugu State Water Corporation (ESWC) These organizations were selected due to their prominence in the state as major/critical social infrastructures The ESBS is a major mass communication facility in the state and it serves as a veritable agent of political mobilization, socialization and information dissemination The ESWAMA is concerned with waste (especially solid waste) disposal and management in both the urban and rural communities in the state In view of the population explosion in the urban cities and the concomitant housing deficit, waste management has become a major factor in assessing and evaluating the performance of any government in power in the state Again, due to rising unemployment and clamour for small and medium scale enterprises, entrepreneurship and diversification of the economy and the health and environmental implications of poor waste management, the government has placed premium on waste management, control and disposal while the populace now largely evaluates the government on the basis of its efficiency and effectiveness in this regard The same emphasis is placed on the provision of water especially pure water for the citizenry This informed the choice of the third parastatal for this paper – the Enugu State Water Corporation (ESWC) Effective provision of potable water in Enugu and its environs is a herculean task due to the presence of large deposits of coal in the area Hardly can individuals provide bore holes within Enugu city and that means that boreholes must be sunk very far away (sometimes 20 to 50 kilometers) and water piped down to major reservoirs before reticulation to houses The cost is enormous forcing the state government to solicit for financial aid from international donor agencies like the USAID, DFID, World Bank et cetera Due diligence must be followed in administering such financial aids and grants and effective audit both internal and external are critical in this respect In fact, objective and independent audit is a sin qua non to efficient management of resources in the public sector especially in Nigeria where the level of corruption is so high that the Transparency International consistently ranks Nigeria among the most corrupt http://www.iaeme.com/IJMET/index.asp 470 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria countries of the world Hence these three parastatals constitute the scope of this paper Auditors on the other hand were selected as they are closely affected by audit expectation gap The population is effectively made up one hundred (100) management and senior staff of these three parastatals and 20 selected auditors using probability sampling The distribution of the population is shown below: Table Population Distribution Corporations/Parastatals Enugu State Broadcasting Service (ESBS) Enugu State Waste Management Agency (ESWAMA) Enugu State Water Corporation Auditors Total Source: Field Survey, 2019 Population (Respondents/No of management and senior staff) 45 20 35 20 120 3.2 Sample Size In order to get a representation of the entire population, the Taro Yamani statistical formula was employed According to Taro Yamene (1964) the formula is stated as follows n = N 1+N(e)2 Where n = represents the sample size N = represents the population e = represents the margin of error I = constant Here, N = 120; e = 5% while n = sample size Therefore the sample size n = 120 1+120(0.05)2 = 120 1+ 120(0.0025) = 120 + 0.3 = 120 1.3 n = 92 The sample size for this study is 92 3.3 Model Specification http://www.iaeme.com/IJMET/index.asp 471 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke The model of the study was adopted from the classical linear regression model of Brooks (2014) The model is shown as follows; Y = βO + β1X1 + β2X2 - - - -βnXn + μt (3.1) Where; Y = dependent variable X1, X2, -Xn = Explanatory or independent variable β1, β2, βn = the slope of coefficient of the parameter estimate μ = Error or disturbance term t = time In relating this to the study ADt = β0 + β1AIt + β2tCNAFt + β3CRAt + β4UUEt + β5REAPt + β6MAt + β7UOSt + μt (3.2) Where: ADt = Auditors‘ Disposition at time CANt = Complicated Nature of the Audit Function at time CFAt = Conflicting Role of Auditors at time UUEt = Unawareness and Unreasonable Expectations at time REAPt = Retrospective Evaluation of Auditors‘ Performance at time AIt = Auditors not being Independent enough at time MAt = Miscommunication of Auditors at time UOSt = Users‘ over expectation of standards at time βO = Constant β1 – β7 = Coefficient of the Variables in the regression equation μ = Error or disturbance associated with the model = time t 3.4 Method of Data Analysis Data was analysed using descriptive statistics The analysis of data relating to the extent to which auditors‘ disposition, skill and performance contribute to audit expectation gap in Nigeria was summarised using descriptive statistics while hypotheses was analysed using Ordinal Linear-by –Linear Association model (Log-Linear Regression Model) 3.5 Apriori Expectation It is expected that β1, β2, β3, β4, >0 Where: β1, β2, β3 and β4, represents the coefficients of Audit Expectation Gap at different stages of the equation on model specification DATA PRESENTATION AND ANALYSIS http://www.iaeme.com/IJMET/index.asp 472 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria Data analysis depicts how the data collected for each of the variables are analyzed with diverse analytical tools From the analysis and results generated, deductions and logical conclusions were obtained A total of 92 copies of questionnaire were distributed while 12 copies were unreturned and 80 copies were returned Table Response on the challenges militating against the closure of audit expectation gap S/N Options SA A U DS SD N Total a Auditors‘ disposition contribute to audit expectation gap in government parastatals in Nigeria Complicated nature of the audit function contribute to audit expectation gap in government parastatals in Nigeria Conflicting role of auditors lead to audit expectation gap in government parastatals in Nigeria Unawareness and unreasonable expectations lead to audit expectation gap in government parastatals in Nigeria Retrospective evaluation of auditors‘ performance contribute to audit expectation gap in government parastatals in Nigeria Auditors not being independent enough contribute to audit expectation gap in government parastatals in Nigeria Miscommunication of auditors contribute to audit expectation gap in government parastatals in Nigeria Users‘ over expectation of standards contribute to audit expectation gap in government parastatals in Nigeria Widespread criticisms and high levels of litigations of auditors affect audit expectation gap in government parastatals in Nigeria Ignorance, naivety and misconception of the public in terms of the nature, purpose and capacities of an audit lead to increasing audit expectation gap in government parastatals in Nigeria The probabilistic nature of auditing lead to audit expectation gap in government parastatals in Nigeria Evaluation of audit performance upon information or data not available to the auditor at the time the audit was completed lead to audit expectation gap in government parastatals in Nigeria Evolutionary development of audit responsibilities which create time lags in responding to changing expectations and corporate crises lead to audit expectation gap in government parastatals in Nigeria The provision of non-audit services for audit clients result conflict of interest which leads to the expectation gap in government parastatals in Nigeria Auditors‗ role conflicts have negative implications on auditors‗ independence and their ability to perform a just audit in government parastatals in Nigeria Self interest and economical benefits of auditors lead to audit expectation gap in 25 40 13 92 344 Mean score 3.74 38 32 10 92 367 3.99 20 18 10 29 15 92 275 2.99 30 19 10 25 92 262 2.85 19 24 14 26 92 277 3.01 22 15 29 17 92 272 2.96 30 13 10 24 15 92 295 3.21 35 22 14 12 92 330 3.59 30 10 12 18 22 92 284 3.09 27 19 20 19 92 291 3.16 30 12 22 19 92 288 3.12 20 17 10 15 30 92 228 2.48 36 20 12 10 14 92 330 3.59 28 20 12 23 92 297 3.23 19 13 10 22 28 92 249 2.71 32 21 16 14 92 317 3.44 b c d e f g h i j k l m n o p http://www.iaeme.com/IJMET/index.asp 473 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke q government parastatals in Nigeria Existing insufficient standard regarding auditor responsibilities for detection of fraud and illegal acts lead to audit expectation gap in government parastatals in Nigeria 15 17 12 28 20 92 255 2.77 Source: Researcher‘s Computation, 2019 Table depicted the respondents‘ responses on the various factors militating against the closure of audit expectation gap Table 2: Compilation of mean of the responses S/N a b c d e f g h i j k l m n o p q Options Auditors‘ disposition contribute to audit expectation gap in government parastatals in Nigeria Complicated nature of the audit function contribute to audit expectation gap in government parastatals in Nigeria Conflicting role of auditors lead to audit expectation gap in government parastatals in Nigeria Unawareness and unreasonable expectations lead to audit expectation gap in government parastatals in Nigeria Retrospective evaluation of auditors‘ performance contribute to audit expectation gap in government parastatals in Nigeria Auditors not being independent enough contribute to audit expectation gap in government parastatals in Nigeria Miscommunication of auditors contribute to audit expectation gap in government parastatals in Nigeria Users‘ over expectation of standards contribute to audit expectation gap in government parastatals in Nigeria Widespread criticisms and high levels of litigations of auditors affect audit expectation gap in government parastatals in Nigeria Ignorance, naivety and misconception of the public in terms of the nature, purpose and capacities of an audit lead to increasing audit expectation gap in government parastatals in Nigeria The probabilistic nature of auditing lead to audit expectation gap in government parastatals in Nigeria Evaluation of audit performance upon information or data not available to the auditor at the time the audit was completed lead to audit expectation gap in government parastatals in Nigeria Evolutionary development of audit responsibilities which create time lags in responding to 3.59 changing expectations and corporate crises lead to audit expectation gap in government parastatals in Nigeria The provision of non-audit services for audit clients result conflict of interest which leads to the 3.23 expectation gap in government parastatals in Nigeria Auditors‗ role conflicts have negative implications on auditors‗ independence and their ability to 2.71 perform a just audit in government parastatals in Nigeria Self interest and economical benefits of auditors lead to audit expectation gap in government 3.44 parastatals in Nigeria Existing insufficient standard regarding auditor responsibilities for detection of fraud and illegal 2.77 acts lead to audit expectation gap in government parastatals in Nigeria Source: Researcher‘s Computation, 2019 Table showed a compilation of the mean of the responses Table One-Sample Statistics (first output) N Mean Std Deviation Std Error Mean Mean Responses 17 3.1724 39444 09567 Source: SPSS Version 23.0 Table showed the first output of one – sample test carried out using the mean values of the responses It indicated that there were seventeen (17) responses as to challenges militating against the closure of audit expectation gap and the cumulative mean of these responses is 3.1724 while the standard deviation is 0.39444 and the standard error mean is 0.09567 The standard deviation measures how widely values are dispersed from the average value (mean value) This implies that the values of the responses are not widely dispersed from the mean as the standard deviation is 39% On the other hand standard error mean function as a way to determine the accuracy of the sample or the accuracy of multiple samples by analyzing http://www.iaeme.com/IJMET/index.asp 474 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria deviation within the means Therefore, since the standard error mean is 0.09567 which is 9% indicates that the samples are considerably accurate Table One-Sample Test (second output) Test Value = 3.0 t Mean Responses 1.802 Source: SSPSS Version 23.0 Df 16 Sig (2-tailed) 009 Mean Difference 17235 95% Confidence Interval of the Difference Lower Upper -.0304 3752 Table showed the output of the second sample t-test It indicated that the test value is 3.0 This showed that a point likert scale was used for the responses The value of the tstatistics being 1.802 showed that the responses are positively related to the statement on the challenges militating against the closure of audit expectation gap Since the degree of freedom (Df) is 16 showed that there were 17 responses Df = (R-1) Where: Df = Degree of Freedom R = Row The sig value being 009 showed that there is a significant relationship between the statement and the responses, implying that auditors‘ disposition, the complicated nature of the audit function, conflicting role of auditors, unawareness and unreasonable expectations, retrospective evaluation of auditors‘ performance, auditors not being independence, miscommunication of auditors, users‘ over expectation of standards significantly contribute to audit expectation gap in Nigeria SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS Auditors‘ disposition, the complicated nature of the audit function, conflicting role of auditors, unawareness and unreasonable expectations, retrospective evaluation of auditors‘ performance, auditors not being independence, miscommunication of auditors, users‘ over expectation of standards significantly contribute to audit expectation gap in Nigeria The study concluded that all the variables are integrated of order one or are stationary at first difference The study recommended that the users of audited accounts should familiarize themselves with the laws, statutes and standards that regulate and stipulate the duties of an auditor so as to know what to expect of the auditors in order to bridge the performance gap REFERENCES [1] Agyei, A., Kusi-Aye, B and Owusu-Yeboah, E (2013) An Assessment of Audit Expectation Gap in Ghana, International Journal of Academic Research in Accounting, Finance and Management Sciences, (4), 112 – 118 [2] Alani, H (2014) Bridging the Expectations Gap between Auditors Reports and Requirements of the Financial Community: An Empirical Study Kingdom of Bahrain, Research Journal of Finance and Accounting, 5(15), 12 – 18 [3] Aljaaidi, K.S.Y (2009) Reviewing the Audit Expectation Gap Literature from 1974 to 2007 IPBJ, (1) 41 – 75 http://www.iaeme.com/IJMET/index.asp 475 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke [4] Bostick, L N (2009) Minimizing the Expectation Gap, Academy of Accounting and Financial Studies Journal, 8(1), 23 – 33 [5] Chinwuba, O and Otalor, J I (2013) Narrowing the Expectation Gap in Auditing: The Role of the Auditing Profession, Research Journal of Finance and Accounting, (2), 12 – 19 [6] Enyi, V C., Ifurueze, M.S and Enyi, R (2012) The Audit Expectation Gap Problem in Nigeria: The Perception of Some Selected Stake-Holder Groups, Research Journal of Finance and Accounting, (7), 19 – 25 [7] Gloeck, J.D (1998) A Public Interest Perspective of the Auditing Standard Setting Process in South Africa Southern African Journal 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Users‘ Perceptions of the Independent Auditor‘s Areas of Responsibilities With respect to Financial Statements: A Comparative Study The Iranian Accounting And Auditing Review, (27), – 70 [14] Ojo, M (2006) Eliminating the Audit Expectations Gap: Myth or Reality Enugu: Abic Books and Equipment.Porter, B (2011) Principles of Auditing New York: John Wiley andSons Ltd [15] Salehi, M (2011) Audit expectation gap: Concept, nature and trace, African Journal of Business Management, 5(21), 376 – 392 [16] Semiu, B A and Olayinka, M U (2011) An empirical investigation of the audit expectation gap in Nigeria, African Journal of Business Management, 5(19), 964 – 971 http://www.iaeme.com/IJMET/index.asp 476 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria APPENDIX Section A What is your age? a Male () b Female () Section B: challenges militating against the closure of audit expectation gap S/N a b c d e f g h i j k l m n o p q Options Auditors‘ disposition contribute to audit expectation gap in government parastatals in Nigeria Complicated nature of the audit function contribute to audit expectation gap in government parastatals in Nigeria Conflicting role of auditors lead to audit expectation gap in government parastatals in Nigeria Unawareness and unreasonable expectations lead to audit expectation gap in government parastatals in Nigeria Retrospective evaluation of auditors‘ performance contribute to audit expectation gap in government parastatals in Nigeria Auditors not being independent enough contribute to audit expectation gap in government parastatals in Nigeria Miscommunication of auditors contribute to audit expectation gap in government parastatals in Nigeria Users‘ over expectation of standards contribute to audit expectation gap in government parastatals in Nigeria Widespread criticisms and high levels of litigations of auditors affect audit expectation gap in government parastatals in Nigeria Ignorance, naivety and misconception of the public in terms of the nature, purpose and capacities of an audit lead to increasing audit expectation gap in government parastatals in Nigeria The probabilistic nature of auditing lead to audit expectation gap in government parastatals in Nigeria Evaluation of audit performance upon information or data not available to the auditor at the time the audit was completed lead to audit expectation gap in government parastatals in Nigeria Evolutionary development of audit responsibilities which create time lags in responding to changing expectations and corporate crises lead to audit expectation gap in government parastatals in Nigeria The provision of non-audit services for audit clients result conflict of interest which leads to the expectation gap in government parastatals in Nigeria Auditors‗ role conflicts have negative implications on auditors‗ independence and their ability to perform a just audit in government parastatals in Nigeria Self interest and economical benefits of auditors lead to audit expectation gap in government parastatals in Nigeria Existing insufficient standard regarding auditor responsibilities for detection of fraud and illegal acts lead to audit expectation gap in government parastatals in Nigeria http://www.iaeme.com/IJMET/index.asp 477 SA A U DS editor@iaeme.com SD Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke Output of Unit Root Tests Null Hypothesis: AD has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -3.661340 -3.271402 -2.082319 -1.599804 0.0063 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation Dependent Variable: D(AD) Method: Least Squares Date: 09/01/19 Time: 16:29 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob AD(-1) -0.507699 0.138665 -3.661340 0.0352 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.650126 0.650126 6.610982 131.1153 -12.65532 3.347993 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter -9.250000 11.17661 6.827660 6.674233 6.490977 Null Hypothesis: AI has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -2.726034 -3.271402 -2.082319 -1.599804 0.0200 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation http://www.iaeme.com/IJMET/index.asp 478 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria Dependent Variable: D(AI) Method: Least Squares Date: 09/01/19 Time: 16:30 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob AI(-1) -0.337671 0.123869 -2.726034 0.0722 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.434009 0.434009 4.856228 70.74886 -11.42144 3.141782 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter -5.500000 6.454972 6.210719 6.057293 5.874036 Null Hypothesis: CNAF has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -5.886089 -3.271402 -2.082319 -1.599804 0.0009 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation Dependent Variable: D(CNAF) Method: Least Squares Date: 09/01/19 Time: 16:31 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob CNAF(-1) -0.405714 0.068928 -5.886089 0.0098 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.809232 0.809232 2.883450 24.94286 -9.336340 2.490027 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter http://www.iaeme.com/IJMET/index.asp 479 -6.750000 6.601767 5.168170 5.014744 4.831487 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke Null Hypothesis: CRA has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -3.002435 -3.271402 -2.082319 -1.599804 0.0138 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation Dependent Variable: D(CRA) Method: Least Squares Date: 09/01/19 Time: 16:32 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob CRA(-1) -0.463760 0.154461 -3.002435 0.0576 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.602000 0.602000 6.616647 131.3401 -12.65875 2.980684 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter -7.000000 10.48809 6.829373 6.675946 6.492690 Null Hypothesis: MA01 has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -3.732482 -3.271402 -2.082319 -1.599804 0.0059 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation http://www.iaeme.com/IJMET/index.asp 480 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria Dependent Variable: D(MA01) Method: Least Squares Date: 09/01/19 Time: 16:34 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob MA01(-1) -0.367945 0.098579 -3.732482 0.0335 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.445567 0.445567 4.272012 54.75027 -10.90873 2.964775 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter -7.250000 5.737305 5.954365 5.800939 5.617682 Null Hypothesis: REAP has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -2.624798 -3.271402 -2.082319 -1.599804 0.0228 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation Dependent Variable: D(REAP) Method: Least Squares Date: 09/01/19 Time: 16:35 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob REAP(-1) -0.325989 0.124196 -2.624798 0.0787 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.189064 0.189064 5.225084 81.90452 -11.71427 2.690481 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter http://www.iaeme.com/IJMET/index.asp 481 -6.500000 5.802298 6.357137 6.203710 6.020454 editor@iaeme.com Livinus Okoro, Obioma V Ugwoke and Robinson O Ugwoke Null Hypothesis: UOS has a unit root Exogenous: None Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -3.876875 -3.271402 -2.082319 -1.599804 0.0051 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation Dependent Variable: D(UOS) Method: Least Squares Date: 09/01/19 Time: 16:38 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob UOS(-1) -0.281812 0.072691 -3.876875 0.0304 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood Durbin-Watson stat 0.548939 0.548939 2.816231 23.79347 -9.241988 1.900664 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter -4.750000 4.193249 5.120994 4.967568 4.784311 Null Hypothesis: UUE has a unit root Exogenous: Constant, Linear Trend Lag Length: (Automatic - based on SIC, maxlag=0) Augmented Dickey-Fuller test statistic Test critical values: 1% level 5% level 10% level t-Statistic Prob.* -0.854857 -10.66657 -6.482609 -4.819859 0.8349 *MacKinnon (1996) one-sided p-values Warning: Probabilities and critical values calculated for 20 observations and may not be accurate for a sample size of Augmented Dickey-Fuller Test Equation http://www.iaeme.com/IJMET/index.asp 482 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria Dependent Variable: D(UUE) Method: Least Squares Date: 09/01/19 Time: 16:40 Sample (adjusted): Included observations: after adjustments Variable Coefficient Std Error t-Statistic Prob UUE(-1) C @TREND("1") -0.918204 1.074102 11.20970 33.47081 0.500802 7.514874 -0.854857 0.334910 0.066641 0.5497 0.7943 0.9576 R-squared Adjusted R-squared S.E of regression Sum squared resid Log likelihood F-statistic Prob(F-statistic) 0.615332 -0.154003 11.99440 143.8657 -12.84093 0.799824 0.620216 Mean dependent var S.D dependent var Akaike info criterion Schwarz criterion Hannan-Quinn criter Durbin-Watson stat http://www.iaeme.com/IJMET/index.asp 483 -2.000000 11.16542 7.920463 7.460184 6.910414 2.631516 editor@iaeme.com ... http://www.iaeme.com/IJMET/index.asp 466 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria the reporting auditors... Chinwuba and Otalor (2013) studied narrowing the Expectation Gap in Auditing: The Role of the Auditing Profession The study sought to ascertain the role of the auditing profession in narrowing the audit. .. http://www.iaeme.com/IJMET/index.asp 470 editor@iaeme.com Contributions of Auditors‘ Disposition, Skill and Performance to the Existence of Audit Expectation Gap in the Public Sector in Nigeria countries of the world