The number of studies regarding the existence of AEG is very large. However, the typical areas where the AEG arises in the empirical studies include: auditor’s responsibilities;
messages communicated through the audit report, the level of audit’s assurance.
4.1. The existence of the audit expectation gap related to the auditor’s responsibilities
The Cohen Committee (1978) noted that the auditor's fraud detection responsibilities may be the largest gap of AEG when they found that a significant proportion of users ranked fraud detection as one of the most important audit objectives. Research by Gramling et al (1996) in the US showed that 86% of no audit experience respondents agreed that auditors should detect all frauds, while only 24% auditors agreed with that statement. In a study by Monre and Woodliff ‘s (1993) in Australia, surveyed students believe that auditors have more responsibility than business managers in detecting and preventing fraud. The results of Grant et al.’s study (1997) showed that 68.9% of users believe that auditors are required to report suspected fraud to a government agency. The similar results have been shown in many researches such as: Best et al. (2001) in Singapore, Fadzly and Ahmad (2004) in Malaysia, Dixon et al (2006) in Egypt, Onulaka (2014) in Nigeria, Taslima and Fengju (2020) in Bangladesh… Thus, the AEG related to auditor responsibilities of detecting, preventing and reporting the fraud still exists in many countries in the world.
In addition, Best et al (2001) showed that there are significant differences between auditors and bankers, investors regarding the auditor's responsibilities in maintaining the accounting system. Specifically, the auditors believed that this responsibility rests with the management of the auditee, while bankers and investors attributed this responsibility to the auditors. This result has also been shown in some previous studies in Singapore such as the study of Low et al (1988) or Hian (2000). However, this gap did not exist in the study of Schelluch (1996) in Australia. According to Best et al. (2001), Australia has adopted the long
form audit report while Singapore up to 2001 is still using the short form report.
The auditor's responsibility for the effectiveness of the auditee's internal control system has also been evaluated as an important aspect of the AEG in many empirical studies.
Schelluch (1996) not only showed that there exists an expectation gap related to the auditor's responsibility for the effectiveness of internal control, but also suggested that this can be reduced by improve the wording used in the audit report. Studies that inherit Schelluch's method (1996) in many countries also gave similar results such as the study of Best et al.
(2001) in Singapore, Fadzly and Ahmad (2004) in Malaysia, Dixon et al. 2006) in Egypt, Agyei et al (2013) in Ghana…
Potter's study (1993) in New Zealand assessed the AEG related the auditor responsibilities and showed that 90% of the 200 respondents believe that the auditor is responsible for detecting fraud, 30% of the respondents on the rating of fraud detection as the main objective of the audit. The study of Pierce and Kilcommins (1996) evaluated the difference between the perceptions of the 1st year financial accounting students (who have not studied audit), the 2nd year (who have studied 1 audit module) and the 3rd year (divided into completed and incomplete audit courses) in aspects: auditor responsibilities, ethical and regulatory frameworks of auditing, audit reports. The results showed that the 2nd year students had significantly improved cognitive performance compared to the freshmen, similarly the 3rd year group achieved even more significant improvement in all areas in an impressive way. However, the auditor's responsibility is the area where there is the largest misunderstanding of all year students, even for third-year students who have completed a course in auditing. The authors argued that education can improve students' awareness but does not significantly affect the perception of auditors' responsibilities, especially those related to fraud and illegal acts. Other Studies gave similar results on the existence of AEG related to the auditor's responsibility from the user's side such as: Chinwuba và John (2013), Gbadago (2015)…
In Vietnam, several studies on the AEG related the auditor’s responsibilities have been carried out and most of these studies inherited the Porter’s (1993) definition, structure and method of measuring AEG. Nguyen and Dang (2019) and the results of this research indicated that AEG in Vietnam consists of three components: the resonableness gap (31%), the deficient standard gap (49%) and the deficient performance gap (20%). Hong and Thuong (2020) also shown that there is the existence of AEG related to the auditors’ responsibilities and the factors creating this gap include: the auditors have not fully performed their responsibilities based on the standards, the dificient standards which could not respond to the requirements of society and the users’ requirement of audit result could not easily perform.
4.2. The existence of the audit expectation gap related to the messages communicated through the audit report
In the Cohen Commission report (1978), the result showed that the readers were misinterpreting the audit reports because the information conveyed in the audit report was not
clear. Moreover, the users understood the meaning of the report based on their knowledge and experience and this understanding did not match the message the report wants to convey. Holt and Moiser (1990) noted that there were significant disagreements between auditors and users of the audited financial statements regarding the meaning of unqualified audit report. Another unreasonably ascribed meaning to the unqualified audit report is the effectiveness of the auditee. Humphrey et al (1993) found that 62% of non-audit respondents believe that unqualified audit report ensures that the auditee is operating effectively. The study of Michael et al. (2000) found that users believe that an unqualified audit report proves that the management is effective and the company is financially secure. Chenok (1994) also showed that some people believe that the audit report with an unqualified opinion means that the auditor has certified that there is no fraud and that the company is doing well and will continue to work well and does not face any unforeseen problems in the near future.
Research by Hatherly et al (1991) selected 140 MBA students at the University of Edinburgh and divided them into 2 groups by age (meaning representative of the experience of the respondents). Each group received the same company's financial statements but attached 2 different audit reports, 1 short audit report and 1 extended audit report (SAS 58 reporting template). The results showed clear evidence of the extended audit report's ability to change the reader's perception. Aspects of significant change in reader perception included in the extension of the audit report include: the auditor's impartiality and objectivity, the audit opinion relating to the financial statements as a whole, the financial statements apply appropriate accounting policies, management’s responsible for the financial statements.
However, according to the author, the "halo" effect of the extension as well as the auditor's responsibility related to fraud and the reliability of financial statements is not mentioned or mentioned but not yet clear. has clearly made user expectations far beyond before. Therefore, it is possible that the extension of the audit report helps to close the expectation gap in some respects but widens the gap in others.
Nguyen and Nguyen (2020) provided empirical evidence that users of audit and assurance services in Vietnam still rely on audit reports to make economic decisions. With the results obtained through this survey, it can be seen that the society often puts more expectation on the auditor’s responsibilities in detecting all errors and frauds of audited firms, while there is not much difference in opinion between users of audit in the role of audit and auditors in keeping assurance and trust of investors.
4.3. The existence of the audit expectation gap related to the level of audit’s assuarance In the UK, Humphrey et al (1993) noted that the most important difference between auditors and users is the auditor's responsibility to ensure that all fraud has been detected.
Specifically, up to 86% of non-audit respondents agree while only 43% of auditors support this statement. In Ruhnke and Schmidt’ study (2014), they asked users and auditors about the level of audit assurance required by current auditing standards. Interestingly, only 55% of auditors correctly identified the level of assurance required by the audit standard. According
to Ruhnke and Schmidt (2014), this is because the concept of reasonable assurance has moved from high to reasonable in 2003 in Germany, and this is also considered one of the failures of auditors in their practice, but partly because there is no clear definition of reasonable assurance in the German national auditing standards. Thus, the public's failure to perceive audit assurance is not surprising (Ruhnke and Schmidt, 2014). Besides, the studies of McEnroe and Martens (2001), Onumah et al. (2009), Bedard et al. (2012),... also show that users expect a level of audit assurance is much higher than the auditor.
Beck (1973) mentioned that 71% of users in the survey group want the audit to ensure the effectiveness of management, 81% think that the audit ensures the financial performance of the auditee. As such, the role that users of information assume the auditor plays is much broader than is required by professional standards. Epstein and Geiger (1994) studied investors' perceptions of the degree of assurance associated with the detection of material misstatement by auditors. The results showed that with a material misstatement of error: 51%
of investors believe they should receive reasonable assurance while 47% want absolute assurance. In particular, for material misstatement related to fraud: up to 71% of investors believe that auditors must provide absolute assurance and only 26% want reasonable assurance. Thus, most investors expect the auditor to provide absolute assurance in detecting material misstatements.