The Expectations Gap: Two Remedies Investigated

29 Pages Posted: 18 Dec 2012

See all articles by Jan De Muylder

Jan De Muylder

Vrije Universiteit Brussel (VUB)

Kris Hardies

University of Antwerp

Diane Breesch

Vrije Universiteit Brussel

Date Written: December 17, 2012

Abstract

In this paper, we test the effectiveness of an expanded auditor’s report vis-à-vis an audit course in narrowing the expectations gap. We compared two auditor’s reports in a between subjects design: the ISA 700 report and an expanded auditor’s report. We also examined if explaining audits to users is (more) effective in reducing the expectations gap (compared to expanding the auditor’s report). Belgian economics students participated in an experiment where the first group read a standard auditor’s report and the second read a manipulated auditor’s report. Moreover, a third group of students who already had taken an audit course, contrary to the two other groups, did not read any of the two auditor’s reports. Through a questionnaire survey, we elicited the students’ perceptions on different dimensions of the responsibilities of the auditor and the signaling power of the auditor’s report. Overall, a more thorough explanation of technical audit concepts in the auditor’s report does not significantly narrow the expectations gap. Students who already had an audit course, however, showed more reasonable expectations towards the auditor’s role and responsibilities, leading to a significant smaller expectations gap.

Keywords: expectations gap, auditor’s report, audit course

JEL Classification: M49

Suggested Citation

De Muylder, Jan and Hardies, Kris and Breesch, Diane, The Expectations Gap: Two Remedies Investigated (December 17, 2012). Available at SSRN: https://ssrn.com/abstract=2190404 or http://dx.doi.org/10.2139/ssrn.2190404

Jan De Muylder

Vrije Universiteit Brussel (VUB) ( email )

Pleinlaan 2
Brussels, Brussels Hoofdstedelijk Gewest 1050
Belgium

Kris Hardies

University of Antwerp ( email )

Department of Accounting and Finance
Pleinlaan 13
Antwerp, 2000
Belgium

Diane Breesch (Contact Author)

Vrije Universiteit Brussel ( email )

Pleinlaan 2
Brussels, Brussels 1050
Belgium

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