The Expectations Gap: Two Remedies Investigated
29 Pages Posted: 18 Dec 2012
Date Written: December 17, 2012
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: Suggested Citation