Difficulties in Bridging the Audit Expectations Gap: an Exploration of the Determinants and Available Solutions for the Gap

Author:University Lecturer Diana MANEA, Ph. D. Student, University Lecturer Daniela CIOLPAN, Ph. D.

JEL:M 42

DOI:

Keywords:audit-expectations gap, audit, audit quality, auditor liability

Abstract:
Although the latest financial crisis brought again into the spotlight the Audit Expectations Gap (AEG), Paul Boyle – the head of Financial Reporting Council - stated that, this time, the auditors had ”a good crisis”, meaning that they received less scrutiny than in the past. Following the financial scandals in the early 2000s, financial audit faced a confidence crisis that questioned its role in society. Significant progress was made, in recent years, in improving the audit quality and the public’s perception of audit quality. Although controversial, the limitation of auditor’s legal liability can determine the profession to be more willing to accept new responsibilities, coming closer to meeting the public’s reasonable expectations. This research explores the components of AEG, the main factors causing the AEG and the major obstacles to its elimination. One must be careful, because some proposed solutions for limiting AEG can be two sided – acting to reduce one component of AEG can lead to an increase of another component of AEG, so as the general effect is rather an amplification instead of a reduction of the total AEG.\r\n \r\n

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