Friday, March 31, 4:00 p.m. to 5:40 p.m.
Concurrent session 4D - Corporate Governance and Fraud (Auditing)
Title: The Expectation Gap: Auditors’ and Investors’ Perceptions of Auditors’ Fraud Detection Responsibilities
|Stephen A. Butler
|Mark F. Zimbelman
Brigham Young University
|Bart H. Ward
Oklahoma City University
ABSTRACT: One approach to close the “expectation gap” between auditors’ and nonauditors’ understanding of auditors’ responsibility to detect fraud is to modify audit communications to more clearly reflect auditors’ ability to provide assurance about fraud. This study experimentally compared the intended meaning of terms used to define auditors’ responsibility with perceptions of auditors and investors. We evaluated auditors’ and investors’ perceptions of these terms and identified important differences. We also found that neither group understands the terms in the manner intended by auditing standard setters. Our results identify specific shortcomings in the communications from audit standard setters to both auditors and investors that may contribute to the expectations gap.