EXPECTATION GAP AND AUDITORS REPORT IN NIGERIA
ABSTRACT
This research work examines audit expectation gap and the performance of internal auditors in the prevention of financial misappropriation of funds in the public sector in Nigeria. This study also explores the user’s perceptions of the quality and usefulness of the auditors report which reflects the effectiveness of an auditors report as a communication medium between auditors and users.
To achieve the objective of this research work, data were collected from primary and secondary sources. The primary source adopted in this study was a structured questionnaire, which was used in gathering data from various respondents from the general public and the result was analysed with the Z-test statistics, which was used to test the various hypothesis in the study.
The study revealed that there is a significant relationship between audit expectation gap and internal auditors in the prevention of financial misappropriation of funds in the public. The study examined the level and nature of expectation gap between auditors and users of financial statement.
The findings of this study indicated that there is a wide expectation gap in the areas of auditors responsibility for fraud prevention and detection. The users of financial statements should be enlightened on the responsibilities of auditors on the financial statements. The role of the auditor should be clarified and quality control measures should be observed in and audit firms.     
TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1     Background of the Study
    Reference
CHAPTER TWO: LITERATURE REVIEW
2.1     Introduction
    References
CHAPTER THREE: RESEARCH METHODOLOGY
3.1     Introduction
    References
CHAPTER FOUR: DATA ANALYSIS AND DISCUSSION OF FINDINGS
4.1     Introduction
CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMEDATIONS
5.1     Summary of the Study
5.2     Conclusion
5.3     Recommendations
Bibliography
Appendix
CHAPTER ONE
1.1    INTRODUCTION
    In  Nigeria, the companies and Allied Matter’s Act 1990 stipulates that every company which is incorporated under the Act is required to have its financial statements audited annually. This is often referred to as the statutory audit. Section (227-371) also the (part II) of the Act states that the company’s financial statement are required to be stated before an auditor of a company to report to the members of the company in the accounts presented at the annual general meeting. The auditors report is being attached in any company published annual report. It also contains the auditors opinion about the true and fair view of the company’s financial statement which may add credibility to management representation in the financial statement.
    Audit expectation gap is a critical issue in auditing because of the damage it has brought and continues to bring to the essence of the auditing profession Fazdly  and Ahmed (2004).
    According to Appah (2011) the widespread criticism of and litigation against auditors indicates that there is a gap between society’s expectation of auditors and auditors performance as perceived by society. The majority of research studies suggest that the audit expectation gap is mainly due to users reasonable expectation of audit as well as their unrealistic perceptions of the audit profession performance. The existence of the audit expectation gap and its associated problems has been acknowledge for more than (100) years. It appears that Liggio (1974) in lee, Ali and Gloeck (2009) were the first to apply the term “audit expectation gap” in the auditing literature.
    An auditors report is the final product of any audit process that communicates the auditors findings to interested user’s auditors reports may differ in presentation but in all, they must inform user’s of the degree of correspondence between information contained in the financial statement and establishment criteria in their audit procedures.
    It is important to note that there are two fundamental aspects of an audit. One is to establish the facts while the order is to report material fairly and fearlessly to member. The audit report is  the means by which the auditors express their on the truth and fairness of a company’s financial statement for the benefit principally of the shareholder, but also for other user’s. auditors on the one hand think that users of audited reports appears to have unreasonable expectation of the responsibilities (Gay etal 1997) thus leading emergence of a gap between both parties, due to their divergent expectation.
    Auditors report is essential to the audit or other attestation process because they informs. User’s what the auditors did and the conclusion reached. From the user’s perspective the report is considered the primary product of the attestation process in the financial statement.
    Various research have confirmed the existence of an expectation gap. This expectation gap has became a topic of considerate interest world wide for research in general and advance countries like Innes et al (1997) is United kingdom, gap et al (1997) in Australia, Frank et al (2001) in the United States Hojskov (1998) in Denmark. The purpose of this research is to show and examine the extent of the expectation gap and auditors report among stake holders in Nigeria.
1.2    STATEMENT OF THE RESEARCH PROBLEM   
    Auditors reports add credibility to the financial reporting by ensuring that accounting statement follow the generally accepted guidelines and are accurate, but when the auditors performance is below public expectation then his signature together with his brief opinion will no longer be useful to decision makers. For instance, if the auditing profession has issued a standard that says that auditor should observe the client company’s stock – taking procedures but the auditors fails to do so then his performance would be said to be deficient because he has not behaved in a manner consistent with  professional auditing standards.
    This study is intended to find out and examine the possible reason’s for the above problem and how it may be addressed.
To what extent is toe existence of expectation gap between auditor and user’s of financial statement?
How adequate is the quality control in conducting audit report in Nigeria?
Is the auditor’s report an effective means of communication between auditors and public user’s
To what extent do auditors feel they contributed to the existence of this gap.
1.3    RESEARCH OBJECTIVES
    This study is an attempt to examine the extent at which auditor comply with auditing standard and guidance which might help in reducing the problem of auditors liability and negligence in  Nigeria where there is a yawing gap between the reports and users. In other word, what needs to be done to bridge this gap and enhance the utility value of financial statement in this country’s
    The principal objectives that guide this study are:
To ascertain if the auditors perceive they have a role to play in bridging this expectation gap.
To assess the user’s perceptions of audit expectation performance gap in Nigeria.
To verify the level of the gap between auditors and public user’s
To examine the adequacy of quality control in audit so as to reduce audit risk.
If users of financial statement are aware of their right against the auditors risk.
1.4    RESEARCH HYPOTHESIS
    The following hypothesis are formulated for the study
Hi:    There is the existence of a gap between what auditors are offering and user’s expectation.
Ho:    There is no existence of a gap between what auditors are offering and user’s expectation.
H¬i:    The auditor’s report have impact on the decision of user’s of the financial statement.
H¬o:    The auditor’s report does not have impact on the decision of user’s of the financial statement.
1.5    SIGNIFICANCE OF  THE STUDY
    This study will be significant to:
Auditors, as it reemphasizes the position of law as regard auditors report to client, third parties, users of financial statement in Nigeria.
Also structures the interest of potential researcher on the subject matter and student who are willing to advance in this study.
Enlighten existing share, third parties and user’s of financial statement on auditors report.
Also the finding of this study may affect the auditing standard as modification of existing auditing standard or new standard maybe adopted according to the finding of the study.
The finding of the study also affect audit academic environment of which educating user’s regarding audit knowledge and auditors report is essential for users to understand the essence of audit and to educate user’s to understand the limitation of an audit.
    This study will be important to suggest recommendation on how auditors might better and satisfy as society expectation by narrowing the gap.
1.6    SCOPE OF THE STUDY
    The research focuses on expectation gap between auditors and users of financial statement, it also showed a wider expectation gap on the issue of the auditors responsibility and usefulness of audit report risk and enhance the right of financial statement users against the auditors in Nigeria when they default. The study cover the perceptions of the users of financial statement and auditors reports in Nigeria, with focus on Edo state shareholder.
1.7    LIMITATION OF THE STUDY
    Every research work has its own limitation or impose certain constraint on the study. This study is no exception.
    The limitation of this research are as follow:
This research project is very wide in scope due to difficulties in terms of references, the researcher has to limit the study and materials gotten from websites, libraries which contained vital information were not sufficient enough for the study.
    Again time frame given to the study is rather short and cost of administering questionnaire can be enormous, also it was difficult obtaining information from respondent and the sample size. Lack of find to carry out this research work is also a major constraint.
1.8    IMPORTANT DEFINITION
Audit: Is a “Latin word, meaning he hears the world.
An Auditor: This is an accountant who examines the accounts and underlying financial records and expresses an opinion on the truthfulness and fairness or otherwise of the accounts.
An Audit Report: Is a report issued by the auditor to an enterprise at the end of the audit assignment on the financial statement prepared by management.
Expectation Gap: This is the gap that exist between the standard performance of an auditor and what the auditor have to present.
Qualified Audit Report: Is the report shows that there is a problem with the audit assignment.
Audit Paper work: They are documents prepared or created by the auditor which normally serve as audit evidence.
REFERENCES
Adam, C.A. Evans, R. (2004) Accountability Completeness, credibility and
    the Audit expectation gap J.J. CC, 14: 97-115.
Adenji, A.A. (2010) Auditing  & Assurance Service Lagos: Eltoda Ventures
    Ltd.
Adeniyi, A.A. (2004) Auditing and Investigation page 246 – 268 and 510.
Appah, E. (2010) an Evaluation of Audit expectation issues and challenges
    Inter. J. Econ. Dev. Res. Invest. 1(2-3): 129-141.