The current status of auditors’ and investors’ perceptions of the audit expectation gap

Throughout this study the term “expectation gap” refers to the difference between (1) what the public and financial statement users believe the responsibilities of auditors to be, and (2) what auditors believe their responsibilities are, as in McEnroe and Martens, 2001 (hereafter MM 2001). Approximately 20 years have elapsed since MM 2001 and much has happened in the area of audit failures (i.e. Enron, WorldCom) as well as perceived enhancements (i.e. Sarbanes-Oxley Act). We replicate MM 2001 in order to measure the impact of such events on the expectation gap through analyzing survey responses from auditors, investors, and CFOs. Our findings indicate that two expectation gaps identified by MM 2001 still exist; we believe they can be addressed and perhaps eradicated with educational measures. Our findings additionally indicate that four expectation gaps documented in MM 2001 have been eliminated over time, suggesting that auditors’ perceptions of their role, especially in the area of detecting fraud, has been enhanced.