The public sector audit expectations gap in Bangla

ThepublicsectorauditexpectationsgapinBangladeshRiazurR.ChowdhuryUniversityofDhaka,Dhaka,Bangladesh,andJohnInnesandRezaKouhyUniversityofDundee,Edinburgh,Scotland,UKAbstractPurpose–ToexplorewhetherthereisanauditexpectationsgapinthepublicsectorbetweentheComptrollerandAuditorGeneral’s(CAG)auditorsinBangladeshandtheusersoftheCAGreportsnamelythePublicAccountsCommittee(PAC)oftheParliamentthatexaminestheCAGauditreportsandtheinternationalfundingagencies(IFAs)thatprovideexternalfundinginthepublicsectorinBangladesh.Design/methodology/approach–TheperceptionsofCAGauditorsandusersoftheirreportswereexploredusingaquestionnairebasedonatheoreticalframeworkofaccountabilityandsixrelatedauditconcepts.Findings–Therewerestatisticallysignificantdifferencesinperceptionsbetween17CAGauditorsandthe15membersofthePACon13ofthe25variablesandbetweenthese17CAGauditorsandninerepresentativesoftheIFAson14ofthesevariables.Researchlimitations/implications–Therelativelysmallnumberofrespondentstothisquestionnaireisalimitationofthisresearchproject.Practicalimplications–BettertrainingfortheCAGauditorsintotheirreportusers’informationrequirementsandexpectationsandbettertrainingforthemembersofthePACandtherepresentativesoftheIFAscoupledwithmorecooperationbetweentheCAGauditors,thePACandtheIFAsmighthelptoreducethisauditexpectationsgapinthepublicsectorinBangladesh.Originality/value–ThisisthefirsttimethatstatisticalevidencehasconfirmedtheexistenceofanauditexpectationsgapbetweenCAGauditorsandusersoftheirauditreportsinthecontextofthepublicsector.KeywordsAuditing,Bangladesh,Governmentagencies,Annualaccounts,PublicsectororganizationsPapertypeResearchpaperIntroductionThefirstuseoftheterm“expectationsgap”isattributedtoLiggio(1974)althoughthebasicideawasinexistencebefore1974(Lee,1970).TheCohenCommission(1978,p.1)definedtheauditexpectationsgapas“thegapbetweenwhatthepublicexpectsorneedsandwhatauditorscanandshouldreasonablyexpecttoaccomplish”.Porter(1991,p.4)gaveamoresuccinctdefinitionas“thegapbetweenthepublic’sexpectationsoftheauditorsandauditors’perceivedperformance”.AlthoughthisTheEmeraldResearchRegisterforthisjournalisavailableatThecurrentissueandfulltextarchiveofthisjournalisavailableatfinancialsupportduringtheresearchonwhichthispaperisbased.TheauthorsarealsogratefultotheCAGofBangladeshandtheirauditors,theChairmanofthePACoftheParliamentofBangladeshandallthePACmembers,andtheseniorrepresentativesoftheIFAsinBangladesh.TheyacknowledgetheconstructivecommentsofothercolleaguesattheUniversityofDundee(especiallyDonaldSinclair)andofDavidHatherlyoftheUniversityofEdinburgh.ExpectationsgapinBangladesh893ManagerialAuditingJournalVol.20No.8,2005pp.893-908qEmeraldGroupPublishingLimited0268-6902DOI10.1108/02686900510619719definitionreferstothepublic’sexpectations,researchintotheauditexpectationsgaphasbeenalmostexclusivelyfromaprivatesectorauditperspective(CohenCommission,1978;Crasswell,1985;CanadianInstituteofCharteredAccountants,1988;Steen,1990;HoltandMoizer,1990;Porter,1991;Hatherlyetal.,1992;Humphrey,1992;Sikkaetal.,1992;TurleyandBenau,1994;Innesetal.,1997;AustralianEducationalResearch,2002).Power(2000,p.111)hasarguedinrelationtothe“AuditSociety”that“manyoftheclaimsrequirefurtherempiricalsupportandthatmoreresearchisneeded,particularlytodemonstratethattheauditexplosionisnotsimplyaUKphenomenon”.Thereisaneedforempiricalresearchtoexplorewhetherornotanauditexpectationsgapexistsinthepublicsectorbetweenauditorsandusersoftheirauditreports.Intheprivatesectorcontext,theoverwhelmingconclusionofexistingresearchisthatthereisanauditexpectationsgap(FadzlyandAhmad,2004;LinandChen,2004).Muchearlier,theCohenCommission(1978)concludedthatagapdidexistandthemainresponsibilitylaywiththeauditingprofessionratherthanwiththeusers.TheCommissionattributedtheprimarycauseofthisgaptothefailureoftheprofessiontoreactandevolvequicklyenoughtokeeppacewiththechangingbusinessenvironment.BoththeCanadianInstituteofCharteredAccountants(1988)andPorter(1991,1993)viewedtheauditexpectationsgapfromanexpectations-performancepointofview.Thetwomainaspectsofthegapwereidentifiedasafeasibilityorreasonablenessgap(relatedtowhatwereregardedasunreasonableexpectationsbythepublic)andaperformancegap(relatedtodeficientauditingstandardsand/orperformance).Thispaperdiscussestheauditexpectationsgapinrelationtothepublicsectorandthenexaminestheaccountabilityframeworkandsixauditconceptsusedinthisresearchstudyfollowedbysectionsontheresearchdesign,resultsandconclusions.ExpectationsgapandpublicsectorResearchintotheauditexpectationsgaphascentredontheprivatesectorandhasgenerallyignoredthepublicsector.Astheraisond’etreofauditissimilarforbothsectors,itisimportanttoresearchwhetherornotthereisanauditexpectationsgapinthepublicsector.Humphrey(1992,p.1)pointedout“theimportanceoftheexpectationsissuederivesfromnotionsofstewardshipandpublicaccountability”.Theseaspectsareasrelevantinthepublicsectorasintheprivatesector(Batraa