Audit Expectation Gap: Evidence From Mauritius

Audit Expectation Gap: Evidence From Mauritius Vidisha Gunesh Ramlugun Lecturer, Department of Finance and Accounting, University of Mauritius, Mauritius 1. Introduction The audit profession is more on the limelight today given the number of financial scandals which have been disclosed around the world. These scandals not only have depressing consequences on businesses but public confidence on the role of auditors is also shaken. Financial reporting and audit practice are once again at a crossroad (Salehi, 2011). Basically, the role of auditors is to provide assurance on the reasonableness of financial statements of companies. Consequently users would tend to assess the soundness of financial information based on the opinion of auditors. However, with the growing public skepticism over the role of auditors to fulfill their role in an independent manner, it is vital to understand what exactly society expects from them. Most commonly, users would hold auditors legally liable for a perfect assurance, and they are not fully to blame for having high expectations of audit, (Fadzly and Ahmad, 2004). Gloeck and Jager (1993) aver that criticisms and legal actions originally lie in the high expectations that the public has of the audit profession. For the most part, high expectations form users predominantly arise because of a lack of consensus on the role of auditor. The probable lack of clarity between users of financial statements, the general public and auditors as relating to the proper definition of the role and definition of an audit is what contributes to the expectations gap (Ojo, 2006). Sikka (1998) avers no social group, let alone the auditing profession, enjoys a monopoly of power in defining the meaning of its action: its method of interpretation and communication are always shaped and organized relationally by the socio-political context of their use. While research around the world have confirmed the existence of an audit expectation gap, a review of professional literature on the subject reveals that hardly any studies have been done to address such a critical issue in small island developing states. Therefore, the main objective of this study is to examine whether there is an audit expectation gap in Mauritius. More particularly so, several changes were brought in the reporting and auditing framework of companies pursuant to the Report on the Observance of Standards and Codes (ROSC) Accounting and Auditing (A&A) review. Given the different changes in financial reporting and auditing, it is expected that, compared to other studies, the audit expectation gap in Mauritius would be narrow. Furthermore, the report from the National Audit office in Mauritius, reports that the audit profession has faced major challenges in recent years in maintaining the necessary level of professional competence on the part of their audit personnel. The report further states that auditing is a business full of paradoxes. The providers think they are providing one thing (carefully phrased as an attestation that financial accounts based on information provided by management are in accordance with generally accepted accounting principles. ) The investing public, the users of the service, continue to believe (despite the profession s best efforts to tell them otherwise) that the service is something else: a protection against fraud, reliably affirming the financial health of the enterprise being audited. It can be inferred that while the audit profession in Mauritius is well aware of the issue, they have yet to understand its implications. Consequently, it is believed that recent changes in financial reporting and auditing practices would improve corporate financial reporting that will enhance Mauritius' business environment and advance its governance and financial accountability. As a result, the notion of a knowledge gap of what constitute the role and function of auditors and public expectation, one of the preconditions of the audit expectation gap, will www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 18

be smaller in Mauritius. Furthermore, given the importance of the audit-expectation gap, it is believed that research in this arena is being called upon. Therefore, this research endeavours to make a contribution to literature by investigating audit expectation gap from the perspective of small island developing states and improve the status of the auditing profession in Mauritius. 2. Auditing and reporting practices in Mauritius Legislative changes in Mauritius since 2001 have brought about considerable changes in the reporting background of companies. Following these legislative changes, it soon became apparent that there were still some weaknesses in the financial reporting practices in Mauritius. A request was made to the World Bank to conduct a ROSC A&A review to strengthen and improve financial reporting. Several changes were brought in the reporting and auditing framework of companies pursuant to the Report on the observance of standards and codes (ROSC) Accounting and Auditing (A&A) review. It is believed that such changes would improve corporate financial reporting that will enhance Mauritius' business environment and advance its governance and financial accountability both key contributors to improving investor confidence and attracting investments (ROSC 2008). The Companies Act 2001 and the Financial reporting Act 2004 currently govern the accounting reporting framework of companies. With the introduction of the Companies Act 2001, all public and private companies, with the exception of small companies, have to prepare their financial statements in accordance to IFRS. The Companies Act 2001 and the Financial Reporting Act 2004 also provides for the audit requirements for companies. It is worthy to note that the The Financial Reporting Act 2004 was enacted based on the recommendations of the ROSC 2003 policy recommendations. The Companies Act requires an audit by an auditor licensed by the Financial Reporting Council and registered with MIPA (Mauritius Institute of Professional Accountants) for all companies with turnover Exceeding Rs50 million. The audits are to be conducted in terms of International Standards of Auditing (ISA). Companies with turnover of Rs50 million or less need not have an auditor. If a company opts to have an audit, the auditor need not be qualified. The Financial Reporting Act requires public interest entities to be audited by a licensed auditor. Both the Companies and Financial Reporting Acts do not require rotation of either the audit firm or audit partner. As far as reporting requirements of auditors are concerned, Section 39 of the Financial Reporting Act stipulates that: (1) Where an auditor makes a report on the financial statements of an entity which he has audited, he shall express a clear written opinion in his report, giving details as to whether - (a) the financial statements as a whole give a true and fair view of the matters to which they relate; and (b) the financial statements comply with - (i) this Act, or any other relevant enactment; and (ii) the financial reporting and accounting standards. (2) No licensed auditor shall, in his report, express an opinion unless he has complied with the auditing standards issued by the Council under section 73. (3) Where, in the annual report of the entity, the directors disclose the extent of compliance with the Code of Corporate Governance, the auditor shall report whether the disclosure is consistent with the requirements of the Code. Furthermore, the Companies Act 2011 stipulates among others that the duty of auditors is to make a report to the shareholders on the financial statements which have been audited. The auditor s report should state the work done by the auditor, the scope and limitations of the audit. In addition, the report www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 19

should also stipulate whether the auditor has obtained all information and explanations that the auditor has required; whether, in the auditor s opinion, as far as appears from an examination, proper accounting records have been kept by the company; whether, in the auditor s opinion, the financial statements and any group financial statements give a true and fair view of the matters to which they relate, and where they do not, the respects in which they fail to do so and whether the financial statements have been prepared in accordance with the International Accounting Standards. One of the key weaknesses identified by the ROSC 2003 was a need for a proper structure for the monitoring of auditing and reporting practices of companies and proposed the creation of the Financial Reporting Council. The FRC was set up with 4 Panels (i) Standards Review Panel, (ii) Financial Reporting Monitoring Panel, (iii) Audit Practice Review Panel, and (iv) Enforcement Panel. It has an oversight on the accounting and auditing standards and also actively supervises the audit profession. This study comes at a propitious time as the different amendments made to auditing and financial reporting requirements can be gauged. In addition, given the different changes in financial reporting and auditing, it is expected that the audit expectation gap in Mauritius would be narrow. 3. The audit expectation gap The term audit expectation gap appears to have been coined in 1974 by Liggio. He defined it as the difference between the levels of expected performance as envisioned by the independent accountant and by the user of financial statements (p.27). This definition was further extended by The Cohen Commission (Commission on Auditors Responsibilities, 1978) by considering whether a gap may exist between what the public expects or needs and what auditors can and should reasonably expect to accomplish. Monroe and Woodliff (1993) defined the audit expectation gap as the difference in beliefs between auditors and the public about the duties and responsibilities assumed by auditors and the messages conveyed by audit reports. Porter (1993) is of the view that earlier definitions of the audit expectations gap were excessively narrow in that they failed to recognise the possibility of sub-standard performance by auditors. Under this premise, she proposed that the gap be titled as the audit-expectation performance gap and argued that an understanding of the full extent of the audit expectation gap can only be done by comparing society s expectations of auditors against the perceived performance of auditors. According to Porter (1993), the gap may widen either when there is an increase in society s expectations or when it is perceived that there is deterioration in auditor performance. The debate around the audit expectation gap seems therefore to revolve around the issue of trying to align financial statement users expectations of auditor responsibilities and perceptions to actual audit performance. The definition that appears to have gained general preference is the one which refers to the gap as the difference between what the public and users of financial statements perceive the role of auditors to be and what the audit profession claims as expected of the auditors during the conduct of an audit (Onumha et al, 2009). According to Ojo (2006), apart from users of financial statements and the general public, an auditor may also perceive a somewhat different interpretation or worse still; fail to comply with the standards set by the audit profession. Therefore, in the words of Sikka et al (1998), the nature of the components of the expectations gap, makes it difficult to eliminate. 4. Prior research Research literature on the audit expectation gap abound. The audit expectation gap has been studied in areas such as the nature of the audit function, the perceived performance of auditors, the auditor s duties and role, the independence of auditors, and the non-audit services, (Dixon et al 2006). These studies bring out the nature of the audit expectation gap among different sections of the society. www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 20

Libby (1979) studied users perception of auditors intended message among bankers and auditors in Chicago and it was found that miscommunication of the messages intended by audit reports to more sophisticated users may not be justified. Epstein and Geiger s (1994) research in the United States examined investors views on the level of assurance they believed auditors should provide with respect to error and fraud. The results revealed that auditors were expected to bring a much higher level of assurance contrary to the expectation of researchers who expected a typical response of reasonable assurance. Following the evidence of an expectation gap between what auditors and investors perceive as the level of assurance that should ideally be provided by auditors, Epstein and Hill (1995) elaborated on the study and found that the level of assurance required by auditors depend on the level of sophistication of investors, that is less sophisticated auditors will tend to expect absolute assurance from auditors. An audit expectation gap was also recognized in the UK. The study conducted by Humphrey et al (1993) in the UK also revealed the existence of an audit expectation gap more particularly in areas such as the auditor s role to detect fraud, the extent of auditor responsibility to third parties, the nature of balance sheet evaluations, and the strength of, and continuing threats to auditors independence. Humphrey et al. (1993) also aver that they have doubts as to the possibility of closing the gap but they hope that their study can contribute to a better understanding of the nature and significance of the gap because such problems have been constantly in existence within the auditing profession. The study of Best et al (2001) provides evidence of an audit expectation gap as far as level and nature of audit responsibilities are concerned. The audit expectation gap was less heightened in areas such as auditor s responsibility for the soundness of internal controls, the degree to which financial statements give a true and fair view, auditor agreement with accounting policies used in the financial statements and the usefulness of audited financial statements in monitoring the performance of the entity. Further evidence of an audit expectation gap in Singapore was provided in the study of Koh and Woo (2001). Fadzly and Ahmad (2004) study in Malaysia revealed substantial evidence of the audit expectation gap. Significant support of the expectation gap was found regarding auditors responsibilities. In addition, confirmation of the gap was also received with regard to auditor s scope of legal responsibility and culpability in a fraud-related business failure. However, the study demonstrates that Malaysian users still believe that auditors are trustworthy. Dixon and Woodhead (2006) also established evidence of an audit expectation gap in Egypt in relation to the level and nature of auditor s responsibilities, similar to the study of Best et al (2001). The expectation gap primarily appear on issues such as auditor s responsibilities for fraud prevention and detection and the auditor s responsibility for maintenance of accounting records, exercise of judgment in the selection of audit procedures, soundness of internal control, and whether the auditor is unbiased and objective. As far as reliability of audit and audited financial statements, and the usefulness of audit are concerned, the manifestation of an audit expectation gap was less important. Gloeck and De Jager (1993) measured the audit expectation gap in South Africa among financially knowledgeable participants and auditors. The study revealed the presence of the audit expectation gap on three fronts, namely the lack of independence and objectivity of auditors, uncertainty regarding the role of auditors and the dissatisfaction with the compulsory audit of small owner managed companies. Onumah et al (2009) aver from their study in Ghana that the findings of their study provide yet another call to placing the issue of perceived differences in perception between auditors and financial statements users on the agenda of corporate accounting and reporting for discussion. Their study revealed that users of www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 21

financial statements have a significantly different perception about assurances provided by auditors reports as compared to accountants whose views are quite close to those of auditors. Sidani (2007) investigated the extent of an expectation gap in Lebanon. The objective of the study was to find whether there was a difference between accountants and non-accountants in relation to their understanding of the responsibility of financial statements, perception of the auditors role and attitude of accountant and non accountants towards auditors and the auditing profession. Again, an audit expectation gap was identified between what auditors actually do or perceive themselves to be doing, compared to the perception of the financial statements users. Porter (1993) proposed that the gap be better titled as the audit expectation-performance gap and investigated its existence among the financial community groups and the general public groups in New Zealand. The study most particularly reviewed the auditors existing duties, the standard of performance of these duties, and the duties that auditors should perform. The findings revealed that 50 per cent of the gap is attributable to deficient standards, 34 per cent from society holding unreasonable expectations of auditors, and 16 per cent from perceived sub-standard performance by auditors. Monroe and Woodliff (1993) investigated the audit expectation gap in Australia from three perspectives, namely: auditor s responsibilities, reliability of audited financial statements, and prospects of the audited entity. Their study reported that differences in perceptions between sophisticated or knowledgeable users and auditors were smaller than that of unsophisticated users, similar to the findings of Epstein and Hill (1995) Schelluch (1996) found that the expectations gap indentified in prior studies dealing with auditor responsibilities appeared to be reduced over time with the introduction of the long-form audit report. Schelluch (1996) stated that where areas specifically addressed by the wording of the expanded report were concerned, there seemed to be a significant reduction on beliefs between users and auditors. However, even after the introduction of the long form audit report, expectation gap continued to exist when it comes to financial statement reliability. Besides, the findings indicate mixed opinions over the role played by the auditing profession and over the clarity of the report in explaining the level of assurance and the extent of audit work performed. The findings tend to indicate a failure from users of financial statements in understanding audited financial statements. 5. Data and Methodology To assess existence of an audit expectation gap in Mauritius, a two section questionnaire was circulated. The first section gathered demographic data on qualification, experience and occupation of respondents and the second section contained 16 statements similar to the study of Schelluch (1996), Best et al (2001) and Fadzly and Ahmed (2004) relating to activities usually undertaken by auditors. The questions in the second part of the survey instrument were on a seven point likert scale where 1 represents strongly disagree and 7 represents strongly agree. Survey participants were broken into three groups, auditors, bankers and investors. Study participants were selected from a convenience sample because of their convenient accessibility and convenience to the researcher. It should be noted that most of the financial services company have now moved out of the Capital city recently and are now clustered in new Cyber region and participants were easier to recruit. The participants consisted of 100 participants from each of the three groups: auditors, bankers and investors and questionnaires were hand delivered. Statistical Package for Social Sciences commonly known as SPSS 20 was used for analyzing the data obtained. Factor Analysis and ANOVA values were drawn upon to identify the significant differences among the sample population. www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 22

6. Results 6.1 Demographics of respondents Response rates from the three groups and other demographic information are presented in table 1 and 2 below. Table 1: Response rates and demographic details of participants Responses received Accounting experience Accounting qualification Groups Survey sent n % Yes No Yes No Bankers 100 41 41 26 15 23 18 Auditors 100 28 28 27 1 22 6 Investors 100 23 23 8 15 7 16 Total 300 92 30.6 61 31 52 40 Table I indicates an overall response rate of 30.6 % from the survey sent. Most respondents have accounting experience and accounting qualifications. An analysis of the results shows that 43% of the sample size does not have accounting qualifications but 61 respondents do have accounting experience. It can be inferred that respondent groups might have satisfactory experience about financial statements used and the auditing process. Therefore, any measure of the audit expectation gap should be considered with restraint. Table 2: Occupational experience of respondents 1-5 years 6-10 years 11-15 years Over 16 years Group n % n % N % n % Banker (n= 41) 22 53.6 9 21.9 2 4.9 8 3.2 Auditor (n=28) 21 75 4 14.3 1 3.6 2 7.1 Investor(n=23) 8 34.7 8 34.8 1 4.3 6 26.1 total 51 55.4 21 22.8 4 4.3 16 17.4 The results from table 2 indicate that the level of occupational experience was quite widespread, where approximately 55. 4 % respondents have 1 to 5 years of experience, 22.8 % having 6 to 10 years experience. Only 21.7 % of respondents have above 11 years of experience. Given the current situation, it can be considered that respondents have sufficient experience in their respective fields and should satisfactorily provide knowledgeable judgment on the issues involved in the survey. It is also believed that the level of experience combined with accounting qualification and accounting experience would provide sufficient credibility that their opinions are based on professional experience. 6.2 Discussion and Analysis With the 16 potential audit activities, it becomes difficult to retain a sense of position as to what factors would have a significant difference among occupations. To facilitate such a positioning a principle components analysis with a Varimax rotation from the 16 Likert scale questions from the survey questionnaire was conducted to identify factors which together could explain the existence of an audit expectation gap. Since one of the factors resulted in negative means, it was removed from the factor analysis, resulting in 15 variables. An examination of the Kaiser-Meyer Olkin measure of sampling adequacy suggested that the sample was factorable (KMO=.616). The Barlett test of sphericity reached statistical significance (0.000) indicating that factor analysis was appropriate. According to the Kaiser www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 23

principle, only those factors with eigen values greater than 1 were maintained for further analysis. A clear structure emerged after reducing the variables to five factors. A varimax rotation was performed to reorganize the five components. As a general rule factor, loadings less than 0.4 have been suppressed. The communalities were all above.4 and initial eigen values indicated that the first three factors explained 21%, 18%, and 11% of the variance respectively. The variables were listed in Table 3 in the order of size of their factor loadings. Table 3: Rotated Component Matrix for 15 survey items a Component 1 2 3 4 5 The extent of assurance given by the auditor is clearly.895 indicated The extent of audit work performed is clearly.827 communicated The financial statements give a true and fair view.711 The entity is well managed.427 The auditor is responsible for the soundness of the internal.850 control structure of the entity The auditor is responsible for detecting all fraud.833 The auditor is responsible for maintaining accounting.718 records The audited financial statements are not useful in.857 monitoring the performance of the entity The audited financial statements are not useful for making.796 decisions The auditor does not agree with the accounting policies.550 used in the financial statements The entity is free from fraud.809 Users can have absolute assurance that the financial.748 statements contain no material misstatements The auditor does not exercise judgment in the selection of.877 auditor procedures The auditor is unbiased and objective.553 The auditor is not responsible for preventing fraud Eigenvalues 3.096 2.773 1.726 1.271 1.088 Percentage of variance explained 20.638 18.488 11.510 8.464 7.526 a Loadings =>.0.4 A number of the factors that were seen to underlie audit activities were common to most groups. The various factors have subjectively been named in an attempt to find a description that best reflects the concepts shared by each component items. Four items loaded on factor 1. Independent audit of financial statements has long been associated with the role of assurance, from which the credibility of information presented by the management is, to a certain extent, guaranteed, (Kamau, 2013). From www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 24

table 3, it is clear that they relate to the level of assurance that is required from auditors. This factor was subjectively named as assurance as they relate to the level of confidence that users expect from auditors for abiding to procedures. Three items loaded onto factor 2, which was labelled responsibility, most particularly viewed from what users of financial statements associate the use of audited financial statements. Three items loaded to factor thee and have been labelled reliability. Items loaded on factor 4 and five have been respectively named transparency and objectivity. To test whether there were significant differences between the means of the different emerging factors and given the parsimonious sample size, composite variables were computed with the five factors, so as to make more meaningful measures of the underlying dimensions. Internal consistency of each of the scales was examined using Cronbach s alpha. The alphas were reasonable: 0.766 for Assurance (4 items), 0.773 for Responsibility (4 items), 0.664 for Reliability (3 items), 0.605 for Clarity/transparency (2 items) and moderate alpha for objectivity was observed with a value of 0.413. No substantial increases in alpha for any of the scales could have been achieved by eliminating items. As evidenced by the study of best et al (2001), Schelluch (1996) and Fadzly and Ahmed (2004), any significant difference in the mean scores between auditor and bankers and investors indicates the possible existence of an expectation gap. To assess whether there were significant differences in the responses of participants, a one-way ANOVA was conducted. Following the results of the ANOVA, which indicates significant differences in the responses of the users as compared with those of the auditors, a post hoc test was conducted. Table 4 measures the level and nature of expectation gap by providing details of the mean responses for each of the respondent groups both within groups and across groups and by detailing the results of the ANOVA with post hoc test for significant differences between the three respondent groups. Table 4 Mean responses of participants Mean responses Statements Auditors Bankers Investors Across groups Sig. Cronbach s Alpha Assurance 4.7679 4.6037 4.6304 4.6603 0.869 0.766 Responsibility 2.1786 4.6179* 5.0580* 3.9855 0.001 0.773 Reliability 2.4643 3.1789 3.5652* 3.0580 0.002 0.664 Clarity/Transparency 4.8600 3.1146* 3.0391* 3.6712 0.027 0.605 Objectivity 4.7679 4.8415 4.6739 4.7772 0.799 0.413 *Significantly different from auditors at p<= 0.5 Results from table 4 indicate that there is no significant difference among auditors, bankers and investors with respect to the level of assurance given by auditors. Results are contrary to the findings of Epstein and Geiger (1994) which show that investors require a high level of assurance level of assurance from auditors. Further analysis revealed that there was a negative correlation (r= -0.232, p < 0.05) between accounting experience and level of assurance given by auditors, inferring that a high accounting experience and therefore an understanding of the work of the auditor reduces the level of assurance required from participants. In addition, no significant difference were found concerning the views of auditors, bankers and investors with respect to the statements that the extent of audit work performed is clearly communicated, and that the financial statements give a true and fair view. www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 25

However, significant differences were noted as far as responsibilities of auditors are concerned, with quite a large gap between the mean responses of auditors from bankers and investors, indicating that bankers and investors place a large responsibility on auditors for internal control, fraud detection and maintenance of financial records. Similar results were found in the study of Dixon and Woodhead (2006), Humphrey et al (1993), Low (1980). Further analysis of participants revealed a mean response of 2.85 for those participants with an accounting background and a mean of 4.23 (p < 0.05) for participants with a non accounting background pertaining auditors responsibility for maintaining accounting records. As averred by Onumah et al (2009), this confirms to the professional pronouncement that it is not the auditors role to maintain financial records and also provides corroborative evidence that sometimes users of accounts fail to understand the role and responsibilities of auditors which have been one of the underlying reason of audit-expectation gaps. Reliability statements produced significant differences among investors only. This can be explained by the fact investors use financial statements as one of the key indicators for investment decisions, which shows some skepticism from investors over the reliability of financial statements for investment decisions. This would also infer the uneasiness of users of financial statements with regards to the role played by the accounting profession. Prior studies have revealed that even after the introduction of the long form audit report, an expectation gap continue to exist as far as financial statements reliability are concerned. Significant differences were found for clarity and transparency with obviously a higher mean from auditors, indicating the existence of an expectation gap. Response level indicates that users of financial statements do recognize the fact that audits cannot provide the assurance that financial statements contain no material misstatements. The analysis also reveals a lower mean from shareholders as compared to bankers demonstrating some scepticism of investors to rely on financial statements, perhaps due to recent financial collapses after an unqualified audit report. No significant difference was found among survey respondents concerning objectivity of auditors similar to the findings of Fadzly and Ahmad (2004) and Best (2001), where all users agree that auditors would conduct audits in an objective and unbiased manner. Results are contrary to the findings of Schelluch (1996) who found an expectation gap concerning the ability of auditors to be unbiased and objective. 7. Conclusion and limitation This research reveals the existence of an audit expectation gap in Mauritius, more particularly so in areas of responsibility, reliability and transparency required from auditors. The audit expectation gap was found to be particularly wide on the issue of auditors responsibilities for the soundness of internal control, fraud detection and maintaining financial records. While evidence of an expectation gap was observed for issues pertaining to reliability and transparency, the expectation gap was quite narrow. No support for an expectation gap was obtained for assurance and objectivity required from auditors. While the paper does provide support for an audit-expectation gap in Mauritius, given the extent of the gap, it would seem that the change in financial reporting and auditing requirement propose by the World Bank in its report have conveyed positive results. Prior research have demonstrated that the result of expectation gaps usually arise due to poor knowledge of users of financial statements as to the role and responsibilities of auditors. Dixon and Woodhead (2006) note that prior studies have suggested solutions for reducing or narrowing the expectation gap such as improvement of auditor-user communication (through audit reports), augmentation of the auditing framework, strengthening of the auditor s integrity, and further educating users on the nature and functions of audit. www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 26

The present study provides an insight on the audit expectation gap in Mauritius and has several limitations. Firstly the research was limited to only 100 respondents. More inductive evidence might be obtained with a bigger sample size. In addition, it is worthy to note that out of the big four audit firms, only one accepted to participate in the survey which could have caused uncoverage bias. In addition, the use of convenience sampling may limit generalization of the results. References Best, P.J., Buckby, S. and Tan, C. (2001), Evidence of the audit expectation gap in Singapore, Managerial Auditing Journal, Vol. 16 No. 3, pp. 134-44. Cohen Commission (1978). Report of the Commission on Auditors Responsibilities; Conclusions and Recommendations, New York: American Institute of Certified Public Accountants. Dixon, R., Woodhead, A.D. and Sohliman, M. (2006), An investigation of the expectation gap in Egypt, Managerial Auditing Journal, Vol. 21 No. 3, pp. 293-302. Epstein, M.J.,&Geiger,M.A.(1994).Investorviewsofauditassurance:Recentevidenceof the expectation gap. Journal of Accountancy, 177(1), 60 64. Epstein MJ, Hill J (1995). The Expectation Gap between Investors and Auditors, Greenwich, Connecticut, JAI Press Inc. Fadzly, Mohamed Nazri and Ahmad, Zauwiyah (2004),"Audit expectation gap: The case of Malaysia", Managerial Auditing Journal, Vol. 19 Iss: 7 pp. 897 915. Gloeck, J.D. and Jager, H. (1993), The audit expectation gap in the Republic of South Africa, working paper, School of Accountancy, University of Pretoria, Pretoria. Humphrey,C., Moizer,P.,& Turley,S.(1993).The audit expectation gap in Britain: An empirical investigation. Accounting and Business Research, 23(91A), 395 411. Kamau, C.G. (2013). Determinants of Audit Expectation Gap: Evidence from Limited Companies in Kenya International Journal of Science and Research (IJSR), India Online ISSN: 2319-7064, Volume 2 Issue 1, Koh, H.C. and Woo, E. (2001), The auditor-manager expectation gap in auditing, Managerial Auditing Journal, Vol. 16 No. 3, pp. 176-88. Libby, R. (1979), ``Bankers' and auditors' perceptions of the message communicated by the audit report'', Journal of Accounting Research, Vol. 17, pp. 99-122. Liggio, C.D.(1974).The expectation gap:the accountant s Waterloo. Journal of Contemporary Business, 3(3), 27 44. Monroe, G.S.,&Woodliff,D.R.(1993).Theeffectofeducationontheauditexpectationgap. Accounting and Finance, 33, 61 78. Low, A.M. (1980), The auditor s detection responsibility: is there an expectation gap?, Journal of Accountancy, Vol. 150, pp. 65-70. Ojo, M.(2006). Eliminating the audit expectation gap:myth or reality? MPRA PaperNo.232. Available at http://mpra.ub.uni-muenchen.de/232/ Onumah, J.M., Simpson, S.N and Bohanyire, A. (2009), The audit expectation gap concept: Examining views on auditors reports from Ghana. Accounting in Emerging Economies, Vol 9, 321-343 Porter, B.A.(1993).An empirical study of the audit expectation-performance gap. Accounting and Business Research, 24(93), 49 68. Salehi, M, (2011), Audit expectation gap: Concept, nature and trace African Journal of Business Management, Vol. 5(21), pp. 8376-8392. www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 27

Schelluch, P. (1996), Long-form audit report massages: further implications for the audit expectation gap, Accounting Research Journal, Vol. 9 No. 1, pp. 48-55. Schelluch P, Green W (1996). The Expectation Gap: The Next Step.Account. Rev., pp. 19-23. Sidani, Y.M. ((2007), The audit expectation gap: evidence from Lebanon. Managerial Auditing Journal Vol. 22 No. 3, 2007 pp. 288-302 Sikka,P.,Puxty,A., Willmoo,H., & Cooper,C. (1998). The impossibility of eliminating the expectation gap: Some theory and evidence. Critical Perspectives on Accounting., 9(3), 14 24. The Companies Act 2001- Mauritius The Financial Reporting Act 2004- Mauritius Report on the observance of standards and codes (rosc) Mauritius Accounting and auditing June 2011 http://www.worldbank.org/ifa/rosc_aa_mauritius2011.pdf www.theinternationaljournal.org > RJEBS: Volume: 03, Number: 5, March-2014 Page 28