The idea of an Expectations Gap (EG) first came about in the 1970's as auditors work came under criticism in America. The idea of a knowledge gap spread across Europe and the Auditing Standards Board produced 'Expectation Gap Standards' that would come into effect from 1990 to try and overcome the problem.
However this has proved problematic as despite scandals there is nothing to say that there is a problem with the standards themselves and the expectation gap debate calls into question the understanding of an auditor's role and duties with the general public and users of financial information considering audit objectives to be one thing and auditors themselves considering them to be quite another.
This report provides definitions of the EG made by theorists in an attempt to determine its characteristics, it then moves on to summaries the evolution of the EG and its nature. A detailed discussion of the aspects of the EG that are causing the debate including societal expectations on the reasonableness gap, the deficient performance gap and the deficient standards gap.
The issue of why the EG will never disappear will then be addressed by looking at regulatory pressures, the changing expectations of society and the evolving perception of reasonableness leading to the conclusion that although the narrowing of the gap will be beneficial to both the general public and the auditing profession the measures taken to ensure this happens can create problems of their own allowing the nature of the gap to evolve and change over time but to never fully disappear.
1.1 Definitions of the Expectations Gap
A study done by Australian auditors in 1994 defined the expectations gap as ...the difference between the expectations of users of financial reports and the perceived quality of financial reporting and auditing services delivered by the...