Emerald Article: Audit disaster futures: antidotes for the expectation gap? Fran M. Wolf, James A. Tackett, Gregory A. Claypool
To cite this document: Fran M. Wolf, James A. Tackett, Gregory A. Claypool, (1999),"Audit disaster futures: antidotes for the expectation gap?", Managerial Auditing Journal, Vol. 14 Iss: 9 pp. 468 - 478 Permanent link to this document: http://dx.doi.org/10.1108/02686909910301556 Downloaded on: 04-12-2012 References: This document contains references to 56 other documents Citations: This document has been cited by 11 other documents To copy this document: firstname.lastname@example.org This document has been downloaded 3276 times since 2005. *
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Audit disaster futures: antidotes for the expectation gap?
Fran M. Wolf Associate Professor, Youngstown State University, Department of Accounting and Finance, Youngstown, Ohio, USA James A. Tackett Professor, Youngstown State University, Department of Accounting and Finance, Youngstown, Ohio, USA Gregory A. Claypool Associate Professor, Youngstown State University, Department of Accounting and Finance, Youngstown, Ohio, USA Keywords
Expectation gap, Audit failure, Audit futures, Market-based measures
The ``expectation gap'' is an apt description of the diverse perceptions and expectations held by various corporate stakeholders regarding the external audit. In general, the expression denotes differing expectations of what ``the public'' desires from the audit and what the auditor understands his or her role to encompass. As the savings and loan debacle unfolded and audit failures of other Â Ã institutions became common, litigation directed at public accounting firms abounded and often prevailed. US accounting firms lost suit after suit, billions of dollars, as well as a share of their credibility. In addition to monetary and reputation losses, increased legal fees, costly out-of-court settlements, skyrocketing insurance premiums, and threatened regulation are some of the costs associated with the expectation gap. It is the premise of this paper that the accounting profession's response to the expectation gap has not increased public confidence. Indeed, as a result of behavioral changes, additional standards have been required to further clarify the auditor-client relationship. A suggested modification to the external auditor's environment is presented that can result in both improved audit process and product. Additionally, marketbased methods of dealing with the remaining risk, audit failure permits and audit disaster futures, are suggested.
The gap between what the public expects from the auditor and what the auditor perceives his or her role to be has exacerbated crises within the accounting profession. Perceived audit failures, followed by historically large law suits, have resulted in the alteration of accounting firms' behavior....