audit expectation gap in ghana (case study of senior

AUDIT EXPECTATION GAP IN GHANA

(CASE STUDY OF SENIOR HIGH SCHOOLS IN KUMASI METROPOLITAN

ASSEMBLY, ASHANTI REGION)

By

Ahmed Iddrisu, BBA (Hons.)

A thesis Submitted to the Department of Accounting and Finance, Kwame

Nkrumah University of Science and Technology (KNUST), in partial fulfillment

of the requirement for the degree of

MASTERS OF BUSINESS ADMINISTRATION (ACCOUNTING- OPTION)

COLLEGE OF HUMANITIES AND SOCIAL SCIENCES

SCHOOL OF BUSINESS

DEPARTMENT OF ACCOUNTING AND FINANCE

AUGUST, 2015

ii

DECLARATION

I hereby declare that this piece is my own work towards the Master of Business

Administration and that, to the best of my knowledge, it contains no material

previously published by another person or material which has been accepted for the

award of any other degree of the university except where due acknowledgement has

been made in the text.

Ahmed Iddrisu ………………..……… ….………………

PG 9606213 Signature Date

Certified by:

Dr. Daniel Sakyi ………………..……… ….………………

(Supervisor) Signature Date

Certified by:

Dr. K.O Appiah ………………..……… ….………………

(Head of Department) Signature Date

iii

ABSTRACT

This study investigates audit expectation gap in public senior high schools in the

Ashanti Region of Ghana. This follows a number of observation differences between

the public‟s expectation of the auditors‟ roles and what the auditors actually do. Using

a sample of 120 persons from 22 public senior high schools within the Kumasi

metropolis and Cross Tabulation, it was discovered that there is a difference between

the opinion of auditors and general public with respect to the statutory role of external

auditors, duty of auditors, reliability on audit reports for decision making, and

independence factors. The audit expectation gap is multi-faceted but consists mainly

of misunderstanding of the external auditor‟s responsibilities by the users of audited

financial statements. It is recommended that the public should be educated on the

responsibilities of auditors, the extent to which they can rely on auditor‟s report and

nature of audit services.

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ACKNOWLEGEMENT

I express my profound gratitude to the Almighty Allah for his grace and mercies

without which this work would not have been completed. I also wish to thank the

following persons:

The first goes to Dr. Daniel Sakyi, the supervisor of this thesis, with whose guidance,

constructive criticisms, and suggestions this work has become successful.

The contributions of Mr. Eric Opoku and Mr. Mustapha Immurana in designing the

research are gratefully acknowledged..

Another appreciation goes to all my respondents. It is their contributions that provided

the results of this work. I am very grateful for the entire field assistants of the

Regional and Metro Staff of Ghana Education Service, Kumasi.

Also, the contribution of my siblings who supported my studies on uncountable ways

cannot be forgotten.

Last but not the least, the diverse support my family my and friends gave in doing this

study is fully acknowledged and gratified.

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DEDICATION

This work is dedicated to my parents; Late Alhaji Iddrisu and Hajia Lawratu Abdul

Rahman Ciecey. And to my lovely wife; Sa‟ada Muntari (Sacute).

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TABLE OF CONTENTS

CONTENT PAGE

DECLARATION.......................................................................................................... ii

ABSTRACT .................................................................................................................iii

ACKNOWLEGEMENT............................................................................................. iv

DEDICATION.............................................................................................................. v

TABLE OF CONTENTS ........................................................................................... vi

LIST OF TABLES ....................................................................................................viii

CHAPER ONE ............................................................................................................. 1

INTRODUCTION........................................................................................................ 1

1.1 Background of the Study .........................................................................................1

1.2 Statement of the Problem .........................................................................................3

1.3 Research Objectives .................................................................................................4

1.4 The Research Questions ...........................................................................................4

1.5 Significance of the Study. ........................................................................................4

1.6 Scope of the Study. ..................................................................................................5

1.7 Limitation of the Study ............................................................................................5

1.8 Organization of Research .........................................................................................5

CHAPTERTWO .......................................................................................................... 6

LITERATURE REVIEW ........................................................................................... 6

2.1 Introduction ..............................................................................................................6

2.2 Development of Auditing ........................................................................................6

2.2.1 Historical Background and the Ancient Auditor. ................................................. 6

2.2.2 Emerging Trends in the Auditing Environment.................................................... 8

2.3 Audit in Ghana .......................................................................................................10

2.4 The Concept of Audit Expectation Gap (AEG) .....................................................11

2.5 Theoretical Framework ..........................................................................................12

2.6 Auditors‟ Responsibility for Fraud and Errors Detection and Prevention in

Public Sector Organizations ................................................................................13

2.7 Perception of the Public about the Auditor‟s Role in the Detection and

Prevention of Fraud and Errors in Public Sector Organizations .........................16

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2.8 Duty to Prevent Fraud and Errors in an Organization ...........................................16

2.9 Empirical Review...................................................................................................18

CHAPTER THREE. .................................................................................................. 25

METHODOLOGY. ................................................................................................... 25

3.1 Introduction. ...........................................................................................................25

3.2 Research Design.....................................................................................................25

3.3 Population ..............................................................................................................25

3.4 Sample and sampling technique.............................................................................26

3.6 Data Analysis. ........................................................................................................26

3.7 Organizational Profile ............................................................................................27

3.7.1 Kumasi Metropolitan Assembly ......................................................................... 27

CHAPTER FOUR ...................................................................................................... 32

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS ..... 32

4.1 Introduction ............................................................................................................32

4.2 Data Presentation (Using Tables) ..........................................................................32

CHAPTER FIVE ....................................................................................................... 55

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS .. 55

5.1 Introduction ............................................................................................................55

5.2 Summary of major findings ...................................................................................55

5.4 Conclusion .............................................................................................................56

5.5 Recommendations ..................................................................................................57

REFERENCES ........................................................................................................... 59

APPENDIX ................................................................................................................. 67

viii

LIST OF TABLES

TABLE PAGE

Table 4.1.1 Highest Academic Qualification of Respondents. .................................... 32

Table 4.1.2 Auditor‟s duty for preparing financial statement ...................................... 33

Table 4.1.3 Auditor‟s Duty for Expressing an Independent Opinion on the

Financial Statements based on their Audit. .............................................. 34

Table 4.1.4 Auditor‟s Duty to Verify Every Accounting transaction .......................... 35

Table 4.1.5 Auditor‟s Duty for detecting all fraud in an organization ........................ 36

Table 4.1.6 Auditor‟s Duty for an Effective System of Internal Control. ................... 37

Table 4.1.7 Auditor‟s Exercise of Judgment in Selection of Audit Procedures .......... 38

Table 4.1.8 Auditors‟ Additional Duty for Evaluating whether an organization is a

Going Concern ......................................................................................... 39

Table 4.1.9 Auditor‟s duty for Disclosing whether any Theft occurred

during the Financial Year. ........................................................................ 40

Table 4.1.10 Auditors are Responsible for Organizational Failure ............................. 41

Table 4.1.11 Auditors should be Financially Liable when they do not

Exercise Diligence in Handling the Accounts of an organization. ........... 42

Table 4.1.12 An Auditor is Responsible for Maintaining Public Confidence in an

Organization. ............................................................................................ 44

Table 4.1.13 Auditors are meant to Forecast Financial Profile ................................... 45

Table 4.1.14 The Audited Financial Statements are Useful in Monitoring an

Organization‟s Financial Performance ..................................................... 46

Table 4.1.15 Audit Reports Should Contain More Information About Financial

Forecast .................................................................................................... 47

Table 4.1.16 The Extent Of Assurance Given By An Auditor Is Clearly

Indicated In Audit Reports ....................................................................... 48

Table 4.1.17 Auditor Independence Can Influence The Performance Of Audit

Services .................................................................................................... 49

Table 4.1.18 When an Auditor Engages In The Provision Of Non-Audit And

Audit Services At The Same Time, Objectivity May Be Impaired .......... 50

Table 4.1.19 Provision of Audit Services Consistently For A Long Period Of

Time May Lead To Familiarity Threat ..................................................... 51

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Table 4.1.20 Auditors Are More Concerned With Pleasing Management .................. 52

Table 4.1.21 The Quality Of Audit Has Improved In The Recent Years .................... 53

1

CHAPER ONE

INTRODUCTION

1.1 Background of the Study

The controversy as to who has the mandate to discover as well as possibly prevent

fraudulent activities and errors in organizations still continue in the minds of the

general public. These controversies are as a result of differences in perception

between the general public and professionals in the auditing industry in relation to the

duty of the auditor with regards to the detection and prevention of fraudulent practices

and errors. There is an assertion that the increasing trend in the judicial proceeding

and criticism against auditing professionals can be attributable to the „audit

expectation gap‟ (Porter et al, 2001). The audit expectation gap indicates the

difference between the actual standard performance of the auditor and the various

expectations of the public concerning the auditor‟s performance to the anticipated

performance measure (Ojo, 2006). This therefore implies that the expectation gap

exist with auditors on one hand and the general public on the other hand, with respect

to the detection and prevention of fraud, errors and other irregularities.

An auditor is an independent person whose duty is to report on the accounts of an

organization. The main task of the auditor is to examine the accounts and the

underlying records giving rise to entries therein and report whether in his opinion they

properly reflect the activities of the organization, during the period under

consideration. However, the general public on the other hand sees the auditor‟s duty

to be fraud and errors detections and possible prevention. This perception regarding

fraud and errors detection and prevention and the auditor has some historical

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background. In the 1960s for instance, many textbooks classified the main objectives

of the audit work into three folds namely:

i) to report on fairly and adequately on the financial statements, ii) to detect

fraudulent activities and errors, and iii) to preclude fraudulent activities and errors by

the deterrent and moral effect of an audit (Champ, 1993).

Martinis (1995) states that more contemporary studies have increasingly considered

inadequate performance of the audit functions as a significant cause of expectation

gap in the light of self-regulated practices of the accounting profession and very

minimal intervention stance of government. The responsibilities of the auditor in

respect of irregularities and errors are limited to the planning and performance of his

work. This happens so that he has the expectation of identifying those errors which

might impair the „truth and fairness‟ of the view given by the accounts. When

reporting on accounts, the auditor has a duty to act with the skills and care that

reasonably be expected in the circumstance having regards to Approved Auditing

Standards and Auditing Guidelines. There is always some risk that the irregularities

including fraud and errors may not be detected by the auditor.

The Internal Audit Agency Act (2003) (Act 658) reveals that in Ghana however, the

problem of detecting and preventing fraudulent activities and errors were given

greater boost with the introduction of the Act. It should be indicated that Section 2 of

the Internal Audit Act states the functions of the auditor to include setting of required

procedures and standards towards the conduct of internal audit activities in

government organizations. The Agency shall thus ensure accurate, timely and reliable

managerial, financial and operating information which are reported both internally

and externally. This implies that the Agency shall see to the facilitation in the

3

detection and prevention of fraudulent activities and errors (Internal Audit Agency

Act, 2003).

It has become very normal that the internal auditor has a great duty in the detection

and prevention of fraud and errors in public organizations and hence it has become a

norm to many organizations that if fraud should occur in the organization, it is the

irresponsibility of the internal auditor.

1.2 Statement of the Problem

There seems to be widespread claims among people especially in Ghana that most

auditors do not perform their duties well. These have created the impression that there

could be a possible audit expectation gap. Thus there could be differences between

what auditors are legally mandated to do and what the general public think they

should do as in their duty. Based on this, several studies have been done in other

countries on audit expectation gap since it could undermine the integrity of the audit

profession (examples : Gay et al. (1997) in Australia; Innes et al. (1997) in the UK;

Hojskov (1998) in Denmark; Frank et al. (2001) in the US and Best et al. (2001) in

Singapore). However, it is very surprising that, to the best of the knowledge of the

author, only one empirical study (Agyei et al. 2013) has been done on Ghana.

However given the importance of audit expectation gap to the audit profession, it is

imperative that such a topic is extensively studied empirically. Aside the above, this

study departs from Agyei et al. (2013), which sampled only auditors and stockbrokers

in Accra by looking at auditors, accountants, headmasters, storekeepers and teachers

in the Kumasi Metropolis of Ghana in order to investigate the existence of an audit

expectation gap in the Educational Sector.

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1.3 Research Objectives

The study is aimed at exploring the expectation gap existing between auditors and the

general public in senior high schools in the Kumasi Metropolitan Assemble.

1. To find out whether there exists an audit expectation gap.

2. To examine the influence of reliability and duty factors on audit expectation

gap in senior high schools in the Kumasi Metropolitan Assembly.

3. To find whether independent factors influence the audit expectation gap in

senior high schools in the Kumasi Metropolitan Assembly.

1.4 The Research Questions

The questions this study is concerned with are:

1. Is there any audit expectation gap?

2. Are there any contributory effects of reliability and duty factors on expectation

gap?

3. Are there any influential effects of independent factors on expectation gap?

1.5 Significance of the Study.

Since Auditing is very important to the functioning of institutions, study on the

existence of an audit expectation gap would be helpful in the following ways,

Firstly, it will bring to bare whether there exists an audit expectation gap and if so the

extent of it.

In addition, it will bring to bare the sources or forms of audit expectation gap and

serve as a signal to policy makers on measures that can be instituted to tackle it.

Last but not the least it could serve as an important source of literature for future

studies on audit expectation gap.

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1.6 Scope of the Study.

The main focus of the study is to identify the existence of an audit expectation gap in

Kumasi. The determinants of the gap are numerous. The study adapts the factors

looked into by Best et al. (2001) when they researched into this topic in Singapore,

considering the duty factor (the external auditor‟s duties) and reliability factor”.

Schelluch and Gay (2006) found that the trait and meaning of the „audit report

messages‟ also contribute to an audit expectation gap. This factor will be looked into

in the Ghanaian context. An additional factor called independence threat will be

looked into. The population for the study cover all public senior high schools in the

Kumasi metropolis. However, it has been limited to a sample size of 110 participants

drawn from 22 public senior high schools in the metropolis and 10 auditors.

1.7 Limitation of the Study

The major challenge was inability of the study to cover all schools in the regions and

particularly the Kumasi Metropolis.

1.8 Organization of Research

The study is structured in five different chapters. Chapter one comprises the general

background of the study, statement of the problem, the research objectives, questions,

the relevance of the study, limitation of the research, the scope and finally the

organization of the study. Chapter two reviews both theoretical and empirical

literature on the subject. Chapter three covers the research methodology that was used

to attain the research objectives. The fourth chapter covers presentation and

discussion of the findings of the study. Chapter five concludes the study and gives

some recommendations.

6

CHAPTERTWO

LITERATURE REVIEW

2.1 Introduction

This section of the report involves reviewing relevant concepts on the variables that

contribute to an audit expectation gap. Following this introductory section, a

development of auditing is established. Based on the review of the relevant concepts

on the audit expectation gap, hence both conceptual and theoretical frameworks were

derived. The chapter further reviewed scholarly work on the historical background of

auditing, duties of the auditor, aims and objectives for auditing in Ghana.

2.2 Development of Auditing

2.2.1 Historical Background and the Ancient Auditor.

According to Flint (1998), the phenomenon of auditing dates back to the medieval

ages. There was the essence of managing affairs of organizations or individuals at the

early stages of civilization by putting in place measures to oversee the financial

aspect of their businesses to propel businesses to have total dominion over the „where

from‟ and how spent‟ aspects of funds in the business (Association of Accountancy

Bodies in West Africa (ABWA), 2012).

Scholarly works revealed that people in ancient Egypt and Rome, were tasked to

review works carried out by tax collectors and estate managers. It is further

researched that during the era of medieval Britain, independent people were employed

to ensure that the returns from tenant farmers accurately reflected revenues received

from the estate. In that era, there was much attention on detecting fraud and other

irregular acts (Gul et al, 1994).

7

To this end the financial statements prepared by the businesses were entrusted to

independent trusted individual(s) who undertook a thorough check of the „accounts‟ –

The checking procedure involved the attendance of the accounting party at a hearing

before the independent arbitrator appointed by the interested parties for the accounts

to be „‟heard‟‟ by him, and he, in turn, gave his opinion by issuing an oral report for

the information of the interested parties.

This historical background of auditing spells out the inherent qualities of an auditor

(i.e. honesty, integrity, respectability, independent of mind, among others), which the

accountancy profession still upholds today. According to Brown (1962), the word

„audit‟ is a coined word from the Latin word „audire‟ meaning simply „to hear‟ in line

with the historical practice of „hearing‟‟ accounts. The first auditors only had means

of listening to oral reports of mandated professionals or individuals and confirmed or

denied the accuracy of the reports.

Also, other developments about the auditing profession have transformed the mode

and nature of auditing. This has made the discipline highly demanding and perverted.

Furthermore, the role of auditors over the centuries, as the verifiers of formal reports

developed to include that of verifying written records. Double entry bookkeeping

particularly in the sixteenth century had evolved to the point where Luca Pacioli had it

written in the first known book on „bookkeeping‟. He further recommended the

records of accounting to be verified by other auditors.

Thus auditors were appointed as independent professionals to specifically investigate,

detect and report on organizations‟ failures as well as providing measures to address

them. This occurred in the early nineteenth century.

8

According to Teck-Heang and Ali (2008), modern means of auditing started in mid

1800s in the United Kingdom when the Joint Stock Companies Act was enacted. With

this, mandated directors of companies reported to shareholders through the balance

sheet. Auditors were not required to be accountants nor independent. In 1900

however, a new Companies Act was put in place to give mandate to organizations to

appoint independent auditors. The discussion thus reveals that, the issue of having

independent auditors has been in existence over a century.

2.2.2 Emerging Trends in the Auditing Environment

Having seen the rapid changes in the economic environment (as well as business),

auditing and accounting activities ought to catch up with these changes so as to

address any challenges that would emerge as a result of the changes. Thus, there have

been various activities that have defined the auditing and accounting profession in

these years. For instance, due to the expansion of statutory provisions, the avenues for

having in place auditing practices have also grown largely. This phenomenon has

informed market regulatory bodies to improve upon their duty in the auditing and

accounting practices. This also requires financial auditors to formally enroll

companies on recognized platforms.

Also, these changes in the discipline have led to improvement in activities of audit

markets and their functions. Their activities have significantly expanded and led to the

growth of international security markets to monitor and regulate the activities of

organisations or businesses.

Further, the advancement in information technology has directly impacted on the

auditing and accounting environment, as well as their practices. Thus the auditing and

9

accounting environment and scope have been influenced greatly by these recent

developments in technologies.

Turley and Cooper (2005) indicate that there is the need to meet the demands of the

public when it comes to variations in information and communication technologies,

stock and financial markets in the auditing profession. Therefore, professionals ought

to learn more, update themselves and be in tune with evolving needs of the market,

statutory regulations, and the forms of services to be rendered to clients, and meeting

set auditing and accounting standards among others.

There were however measures to address some of the emerged challenges during the

early part of the century, particularly in the United States. Prominent among the

challenges were the emergence of corporate financial standards, irregular and wrong

report practices in the 1929 stock market which led to the Great Depression and crash

of the stock market in the United States.

There were then enactments to mandate companies that were then on the United

States stock market to accommodate both balance sheet statements and profit/loss

statements.

There were also efforts to address the challenge by requiring the formation of auditing

committees, which was to be made up of no-executive directors and other appointees

(auditors) who were to be accepted by stakeholders.

There was also a major challenge when the States witnessed numerous failures in

businesses as well as failures in auditing practices. The United States thus regulated

the formation a Commission (Cohen) and subsequently followed the stated

recommendations of the Commission. The recommendations was implemented and

10

instituted until the period when there were criticisms about the auditing practices of

professionals, which included the autonomy of the auditor. This led to the collapse of

the then major accounting firm; Enron, and its auditor, Arthur Anderson.

2.3 Audit in Ghana

In Ghana, the company‟s code, 1963, Act 179 introduced compulsory audit

requirement. In accordance with Section 124(1c) of the Ghana‟s Company Act, 1963,

Act179, the auditors‟ report should be part of every organization‟s account before it

can be distributed to the relevant stakeholders. The implication is that, every

organization is mandated to have an auditor.

The appointed auditor is also anticipated to have a view on the truthfulness as well as

fairness of the income statement and the statement of financial position. These are to

be made available by the directors of the organisations and made available to all

stakeholders during annual general meetings.

The companies code,1963,Act 179 states who qualifies to be appointed as auditor for

private companies (Sec 270) or public companies (Sec 296).The modern auditor

therefore should have qualification and skill in the use of the principles of book-

keeping as well as expert knowledge of general business affairs to be able to cope

with his new responsibilities.

To be qualified to be appointed as an auditor in Ghana in accordance with the

company‟s code, 1963, Act 179, one must have adequate accountancy training which

normally involves passing the qualifying examinations of ICAG as a first step,

followed by specified number of years‟ of practical experience in accountancy to be

able to gain admission into membership of the body. The next hurdle to be cleared

which will give the individual the authority to practice as an accountant, and for that

11

matter as auditor, is the completion of a specified period of training under a qualified

and experienced practicing accountant. Even after this, a qualified accountant is still

required to undertake a continuing professional development (CPD) and training so as

to keep to the high professional standards of accountants and to keep abreast with

current developments.

2.4 The Concept of Audit Expectation Gap (AEG)

Audit Expectation Gap according to Liggio (1974) and Lee et al (2010) has played

important role particularly in the 1970s and still continues to be very important in the

field of auditing and accounting. During the early parts of the 19th

century, there came

up heated criticism and unfavorable judgment from the public about the accounting

profession, due to unanticipated failures in the corporate world. This has made the

audit expectation gap an emerging topic in recent times. There have thus been such

research works by authors in most developed countries, such as Frank et al (2001) in

the United States, Innes et al (2007) in the United Kingdom, Hojskov(1998) in

Denmark, Gay et al (1997) in Australia, Porter (1993) in New Zealand and Best et

(2001) in Singapore. These studies were done in the respective countries as a result of

the happenings in issues of corporate, financial and audit failures, and subsequently,

the influence of the challenges on the profession.

Lee (1970) and Beck (1974) established the core objectives for academic and

professional research on audit expectation gaps. They did this by identifying and

critically assessing the responsibilities that are expected from auditors. The survey

instrument used (questionnaire) was aimed at capturing the perception and awareness

of people on the core mandates of auditors in general. It was Liggio who envisioned

12

the changing responsibilities of the auditors and championed or established the

theoretical backing of the audit expectation gap concept.

McEnroe and Martens (2001) indicates that, audit expectation gap is the difference

between the perceptions of people, particularly financial statement clients, about the

roles or duties of the auditor and the roles and duties from the point of view of

auditors. Beelde et al. (2005) asserts that professionals within the accounting and

auditing profession have varied views of the term external auditing.

The negative thoughts of the general society about the roles of the auditors in

promoting fair and truthfulness in financial statement preparations, lead to what

Maccarone (1993) term, „the legal liability crisis facing the accounting profession.

Expectation gap is popularly used to denote a state where there exist difference(s) in

the expectation or perception about the work of an auditor (Adeyemi and Uadiale,

2011).

Thus, the perception of the general public of the roles of the auditor is different from

that if the professional. This is what authors refer to as the expectation gap. The term

according to Trauth et al (1993) is often used to explain the perceptions of the

information systems industry relating to the academic preparation of graduates.

2.5 Theoretical Framework

The theoretical description on whether there exists an audit expectation gap or not is

best explained by the role theory. According to the theory, the professional (auditor)

is regarded to occupy a position of professional status within the social system.

Auditors as a result of their status are mandated to abide by the ethical considerations

which are defined by the societal system. Davidosn (1975) posits that, failure of

13

auditors to abide by the stipulated or given responsibilities or meet the expected duties

generate risks of social action to enforce conformity and to penalize nonconformity‟.

Davidson(1975), further argues that the duty of the auditor is dependent on the

interactions of the normative expectations of the various interest clusters in the

society, which have either direct or indirect relationship to the position of the

auditor.

Lastly, Davidson (1975) indicated that the various clusters of users in a way have

different expectations about auditors and that they (expectations) are likely to change

over time. This change is subject to the re-specification of their own role

requirements and also the interaction of other factors within the society. Thus,

the auditors are placed in multi-role and multi expectation positions.

2.6 Auditors’ Responsibility for Fraud and Errors Detection and Prevention in

Public Sector Organizations

The question of whose duty it is to detect and prevent fraud and errors in the public

sector organization is one of the most debated issues in our field of study today,

especially in the eye of the public and other stakeholders. One school of thought,

especially the business community and the general public are of the opinion that

auditors should occupy positions to better detect and prevent fraud and errors. They

argue that the issue at stake has been one of the main purposes of an audit until

recently. They are of the opinion that the shift in emphases has only been in recent

time, that fraud detection has been abandoned as the major objective (Martins, 1995).

As a result, it is not surprising that many persons in the public would still believe that

an audit in the public sector is concerned with the detection and prevention of fraud

and errors in particular. In this vain, there does not appear to be both realistic and

14

legal basis for the profession or stands having moved from the position of accepting

duty for the detection of fraud to one where it is primarily concerned with satisfying

itself that the entity‟s internal control is effective (Martins, 1995).

On the other hand, the emphasis of the auditing profession responsibilities do not

necessitate the auditor to specifically identify fraud and errors unless required by

status or the specific terms in his letter of engagement. The primary aim of an audit is

to allow the auditor to form and express an independent and expert view on financial

statements. The opinion expressed is usually as to whether or not the auditor believes

that the statements of finance truly depict the opinion and financial position of an

enterprise. However, the likelihood of fraud that until otherwise revealed distorted the

results showed by the financial statements. This call for the need to ensure that the

auditor puts in practical measures to enable him detect any irregularities with regards

to the financial statements, so as to address them positively and have a better

outcome.

With the introduction of Statement on Auditing Standard No. 99 (SAS no.99) by

auditing standard board, auditors would have to go through diverse and detailed steps

for the detection of fraud as and when they are implemented. This is to enable the

professional take into consideration fraudulent activities, so as to blend that into the

auditing procedures and update it periodically until completion. The Statement on

Auditing Standard No. 99 explains the procedure for the auditor to go through. These

are outlined as: to gather relevant information to reveal the associated risks of

misstatement that come as a result of fraud; to ascertain the foretasted risks when he

has taken notice of the necessary evaluation acts of the entity‟s programs and control;

and lastly to have adequate response to the findings to be revealed.

15

It should be noted that the professional (auditor) under the SAS has to collect and pay

attention to wider information in order to assess the fraud risks in detail, than what

existed in the earlier periods.

It further requires auditors to have in mind the essence to subdue tendencies that

would affect their profession; relying so much on the biases and views of clients,

which make them, have a skeptical perception about the auditing profession. The

professional must however not have the presumptions that, his clients will treat him

and the profession honestly. This is to enable the auditor render his services

professionally to the satisfaction of everyone.

The Statement on Auditing Standard No. 99 provides the avenue to enable

professionals in the auditing and accounting discipline to carry out their

responsibilities positively and efficiently. It seeks to explore into other areas of the

auditing profession, so as to streamline activities of auditors in a better way. This is to

help do away with the “checklist mentality” but rather introduce and improve upon

effective auditing and accounting practice.

According to the Journal of Accountancy (2003), the recent standard for addressing

fraud, is a major component of the American Institute of Certified Public Accountants

(AICPA‟s) comprehensive antifraud and corporate duty program. Some fraud-related

measures were first clearly spelt out in the speech of the AICPA President and CEO

Barry C. Mel ancon delivered to the Yale Club in New York. He indicated that

AICPA was committed to strengthening the confidence of investors. This was to be

done through improving upon the good quality of the profession as well as reinforce

the core values of the discipline. These measures bring up a practice where the

detection and prevention of fraudulent activities are the duty of every organization,

16

auditing and accounting professionals, as well as corporate America and the financial

reporting community (Journal of Accountancy 2003).

2.7 Perception of the Public about the Auditor’s Role in the Detection and

Prevention of Fraud and Errors in Public Sector Organizations

There is the assertion that audit expectation gap comes about as result of a rise in the

litigation and criticism against the duties of the auditors. This is significant to the

discipline due to the fact that when the expectation of society and clients are not met,

the credibility, honor and potential earnings associated with the profession are

lowered. Sadly, these differences in perception of the general public about the

accounting and auditing profession with reference to the duty of the auditor regarding

fraud and other irregularities still persist. The public expects the auditor to prevent

and detect fraud and other irregularities in the financial statements on which opinion

has been issued to be true and fair.

When reporting on accounts, the auditor has a duty to act with skill and care that

would reasonably be expected in the circumstances having regarded to approve

Auditing Standard and General Guidelines. There is always some risk that

irregularities including fraud and errors may not be detected by the auditor. For

instance, a connived fraud by the employees may go undetected by the auditor.

2.8 Duty to Prevent Fraud and Errors in an Organization

One of the considerable advantages arising from an audit is the detection and

prevention of fraud and errors. Without correcting errors, the account will not depict a

true and fair view. At times what one imagines or thinks to be an error may be due to

fraudulent manipulation of figures, books and documents. It is therefore very

necessary that the auditor examines carefully the cause of genuine errors and other

17

irregularities. This does however not mean that the sole duty towards detecting and

preventing errors laid in the bosom of the auditors.

The elemental obligation for detecting and preventing, errors and other irregularities

rest with relevant managerial bodies or agencies. Management in this context is

defined as any person other than the shareholder who acts on behalf of the

organization. In addition to their business responsibilities, the management have the

(a) duty to safeguard the organization‟s assets because they are reckoned by law as

performing in a stewardship capacity of the property under their control. The

management is also required under the company‟s code to keep proper books of

accounts and prepare accounts which give a vivid position of the organization‟s

activities within a given period of time.

Management should exercise their duty primarily by the institution and operating of

an effective system of internal control which may include internal accounting control,

management control and internal audit unit. The trait and effectiveness of systems of

internal control within the organization can help improve the efficiency of the

financial system and any other system or otherwise of the organization. The presence

of substantial internal control mechanisms reduce the probability of errors and

fraudulent activities in the organization.

The duty of the auditor in respect to fraud and other irregularities are limited to the

planning and performing of his work so that he has a fair anticipation in the detection

of the errors that have the tendency of inhibiting the fairness of the activities of the

profession. To discharge this duty, the auditor should seek a reasonable assurance that

such fraud and errors or irregularities have not occurred or that if they have occurred,

they have been either corrected or properly reflected in the accounts (Salehi, 2007).

18

When reporting on accounts, the auditor has a duty to undertake the activity with the

skill that would be reasonably expected in the circumstance having regard to

Approved Auditing Standards and Guidelines. There is always some risk that

irregularities including fraud and errors may not be detected by the auditor. Whether

the auditor has adhered to such standard and guidelines is determined by the adequacy

of the process which is adopted in the context and the suitability of the audit report

based on the laid down processes (Sokchea, 2015; SAS, 2004).

Most text books made it clear that the purpose of an audit is the expression of an

independent view on the financial statement of an entity. According to Accounting

Standard Board SAS No. 1 (1998), the auditor has the mandate to plan and undertake

auditing of accounts to obtaining a fair confidence on whether the financial statements

are devoid of misstatements. However, people still have the misconception that this

has to do with detection and prevention of fraud and other irregularities. There is also

a wrong perception among the public that auditors should be able to „fish out‟ any

fraudulent dealings in the financial statements they audit. Very few believe that it is

management that is responsible for the prevention of fraud and errors, others suggests

that the auditor has more responsibility as far as fraud and errors detection are

concerned in public organizations. The duty of detecting and preventing fraud and

errors is thus the duty of everyone, the accounting and auditing professionals, Ghana

and the entire financial community.

2.9 Empirical Review

Baron et al (1977) analyzed the distinctions in observations with respect to auditor‟s

fraud finding obligations in the middle of auditors and clients of bookkeeping data in

USA. The study uncovered critical contrast between such discernments.

19

Low et al (1988) demonstrated a study on the audit expectation gap in Singapore.

Noteworthy contrasts were found in the territories of fraud counteractive action,

guaranteeing the precision of the financial statements, successful utilization of

government grants and administration productivity.

Humphrey and Turley (1992) contemplated the audit expectation gap in UK with

respect to the role of auditors through a progression of unstructured interviews,

questionnaire and small scale contextual analyses. The studies uncovered a

unimportant level of contrasts in regards to impression of the audit functions however

critical distinction between auditors and respondents with respect to their perceptions

on the part of auditors, showing the vicinity of an expectation gap.

Schelluch (1996) found that clients were for the most part despondent with the

pretended by the auditing profession, especially with respect to audit autonomy. There

was wide expectation gap in Singapore.

Dana, (2011) likewise directed a study in the general population part in Romania with

students as the respondents. The study found that there exist audit expectation gap in

Romania.

Saeidi, (2012) researched the presence of audit expectation gap desires among

auditors, monetary supervisors and financial specialists in Iran. The outcomes show

there is proof of an audit expectation gap in connection to fraud definition and

auditors‟ obligations in detecting and prevention fraud between auditors and money

related directors, and auditors and financial specialist.

Nasreen (2006) likewise led a study on students of Bangladesh. She considered two

clusters of students, first cluster did not do audit course and second cluster did one

20

audit course. Discoveries uncovered that students who finished one audit course still

had unthinkable expectation in regards to auditor‟s obligation regarding

distinguishing and forestalling misrepresentation and audit assurance. Significant

contrasts were likewise found in choice helpfulness of audited information zone.

Salehi and Azary (2008) set up that there is profound expectation gap between

auditors and bankers. This is as a consequence of bankers' unawareness of auditing

functions. They likewise found that the bankers have sensibility expectation from

auditors.

Bogdanoviciute (2011) led an exact study in the Lithuania; it was found that there

exist audit expectation gap among auditors in connection to parts and obligations of

auditors particularly on fraud counteractive action and detection, assurance and value

of the audited financial statements. The study likewise found that there is broad audit

expectation gap in Lithuania, basically because of diverse expectations with respect to

fraud recognition and lawful liabilities towards outsiders included.

Adeyemi and Uadiale in 2011 directed an overview in Nigeria to analyze the degree

of audit expectation gap in Nigeria. The study uncovered that there exist audit

expectation gap in Nigeria as respondents demonstrated that the current obligations

and obligations of auditors are not obviously characterized and are lacking and the

expectation gap was observed to be wide especially on the issues of the auditors'

obligations on fraud discovery as huge number of the respondents trusted that

auditors' obligations ought to be broadened.

Best, Buckby and Tan in 2001 discovered an expectation gap which was wide

especially in connection to the level and nature of auditor's obligations. They

observed the gap to be especially wide on the issues of the auditor's obligations

21

regarding fraud counteractive action and discovery, and the auditor's obligations

regarding support of accounting records and exercise of judgment in the

determination of audit processes.

Hudaib and Haniffa (2002) explored the vicinity of a "perception gap" in Saudi

Arabia. It was found that uniqueness in sentiments on the official and expected roles

of auditig and issues identified with audit environment in the middle of the different

clusters were obvious. The part of training in influencing the audit expectation gap

was researched by various studies.

There exist diverse literature and research works on the audit expectation gap

particularly in the developed regions around the globe. Studies by Hojskov (1998),

Gay et al. (1997), Innes et al. (1997), and Best et al (2001), among others made

dominant use of the questionnaire as the research instrument to gather empirical data.

The studies focused on examining the forms of audit expectation gaps, where they are

found and their nature, as well as the effects of the gaps on businesses and

professionals and lastly, lasting solutions to address the identified gaps.

Varied categories of respondents were covered by the aforementioned studies. For

instance, respondents like lawyers, auditors, judges were covered during Lowe‟s

(1994) study, investors by Epestein and Gregor (1994), whereas Beck (1994)

considered stakeholders, Humphrey et al., (1993) and Porter (1993) covered financial

directors, chartered accountants, investment analysts, and bankers, and lastly

financial directors and users of corporate financial statement by Benau et al.

(1993).

A research work done by Low in 1980 in Australia revealed the following results:

Lowe‟s work was aimed at examining the duties of the auditor in detecting and

22

preventing irregularities and other non-statutory acts. This was done to have a fair

idea of the capacity of the auditor to identify these risks and address the perceptions

people have about both auditing and non-auditing professionals. The study revealed a

significant relationship of the perceptions to the degree at which auditors played their

roles in detecting irregularities. Thus, the study identified an expectation gap among

the clusters; auditors and non-auditor clusters.

Another similar work was undertaken through the use of research questionnaires to

assess the gap via having a cursory look at peoples‟ opinions of the core duties and

what they expect from auditors in their day-to-day activities. This was carried out by

Humphrey et al. in 1993. The survey instrument comprises series of mini-case. The

categories of people covered by his survey were directors of companies, bankers,

accounting professionals in public sector, and investment analysts. Having undertaken

the survey, findings from it showed a significant difference between auditors and the

respondents with regards to their perceptions on the nature of the accounting and

auditing profession. The findings supported the existence of an audit expectation gap,

particularly in areas of the nature of the audit function and the perception of people on

the performance of auditors.

Similarly, Mohammed and Muhammad-Sori (2002) found the existence of audit

expectation gap in Malaysia arising from doubtfulness in the responsibilities of

auditors, the level of satisfaction with respect to the services rendered by the

professionals, and the non-autonomous nature of the professionals.

Findings from their studies were revealed to confirm studies by scholars like

Boonyanet and Ongthammakul (2006) in Thailand. These and many more works

23

were carried out by researchers to examine whether there exist expectation gaps and if

they do, the causes, nature and ways of addressing them.

Premised on the discussions above, it is deemed relevant to examine the audit

expectation gap in Ghana, taking particular cognizance of Senior High School in the

Kumasi Metropolis. The subsequent section thus presents the profile of the Kumasi

Metropolis

In 1991, the Ireland Institute of Chartered Accountants set up an ancillary

autonomous commission to study the expectation gap. The Commission‟s report

submitted in 1992 settled that there was evidence of an expectation gap which should

be addressed as matter of priority. Porter (1993) found out that the credibility of

external auditor is being highly questioned by scholars and businesses, as wide spread

criticism and litigation against auditors increase.

Some of these perceptions were revealed to be as a result of ignorance or lack of

adequate knowledge of society on issues of company laws and the standards of the

auditing profession as well as misunderstanding of the important duties of the

professionals.

Porter (1993) went further to suggest that a major way of minimizing the expectation

gap is to improve the knowledge base and understanding of the auditors‟ duties

through the provision of auditing education.

Furthermore, the Institute of Chartered Accountants of Canada set up the MacDonald

Commission to study the public‟s expectation of auditing practices. The final draft of

the commission‟s report was submitted in 1988 with the conclusion that the public is

mainly ignorant of the extent of the responsibilities entrusted to auditors and this

24

made some of the most knowledgeable segment felt that their expectation were not

been fulfilled. This thus calls for the need to take efficient and effective measures to

address this gap.

Similarly, Innes et al. (1991) in his study came up with the conclusion that there

should be the provision of information on the scope of operations of auditors to

meeting the demands of their clients. Therefore, the provision of audit education has

also been recommended as a likely strategy to address this expectation gap.

According to Sikka et al (1992), the initial strategy at eliminating the expectation gap

calls for steps to ensure that the objectives of the auditing practice be streamlined

effectively and made open, accountable, democratic and autonomous.

A study was led in Ghana by Agyei A, Aye K. B, Owusu-Yeboah E (2013), the study

found that there exist audit expectation gap in Ghana, especially concerning auditor

obligation identifying with fraud discovery and deterrence, and soundness of internal

control structure of the audited entity. The analysts suggest that the audit calling and

controllers ought to detail such benchmarks, standards and regulations that might

enough guide the auditors to satisfy the sensible expectation of different client

bunches.

This study departs from Agyei et al. (2013), which sampled only auditors and

stockbrokers in Accra by looking at auditors, accountants, headmasters, storekeepers

and teachers in the Kumasi Metropolis of Ghana in order to investigate the existence

of an audit expectation gap in the Educational Sector.

25

CHAPTER THREE.

METHODOLOGY.

3.1 Introduction.

This chapter frameworks the particular research methodology and provides details of

procedures that were employed to achieve the objectives of the study. The chapter

looked at the research design, the population for the research, sample and sampling

technique, the instrument for the study, as well as method of data analysis.

3.2 Research Design

The type of research design employed in this research work was a survey. A survey

design here is a fact-finding type of research design with the aid of questionnaire and

it describes the prevailing conditions that are in existence at a particular point in a

certain time period. Two methods of collecting information were used for the research

design. The primary data information was collected from the field by using

questionnaire. In this case, a cross sectional survey questionnaire design was used in

providing answers to the main research questions. Interviews were an addition used

by the researcher in collecting data for the research work.

3.3 Population

For the purpose of this research work, the population was confined to the staff of

public senior high schools and auditors within the Kumasi Metropolis. The staff in

this context refers to the management of various public senior high schools, the

accountants, administrators, other non-teaching staff as well as teachers. The total

population for the purpose of this study was 2643, thus the entire staff of the 22 public

senior high schools in the Kumasi metropolis.

26

3.4 Sample and sampling technique

For the sake of convenience, the researcher took a sample of 120 participants. Each

school was represented by 5 participants. The selection of the 5 participants was

conveniently done by stratified sampling as follows: The Headmaster, the accountant,

the storekeeper, and two teachers, in addition 10 external auditors were selected to

make the total sample size of 120

There sample size is represented mathematically as follows:

SS= (SS1*N) +A

Where SS=Sample size

SS1= Number of participants per school

A= Number of auditors that participated

N= Number of senior high schools

(5*22)+10 = SS

110+10 = SS

SS= 120

Out of 120 sampled respondents, the author could not retrieve 5 questionnaires from

outfit of Headmasters and hence making the sample size 115.

3.6 Data Analysis.

The data was entered into computer and analysed with the Statistical Package for

Services and Solutions (SPSS) using cross tabulations.

27

3.7 Organizational Profile

3.7.1 Kumasi Metropolitan Assembly

Location

The Kumasi Metropolis is about 270km north from Accra, the nation‟s capital.

Kumasi lies amid latitudes 6.35o and 6.40

o and longitudes 1.30

o and 1.35

o. It has

elevation range between 250 and 300 meters above sea level. Kumasi Metropolis has

a land area of approximately 254sq/km and ten (10) kilometers in radius with a

population mass of 9434 individuals per sq. km. The Metropolis has about 119

communities (Kumasi Metropolitan Assembly, 2013).

Demography

Kumasi is regarded the most populous city in Ashanti Region. According to GSS

(2012), the Metropolis in the year 2010 had a population of 2,035,064 people and a

rate of growth of 4.8% p.a. In 2013, the population of Kumasi was estimated at

2,396,458.

Sex Structure

There are more females (52.22%) in the Metropolis than male (47.78%). Majority of

the population (52.7%) are below 15 years while the remaining 47.3% are above 15

years.

Household Sizes/Characteristics

According to the Ghana Statistical Service (GSS, 2012), Kumasi Metropolis has an

average household size of 5.1. This high average household size is attributable to the

larger number of people in the Metropolis.

28

Rural Urban Split

Kumasi Metropolis has 46%, 48%, and 6% of its towns being peri-urban, urban, and

rural respectively. It is regarded the most populous among all Metropolitan,

Municipal and District Assemblies in Ghana.

The Local Economy

(a) Main Economic Activities

It is estimated that about 86% of residents, particularly active age cluster in the

Metropolis is economically active. Service, Agriculture and Industry are the major

economic activities that proved source of livelihood to people in the Metropolis.

The Service Sector

The sector is regarded as the major economic development avenue of the Kumasi

Metropolis. Approximately 72 percent of the economically active age cluster are

found in or employed by the sector. The Service sector has positioned Kumasi to be

an important center for diverse commercial activities in Ghana; basically wholesale

and retail businesses. The commercial activities are indicated to entail the sale of

various types of goods like office and educational stationeries, clothing, food stuffs,

and building materials. The need for adjunct services to complement the existing

economic activities in the Kumasi Metropolis has called for investments from

other significant service providers. Thus, the banking and insurance sectors in line

with other significant outfits have enabled significantly the creation of sound

economic environment for the development and growth of the Metropolis. Other

telecommunication and transport services are also revealed to be contributing greatly

to the development through revenue generation and creation of employment.

29

The Industrial Sector

The Kumasi Metropolis is noted to have wide range of industrial activities, mostly

small-scale in nature. The industrial sector has contributed enormously to the creation

of gainful employment to about 23percent of the active age cluster and revenue

generation. The Suame Magazine is regarded the largest mechanical garage in the

West African Region. This and Asafo mechanical garages have contributed positively

in the creation of employment and generation of revenue to the Assembly.

There are also other industries that have been noted to contribute positively to the

economic development of the Metropolis, through creation of jobs and providing

sources of income and livelihood for the labour force. These include the beverage

industries.

There exist also, other wood processing and manufacturing industries in the

Metropolis. These are largely in micro, small, medium and large scale in nature and

size. These provide sustainable sources of livelihood to the employees and employers

in the Metropolis.

The Agricultural Sector

The agricultural sector comprises food and livestock farming. Food farming is mostly

small scale staple food crops. Large volumes of the foodstuffs are imported from

other adjoining districts and as well as distant areas.

Major Infrastructure

The major infrastructure comprises the economic infrastructure notably the marketing

facilities, energy, telecommunications and transport infrastructure.

30

The marketing facilities are the major commercial centers within the Metropolis. The

large commercial areas are notably the “Kumasi Central Market, Bantama market,

Kejetia Terminal, Adum Shopping Centre, Suame and Asafo Magazine, Kaase

/Asokwa Industrial Enclave, Sokoban Wood Village among others” (KMA, 2013).

The dominant energy forms and sources of fuel are electricity, biofuels, LPG, and

kerosene.

Transportation

There exist varied travel modes in the Metropolis. There thus exists three major modal

means of travel to various parts of the Metropolis. These include air, rail and road

travel. With respect to road transport, Kumasi Metropolis presently has a total length

of road network of 1,921 km, which links almost all parts of the country. The road

networks are broadly collectors, arterials and local roads which link various

communities to others.

The Metropolis has eight major arterials which take care of movement in and out of

the Metropolis. The arterials are Barekase, Buokrom, Bosomtwe, Ejisu, Obuais,

Sunyani, Mampong, and Offinso routes. These arteries further have quite a number of

collectors which takes traffic volume from the local roads to primary roads.

Health Care and Educational Infrastructure

The Kumasi Metropolis has Metropolitan Health Services which has about 5 Sub

Metro-Health Services.

The educational infrastructure in the Metropolis have both public and private

providers who have stake in developing the educational infrastructure. The private

providers consist of individual and other religious bodies.

31

Structure of the Assembly

Act 462 & LI 1614 of 1989 established KMA to manage the city. The General

Assembly consists of 145 members made up of 92 elected, 43 appointed, 10 Members

of Parliament and a Chief Executive. The Assembly has 9 Sub-Metros, 21 and 92

town councils and Unit Committees respectively.

32

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND DISCUSSION OF FINDINGS

4.1 Introduction

This chapter presents the findings and analysis of data on the five participants based

on their responses on duty factors, reliability factors as well as independence factor

with respect to expectation gap in the work of auditors.

4.2 Data Presentation (Using Tables)

The following tables are the results of data collected from the field survey. The

responses of the auditors are compared with that of accountants, storekeepers,

headmasters and teachers.

Table 4.1.1 Highest Academic Qualification of Respondents.

Occupation.

Highest

Level of

Education

Auditors. Headmasters Accountants. Storekeepers Teachers Total.

WASSCE 0 0 0 0 0 0

HND 3 0 0 15 0 18

BSc. 2 5 5 4 24 40

BA 1 4 7 3 12 26

MBA 4 2 8 0 4 20

MSc. 0 6 2 0 4 12

PhD. 0 0 0 0 0 0

Total 10 17 22 22 44 115

Source: Author‟s Field Survey (2015)

33

From the table above, out of the 10 auditors who responded, 3 were HND holders, 2

had their BSc. 1 was BA holder and 4 were MBA holders. Concerning the 17

headmasters who responded, 5 were BSc. holders, 4 persons had BA and 2 had MBA

degrees, 6 persons had MSc. Concerning the 22 storekeepers 15 are HND holders, 4

had BSc, and 3 had BA degree. Concerning the 22 accountants 5 had BSc. Degree, 7

had BA, 8 had MBA degree and 2 had MSc. Degree. With regards to the 44 teachers

who responded, 24 had BSc. 12 had BA, 4 had MBA and 4 others had MSc. degree.

Table 4.1.2 Auditor’s duty for preparing financial statement

Occupation

Response Auditors Headmasters Accountants Storekeepers Teachers Total

Strongly

Disagree

7 3 13 14 16 53

Disagree 1 1 1 2 1 6

Agree 1 7 2 3 1 14

Strongly

Agree

1 6 6 3 26 42

Total 10 17 22 22 44 115


From Table 4.1.2, concerning the auditors with regards to the preparation of financial

statements as their duty, 7 strongly disagreed that they prepare financial statements, 1

disagreed, 1 agreed and 1 said he strongly agrees. Thus from the above, majority of

the auditors strongly disagreed that it is their duty to prepare financial statements. On

the part of the headmasters concerning the preparation of financial statements as the

duty of auditors, 3 strongly disagreed, 1 disagreed, 7 agreed and 6 strongly agreed. On

the part of the accountants, 13 strongly disagreed, 1 disagreed, 2 agreed, and 6

34

strongly agreed. On the part of the storekeepers, 14 strongly disagreed, 2 disagreed, 3

agreed, and 3 strongly agreed. Finally on the part of the teachers, 16 strongly

disagreed, 1 disagreed, 1 agreed, and 26 strongly agreed.

Thus concerning the preparation of financial statement as a duty of auditors, it was

found that there was no expectation gap between auditors on one hand and

headmasters and accountants on another hand but an expectation gap was found

between auditors on one hand and storekeepers and teachers on another hand.

Table 4.1.3 Auditor’s Duty for Expressing an Independent Opinion on the

Financial Statements based on their Audit.

Occupation


Strongly

Disagree

0 0 0 0 0 0


Agree 1 3 5 5 5 19

Strongly

Agree

9 12 17 16 39 93

Total 10 17 22 22 44 115


From Table 4.1.3, concerning the auditors with regards to the auditor‟s duty for

expressing an independent opinion on the financial statements based on their audit,

none strongly disagreed that is the auditor‟s duty to express an independent opinion

on financial statements, none also disagreed, 1 agreed and 9 said they strongly agree.

Thus from the above, majority of the auditors strongly agreed that is the auditor‟s

duty to express an independent opinion on financial statements. On the part of the

headmasters concerning the auditor‟s duty for expressing an independent opinion on

35

financial statements as the duty of auditors, none strongly disagreed, 2 disagreed, 3

agreed and 12 strongly agreed. On the part of the accountants, none strongly

disagreed, none also disagreed, 5 agreed, and 17 strongly agreed. On the part of the

storekeepers, none strongly disagreed, 1 disagreed, 5 agreed, and 16 strongly agreed.

Finally on the part of the teachers, none strongly disagreed, none also disagreed, 5

agreed, and 39 strongly agreed.

Thus concerning expressing an independent opinion on financial statements as the

duty of the auditor, it was found that there was no expectation gap between auditors

on one hand and headmasters, accountants, teachers and storekeepers on another

hand.

Table 4.1.4 Auditor’s Duty to Verify Every Accounting transaction

Occupation


Strongly

Disagree

4 0 1 3 1 9

Disagree 4 3 2 2 2 13

Agree 1 6 10 9 11 37

Strongly

Agree

1 8 9 8 30 56

Total 10 17 22 22 22 115


From Table 4.1.4, concerning the auditors with regards to the auditor‟s duty to verify

every accounting transaction, 4 strongly disagreed that it is the auditor‟s duty to verify

every accounting transaction, 4 disagreed, 1 agreed and 1 said he strongly agrees.

Thus from the above, majority of the auditors strongly disagreed or disagreed that it is

36

their duty to verify every accounting transaction. On the part of the headmasters

concerning the auditor‟s duty to verify every accounting transaction, none strongly

disagreed, 3 disagreed, 6 agreed and 8 strongly agreed. On the part of the accountants,

1 strongly disagreed, 2 disagreed, 10 agreed, and 9 strongly agreed. On the part of the

storekeepers, 3 strongly disagreed, 2 disagreed, 9 agreed, and 8 strongly agreed.

Finally on the part of the teachers, 1 strongly disagreed, 2 disagreed, 11 agreed, and

30 strongly agreed.

Thus concerning the auditors with regards to the auditor‟s duty to verify every

accounting transaction, it was found that there was an expectation gap between

auditors on one hand and headmasters, accountants, teachers and storekeepers on

another hand.

Table 4.1.5 Auditor’s Duty for detecting all fraud in an organization

Occupation


Strongly

Disagree

6 2 3 3 1 15

Disagree 3 3 4 3 7 20

Agree 1 4 10 9 23 47

Strongly

Agree

0 8 5 7 13 33

Total 10 17 22 22 44 115


From Table 4.1.5, concerning the auditors with regards to auditor‟s duty of detecting

all fraud in an organization, 6 strongly disagreed that it is auditor‟s duty for detecting

all fraud in an organization, 3 disagreed, 1 agreed and none strongly agreed. Thus

37

from the above, majority of the auditors strongly disagreed that it is the auditor‟s duty

for detecting all fraud in an organization. On the part of the headmasters concerning

the auditor‟s duty for detecting all fraud in an organization as the duty of auditors, 2

strongly disagreed, 3 disagreed, 4 agreed and 8 strongly agreed. On the part of the

accountants, 3 strongly disagreed, 4 disagreed, 10 agreed, and 5 strongly agreed. On

the part of the storekeepers, 3 strongly disagreed, 3 disagreed, 9 agreed, and 7

strongly agreed. Finally on the part of the teachers, 1 strongly disagreed, 7 disagreed,

23 agreed, and 13 strongly agreed.

Thus concerning the auditors with regards to auditor‟s duty for detecting all fraud in

an organization, it was found that there was an expectation gap between auditors on

one hand and headmasters, accountants, teachers and storekeepers on another hand.

Table 4.1.6 Auditor’s Duty for an Effective System of Internal Control.

Occupation


Strongly

Disagree

5 1 2 3 3 14

Disagree 3 1 5 3 2 14

Agree 1 7 9 9 20 46

Strongly

Agree

1 8 6 7 19 41

Total 10 17 22 22 44 115


From Table 4.1.6, concerning the auditors with regards to the auditor‟s duty for an

effective system of internal control, 5 strongly disagreed that it is the auditor‟s duty to

ensure an effective system of internal control, 3 disagreed, 1 agreed and 1 strongly

38

agreed. Thus from the above, majority of the auditors strongly disagreed that it is the

auditor‟s duty for an effective system of internal control to be established. On the part

of the headmasters concerning the auditor‟s duty for an effective system of internal

control, 1 strongly disagreed, 1 disagreed, 7 agreed and 8 strongly agreed. On the part

of the accountants, 2 strongly disagreed, 5 disagreed, 9 agreed, and 6 strongly agreed.

On the part of the storekeepers, 3 strongly disagreed, 3 disagreed, 9 agreed, and 7



Thus concerning the auditors with regards to the auditor‟s duty for an effective system

of internal control, it was found that there was an expectation gap between auditors on

one hand and headmasters, accountants, teachers and storekeepers on another hand.

Table 4.1.7 Auditor’s Exercise of Judgment in Selection of Audit Procedures

Occupation


Strongly

Disagree

1 2 2 2 2 9

Disagree 1 1 1 3 4 10

Agree 3 8 11 9 18 49

Strongly

Agree

5 6 8 8 20 47

Total 10 17 22 22 44 115


From Table 4.1.7, concerning the auditors with regards to the auditor‟s duty in the

exercise of judgment in selecting audit procedures, 1 strongly disagreed that it is

auditor‟s duty to exercise judgment in selecting of audit procedures, 1 disagreed, 3

39

agreed and 5 said they strongly agreed. Thus from the above, majority of the auditors

agreed that it is their duty to exercise judgment in selecting audit procedures. On the

part of the headmasters concerning the auditor‟s duty to exercise judgment in

selecting audit procedures, 2 strongly disagreed, 1 disagreed, 8 agreed and 8 strongly

agreed. On the part of the accountants, 2 strongly disagreed, 1 disagreed, 11 agreed,

and 8 strongly agreed. On the part of the storekeepers, 2 strongly disagreed, 3

disagreed, 9 agreed, and 8 strongly agreed. Finally on the part of the teachers, 2

strongly disagreed, 4 disagreed, 18 agreed, and 20 strongly agreed.

Thus concerning the auditors with regards to the auditor‟s duty in exercising judgment

in selecting audit procedures, it was found that there was no expectation gap between

auditors on one hand and headmasters, accountants, teachers and storekeepers on

another hand.

Table 4.1.8 Auditors’ Additional Duty for Evaluating whether an organization is

a Going Concern

Occupation


Strongly Disagree 0 1 5 2 0 8

Disagree 1 3 2 2 5 12

Agree 4 8 8 11 21 52

Strongly Agree 5 5 7 7 18 42

Total 10 17 22 22 44 115


From Table 4.1.8, concerning the auditors with regards to auditors‟ additional duty for

evaluating whether an organization is a going concern, none strongly disagreed that it

is auditors‟ additional duty for evaluating whether an organization is a going concern,

40

1 disagreed, 4 agreed and 5 said they strongly agreed. Thus from the above, majority

of the auditors strongly agreed that it is auditors‟ additional duty for evaluating

whether an organization is a going concern. On the part of the headmasters

concerning auditors‟ additional duty for evaluating whether an organization is a going

concern, 1 strongly disagreed, 3 disagreed, 8 agreed and 5 strongly agreed. On the

part of the accountants, 5 strongly disagreed, 2 disagreed, 8 agreed, and 7 strongly

agreed. On the part of the storekeepers, 2 strongly disagreed, 2 disagreed, 11 agreed,

and 7 strongly agreed. Finally on the part of the teachers, none strongly disagreed, 5

disagreed, 21 agreed, and 18 strongly agreed.

Thus concerning the auditors with regards to auditors‟ additional duty for evaluating

whether an organization is a going concern, it was found that there was no expectation

gap between auditors on one hand and headmasters, accountants, teachers and

storekeepers on another hand.

Table 4.1.9 Auditor’s duty for Disclosing whether any Theft occurred during the

Financial Year.

Occupation


Strongly Disagree 7 2 3 0 2 8

Disagree 1 0 4 2 8 18

Agree 1 6 5 7 18 40

Strongly Agree 1 9 10 13 16 49

Total 10 17 22 22 44 115


From Table 4.1.9, concerning the auditors with regards to the auditor‟s duty for

disclosing whether any theft occurred during the financial year, 7 strongly disagreed,

41

1 disagreed, 1 agreed and 1 said he strongly agrees. Thus from the above, majority of

the auditors strongly disagreed that it is auditor‟s duty to disclose whether any theft

occurred during the financial year. On the part of the headmasters concerning the

auditor‟s duty for disclosing whether any theft occurred during the financial year, 2

strongly disagreed, none disagreed, 6 agreed and 9 strongly agreed. On the part of the


the part of the storekeepers, none strongly disagreed, 2 disagreed, 7 agreed, and 13



Thus concerning the auditors with regards to the auditor‟s duty for disclosing whether

any theft occurred during the financial year, it was found that there was an

expectation gap between auditors on one hand and the non-auditor group

(headmasters, accountants, teachers and storekeepers) on another hand..

Table 4.1.10 Auditors are Responsible for Organizational Failure

Occupation


Strongly

Disagree

8 1 3 6 11 29

Disagree 1 3 8 8 15 35

Agree 0 5 4 5 10 24

Strongly

Agree

1 8 7 3 8 27

Total 10 17 22 22 44 115


42

From Table 4.1.10, concerning the auditors with regards to whether auditors are

responsible for business failure, 8 strongly disagreed that auditors are responsible for

business failure, 1 disagreed, none agreed and 1 strongly agreed. Thus from the

above, majority of the auditors strongly disagreed that auditors are responsible for

business failure. On the part of the headmasters concerning whether auditors are

responsible for business failure, 1 strongly disagreed, 3 disagreed, 5 agreed and 8

strongly agreed. On the part of the accountants, 3 strongly disagreed, 8 disagreed, 4

agreed, and 7 strongly agreed. On the part of the storekeepers, 6 strongly disagreed, 8



Thus concerning the auditors with regards to whether auditors are responsible for

business failure, it was found that there was no expectation gap between auditors on

one hand and the non-auditors (storekeepers, accountants, and teachers) on another

hand but an expectation gap was found between auditors and headmasters on auditors

being responsible for business failure.

Table 4.1.11 Auditors should be Financially Liable when they do not Exercise

Diligence in Handling the Accounts of an organization.

Occupation


Strongly

Disagree

1 2 2 3 2 10

Disagree 3 5 2 1 2 13

Agree 6 7 8 10 16 47

Strongly

Agree

0 3 10 8 24 45

Total 10 17 22 22 44 115


43

From Table 4.1.1, concerning the auditors with regards to auditors should be

financially liable when they do not exercise diligence in handling the accounts of an

organization, 1 strongly disagreed, 3 disagreed, 6 agreed and none strongly agreed.

Thus from the above, majority of the auditors agreed that auditors should be


organization. On the part of the headmasters concerning whether auditors should be


organization, 2 strongly disagreed, 5 disagreed, 7 agreed and 3 strongly agreed. On

the part of the accountants, 2 strongly disagreed, 2 disagreed, 8 agreed, and 10

strongly disagreed. On the part of the storekeepers, 3 strongly disagreed, 1 disagreed,

10 agreed, and 10 strongly agreed. Finally on the part of the teachers, 2 strongly

disagreed, 2 disagreed, 16 agreed, and 24 strongly agreed.

Thus concerning the auditors with regards to auditors should be financially liable

when they do not exercise diligence in handling the accounts of an organization, it

was found that there was no expectation gap between auditors on one hand and the

headmasters, accountants, teachers and storekeepers on another hand..

44

Table 4.1.12 An Auditor is Responsible for Maintaining Public Confidence in an

Organization.

Occupation


Strongly

Disagree

0 1 4 6 1 12


Agree 8 8 8 6 16 45

Strongly

Agree

1 7 7 8 26 49

Total 10 17 22 22 44 115


From Table 4.1.12, concerning the auditors with regards to auditor being responsible

for maintaining public confidence in an organization, none strongly disagreed, 1

disagreed, 8 agreed and 1 said he strongly agrees. Thus from the above, majority of

the auditors agreed that they are responsible for maintaining public confidence in an

organization. On the part of the headmasters concerning whether the auditor is

responsible for maintaining public confidence in an organization, 1 strongly

disagreed, 1 disagreed, 8 agreed and 7 strongly agreed. On the part of the accountants,

4 strongly disagreed, 3 disagreed, 8 agreed, and 7 strongly agreed. On the part of the

storekeepers, 6 strongly disagreed, 2 disagreed, 6 agreed, and 8 strongly agreed.

Finally on the part of the teachers, 1 strongly disagreed, 2 disagreed, 16 agreed, and

26 strongly agreed.

Thus with regards to auditor being responsible for maintaining public confidence in

an organization, it was found that there was no expectation gap between auditors on

45

one hand and the non-auditor group (headmasters, accountants, teachers and

storekeepers) on another hand.

Table 4.1.13 Auditors are meant to Forecast Financial Profile

Occupation


Strongly

Disagree

6 3 6 5 4 24

Disagree 2 4 4 4 9 23

Agree 2 8 10 9 19 48

Strongly

Agree

0 2 2 4 12 20

Total 10 17 22 22 44 115


From Table 4.1.13, concerning the auditors with regards to whether auditors are

meant to forecast financial profile, 6 strongly disagreed that auditors are meant to

forecast financial profile, 2 disagreed, 2 agreed and none strongly agreed. Thus from

the above, majority of the auditors strongly disagreed that auditors are meant to

forecast financial profile. On the part of the headmasters concerning whether auditors

are meant to forecast financial profile, 3 strongly disagreed, 4 disagreed, 8 agreed and

2 strongly agreed. On the part of the accountants, 6 strongly disagreed, 4 disagreed,

10 agreed, and 2 strongly agreed. On the part of the storekeepers, 5 strongly

disagreed, 4 disagreed, 9 agreed, and 4 strongly agreed. Finally on the part of the

teachers, 4 strongly disagreed, 9 disagreed, 19 agreed, and 12 strongly agreed.

46

Thus concerning whether auditors are meant to forecast financial profile, it was found

that there was an expectation gap between auditors on one hand and the non-auditor

group (headmasters, accountants, teachers and storekeepers) on the other hand.

Table 4.1.14 The Audited Financial Statements are Useful in Monitoring an

Organization’s Financial Performance

Occupation


Strongly

Disagree

2 1 2 1 1 7

Disagree 1 2 4 3 1 11

Agree 6 6 9 11 6 38

Strongly

Agree

1 8 7 7 36 59

Total 10 17 22 22 44 115


From Table 4.1.14, concerning the auditors with regards to whether audited financial

statements are useful in monitoring an organization‟s financial performance, 2

strongly disagreed that audited financial statements are useful in monitoring an

organization‟s financial performance, 1 disagreed, 6 agreed and 1 strongly agreed.

Thus from the above, majority of the auditors agreed that audited financial statements

are useful in monitoring an organization‟s financial performance. On the part of the

headmasters concerning whether audited financial statements are useful in monitoring

an organization‟s financial performance, 1 strongly disagreed, 2 disagreed, 6 agreed

and 8 strongly agreed. On the part of the accountants, 2 strongly disagreed, 4

disagreed, 9 agreed, and 7 strongly agreed. On the part of the storekeepers, 1 strongly

47



Thus concerning whether audited financial statements are useful in monitoring an

organization‟s financial performance, it was found that there was no expectation gap

between auditors on one hand and the non-auditor group ( headmasters, accountants,

teacher and storekeepers) on another hand..

Table 4.1.15 Audit Reports Should Contain More Information About Financial

Forecast

Occupation


Strongly

Disagree

1 1 1 1 3 7

Disagree 5 2 4 1 10 22

Agree 3 6 11 10 20 50

Strongly

Agree

1 8 6 10 11 36

Total 10 17 22 22 44 115


From Table 4.1.15 With regards to the auditors on whether audit reports should

contain more information about financial forecast, 1 strongly disagreed that audit

reports should contain more information about financial forecast, 5 disagreed, 3

agreed and 1 strongly agreed. Thus from the above, majority of the auditors disagreed

that audit reports should contain more information about financial forecast. On the

part of the headmasters concerning whether audit reports should contain more

information about financial forecast, 1 strongly disagreed, 2 disagreed, 6 agreed and 8


48




Thus on whether audit reports should contain more information about financial

forecast, it was found that there was an expectation gap between auditors on one hand

and headmasters, accountants, teachers and storekeepers on another hand.

Table 4.1.16 The Extent Of Assurance Given By An Auditor Is Clearly Indicated

In Audit Reports

Occupation


Strongly

Disagree

0 2 0 1 3 6

Disagree 1 0 5 4 5 15

Agree 6 8 10 9 28 61

Strongly

Agree

3 7 7 8 8 33

Total 10 17 22 22 44 115


From Table 4.1.16, concerning the auditors with regards to whether the extent of

assurance given by an auditor is clearly indicated in audit report, none strongly

disagreed, 1 disagreed, 6 agreed and 3 said strongly agrees. Thus from the above,

majority of the auditors agreed that the extent of assurance given by an auditor is

clearly indicated in audit reports. On the part of the headmasters concerning whether

the extent of assurance given by an auditor is clearly indicated in audit reports, 2

strongly disagreed, none disagreed, 8 agreed and 7 strongly agreed. On the part of the

accountants, none strongly disagreed, 5 disagreed, 10 agreed, and 7 strongly agreed.

49




Thus concerning whether the extent of assurance given by an auditor is clearly

indicated in audit reports, it was found that there was no expectation gap between

auditors on one hand and the non-auditor group on another hand.

Table 4.1.17 Auditor Independence Can Influence The Performance Of Audit

Services

Occupation


Strongly

Disagree

0 1 1 2 3 7

Disagree 1 2 3 3 6 15

Agree 3 10 6 7 15 41

Strongly

Agree

6 4 12 10 20 52

Total 10 17 22 22 44 115


From Table 4.1.17, concerning the auditors with regards to whether auditor‟s

independence can influence the performance of audit services, none strongly

disagreed that auditor‟s independence can influence the performance of audit services,

1 disagreed, 3 agreed and 6 said they strongly agreed. Thus from the above, majority

of the auditors strongly agreed that auditor‟s independence can influence the

performance of audit services. On the part of the headmasters concerning whether

auditor‟s independence can influence the performance of audit services, 1 strongly

disagreed, 2 disagreed, 10 agreed and 4 strongly agreed. On the part of the

50

accountants, 1 strongly disagreed, 3 disagreed, 6 agreed, and 12 strongly disagreed.




Thus there was no expectation gap between auditors on one hand and headmasters,

accountants, teachers and storekeepers on another hand with regards to auditor

independence influencing the performance of audit services.

Table 4.1.18 When an Auditor Engages In The Provision Of Non-Audit And

Audit Services At The Same Time, Objectivity May Be Impaired

Occupation


Strongly

Disagree

0 1 1 1 1 4

Disagree 0 2 1 2 5 10

Agree 4 14 12 12 23 65

Strongly

Agree

6 0 8 7 15 36

Total 10 17 22 22 44 115


From Table 4.1.18, concerning the auditors with regards to when an auditor engages

in the provision of non-audit and audit services at the same time, objectivity may be

impaired, none strongly disagreed, none also disagreed, 4 agreed and 6 said they

strongly agreed. Thus from the above, majority of the auditors strongly agreed that

when an auditor engages in the provision of non-audit and audit services at the same

time, objectivity may be impaired. On the part of the headmasters concerning when an

auditor engages in the provision of non-audit and audit services at the same time,

51

objectivity may be impaired, 1 strongly disagreed, 2 disagreed, 14 agreed and none





Thus concerning auditors engaging in the provision of non-audit and audit services at

the same time, it was found that there was no expectation gap between auditors on one

hand and headmasters, accountants, teachers and storekeepers on another hand.

Table 4.1.19 Provision of Audit Services Consistently For A Long Period Of

Time May Lead To Familiarity Threat

Occupation


Strongly

Disagree

0 1 1 0 0 2

Disagree 9 3 0 3 0 15

Agree 1 8 10 9 14 42

Strongly

Agree

0 5 11 10 30 56

Total 10 17 22 22 44 115


From Table 4.1.19, concerning the auditors with regards to the provision of audit

services consistently for a long period of time may lead to familiarity threat, none

strongly disagreed, 9 disagreed, 1 agreed and none strongly agreed. Thus from the

above, majority of the auditors disagreed that provision of audit services consistently

for a long period of time may lead to familiarity threat. On the part of the headmasters

concerning the provision of audit services consistently for a long period of time may

52

lead to familiarity threat, 1 strongly disagreed, 3 disagreed, 8 agreed and 5 strongly

agreed. On the part of the accountants, 1 strongly disagreed, none disagreed, 10

agreed, and 11 strongly agreed. On the part of the storekeepers, none strongly


teachers, none strongly disagreed, none also disagreed, 14 agreed, and 30 strongly

agreed.

Thus with regards to the provision of audit services consistently for a long period of

time leading to familiarity threat, it was found that there was an expectation gap

between auditors on one hand and headmasters, accountants, teachers and

storekeepers on another hand.

Table 4.1.20 Auditors Are More Concerned With Pleasing Management

Occupation


Strongly

Disagree

8 1 2 3 4 18

Disagree 1 4 8 8 16 37

Agree 1 9 10 9 18 47

Strongly

Agree

0 3 2 2 6 13

Total 10 17 22 22 44 115


From Table 4.1.20, concerning the auditors with regards to whether auditors are more

concerned with pleasing management, 8 strongly disagreed that auditors are more

concerned with pleasing management, 1 disagreed, 1 agreed and none strongly

agreed. Thus from the above, majority of the auditors strongly disagreed that auditors

are more concerned with pleasing management. On the part of the headmasters

53

concerning whether auditors are more concerned with pleasing management, 1

strongly disagreed, 4 disagreed, 9 agreed and 3 strongly agreed. On the part of the


the part of the storekeepers, 3 strongly disagreed, 8 disagreed, 9 agreed, and 2



Thus with regards to whether auditors are more concerned with pleasing management,

it was found that there was an expectation gap between auditors on one hand and

headmasters, accountants and teachers on another hand.

Table 4.1.21 The Quality Of Audit Has Improved In The Recent Years

Occupation


Strongly

Disagree

0 1 1 2 2 6

Disagree 1 6 13 8 20 48

Agree 3 6 8 9 16 42

Strongly

Agree

6 4 0 3 6 19

Total 10 17 22 22 44 115


From Table 4.1.21, concerning the auditors with regards to whether quality of audit

has improved in the recent years, none strongly disagreed that quality of audit has

improved in the recent years, 1 disagreed, 3 agreed and 6 strongly agreed. Thus from

the above, majority of the auditors strongly agreed that quality of audit has improved

in the recent years. On the part of the headmasters concerning whether quality of audit

54

has improved in the recent years, 1 strongly disagreed, 6 disagreed, 6 agreed and 4


agreed, and none strongly agreed. On the part of the storekeepers, 2 strongly



Thus concerning the auditors with regards to whether quality of audit has improved in

the recent years, it was found that there was an expectation gap between auditors on

one hand and accountants, but no expectation gap was found between the auditors on

one hand and headmasters and storekeepers on another hand. The responses of

teachers showed some indifference. .

55

CHAPTER FIVE

SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS

5.1 Introduction

This chapter presents the summary of the findings from the survey, the general

conclusion to the study and the possible recommendations to address the findings

from the study.

5.2 Summary of major findings

This study was conducted to study audit expectation gap in the educational sector of

the Kumasi Metropolis, using a sample of 22 public senior high schools through the

administration of questionnaires to headmasters, accountants, storekeepers, teachers

and external auditors.

Concerning the existence of an audit expectation gap, it was found that there existed

an audit expectation gap between auditors and the public (Headmasters, Accountants,

Storekeepers, Teachers and External Auditors).

Specifically on the responsibility factors contributing to an audit expectation gap, it

was found that concerning the preparation of financial statements, verification of

every accounting transaction, detecting all fraud in an organization, effective system

of internal control, disclosing whether any theft occurred during the financial year and

being responsible for organizational failure as duties of auditors, there was an audit

expectation gap. However on responsibility factors such as expressing an independent

opinion on the financial statements, exercise of judgment in selecting of audit

procedures, additional duty for evaluating whether an organization is a going concern,

responsible for organizational failure, financially liable when they do not exercise

56

diligence in handling the accounts of an organization and responsible for maintaining

public confidence in an organization as duties of auditors, there was no audit

expectation gap.

With regards to reliability factors contributing to audit expectation gap, it was found

that there was an audit expectation gap with regards to auditors being responsible for

forecasting financial profile and audit reports should contain more information about

financial forecast. Whilst there was no audit expectation gap in audited financial

statements being useful in monitoring an organization‟s financial performance and the

extent of assurance given by an auditor being clearly indicated in audit reports.

Last but not the least, an independence factors contributing to an audit expectation

gap, it was found that there existed audit expectation gap with regards to Provision of

audit services consistently for a long period of time leading to familiarity threat,

auditors being more concerned with pleasing management and whether the quality of

audit has improved in the recent years. However, with regards to auditor

independence influencing the performance of audit services and when an auditor

engages in the provision of non-audit and audit services at the same time, objectivity

may be impaired, there was no audit expectation gap.

5.4 Conclusion

Findings from the research show that though auditors are tasked to maintain the

confidence of the public in an organization; there exist expectations from the society

about the audit function, which society see as unreasonable.

Thus specifically it can be concluded that, responsibility factors, reliability factors and

independence factors contributed towards the audit expectation gap in the educational

sector of the Kumasi Metropolis.

57

The different perceptions among the user respondents and auditors could be attributed

to the inadequate sensitization of clients of the auditor‟s roles. The call however for

other duties of users may be a channel to move away from the „traditional audit

objective and move to the risk based auditing‟. The presence of an „expectation gap‟

in auditing means that perhaps, as put forward by other researchers, more standards

should be made to enhance the performance of auditors. Also, some previous

researchers have concluded that it is expedient for the audit profession to respond to

public criticism by improving the quality of work done by auditors. The analysis of

the audit expectation gap in this study will help the accounting profession to bridge

the gap.

5.5 Recommendations

The study recommends that clients or users should be adequately sensitized on the

duties of the auditor and the nature of the services rendered by the auditor. This is to

help address the challenge of the existence of the audit expectation gap that has come

about as a result of users‟ ignorance on the major duties in the auditing profession

such as the preparation of financial statements, verifying account transactions,

ensuring effective internal control mechanisms, detecting and preventing fraudulent

activities, among other responsibilities.

Secondly, there should be means of reducing the duration, specifically the number of

years, an accounting professional, should render services to a client. This is due to the

reason that the autonomy of the professional will be hampered or threatened when he

or she engages in rendering services to the same client over a longer period of time.

58

Thirdly, audit firms should be discouraged from rendering both audit and non-audit

services to the same client. This will increase the independence of the auditor when

carrying out audit assignments.

Lastly, auditor independence must be encouraged among auditors which will go a

long way in boosting public confidence in the auditing profession.

59

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APPENDIX

QUESTIONNAIRE

SECTION A- PERSONAL BIODATA

1. Name of Organization……………………………………………….

2. Highest Academic Qualification:

WASSCE HND B Sc. BA MBA M Sc. PhD

3. Professional Qualification

4. Do you have auditing experience?

5. If yes, for how long: Below 1 year 1-10 years above 10 years

6. Occupation: Teaching Staff Management Auditor Accountant

Instruction: The following statements use a four (4) point likert scale. On the scale,

four (4) is the highest construct. The likert scale is given as follows: 4-strongly agree,

3- agree, 2- disagree, and 1- strongly disagree.

SECTION B- RESPONSIBILITY FACTOR SA A D SD

1.Auditors are responsible for the preparation of financial statements. 4 3 2 1

2.The auditor is responsible for expressing an independent opinion on the

financial statements based on their audit.

4 3 2 1

3.The auditor is responsible for verifying every accounting transaction

undertaken by an organization.

4 3 2 1

4.The auditor is responsible for detecting all fraud in an organization. 4 3 2 1

5.The auditor is responsible for an effective internal control in an organization. 4 3 2 1

6.The auditor exercises judgment in selection of audit procedures 4 3 2 1

7.The auditor should take on additional responsibility for evaluating whether an

organization is a going concern.

4 3 2 1

8.The auditor is responsible for disclosing whether any theft occurred during the

financial year.

4 3 2 1

9.Auditors are responsible for organizational failure 4 3 2 1

10. Auditors should be made to pay a fine when they do not exercise diligence

in handling the accounts of an organization

4 3 2 1

11. An auditor is responsible for maintaining public confidence in an

organization.

4 3 2 1

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SECTION C- RELIABILITY FACTOR SA A D SD

12. Auditors are meant to forecast financial profile 4 3 2 1

13. The audited financial statements are useful in monitoring an

organization‟s performance.

4 3 2 1

14. Audit reports should contain more information about

financial forecast

4 3 2 1

15. The extent of assurance given by an auditor is clearly

indicated in audit reports.

4 3 2 1

SECTION E- INDEPENDENCE FACTOR SA A D SD

16. Auditor independence can influence the performance of audit

services.

4 3 2 1

17. When an auditor engages in provision of non-audit and audit

services at the same time, objectivity may be impaired.

4 3 2 1

18. Provision of audit services consistently for a long period of

time may lead to familiarity threat.

4 3 2 1

19. Auditors are more concerned with pleasing management 4 3 2 1

20. The quality of audit has improved in the recent years 4 3 2 1

audit expectation gap in ghana (case study of senior

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