University of Essex
Essex Business School
 
 
 
 
 
 
The Audit Expectations Gap in the Public Sector of Turkey
 
 
 
 
 
 
 
December 2014
 
 
 
 
 
 
 
 
 
 
 
 
BE951-7-AU: RESEARCH METHODS AND METHODOLOGIES IN ACCOUNTING AND MANAGEMENT
COURSEWORK 2
 

Summary:

The concept of audit expectations gap has been widely used in private sector studies. However, in the public sector, it has not been received much attention. Until now, only a very limited number of researches on the audit expectations gap in the public sector have been carried out. Similarly, in Turkey, researches on audit expectations gap generally focus on the private sector. With regard to the public sector of Turkey, research on audit expectations gap has not been undertaken at all. This study aims to identify the existence of the audit expectations gap in the Turkish public sector in terms of performance audit by providing answer to the following questions: Whether or not the audit expectations gap exist in the Turkish public sector relating to performance auditing? If it exists, what is the nature of audit expectations gap?

Background:

Liggio (1974, p.27) first used the term of audit expectations gap in the literature and
defined it as the difference between ‘the levels of expected performance as envisioned both by the independent accountant and by the user of financial statements’. In 1978, Cohen Commission Report (1978, p.xi) broadened the definition as ‘a gap between the performance of auditors and the expectations of the users of financial statements’. However, Porter (1993) criticized previous definitions as they were too limited and did not consider inadequate performance, and made a definition as ‘the gap between the public’s expectations of auditors and auditors’ perceived performance’ (p.50). Although these definitions are private sector oriented, in a broader sense, they could also be used in the context of public sector as the nature of audit is apparently similar.
In general, to examine the audit expectations gap, two approaches are available.  In the first approach, based on private sector auditing, Porter (1993) specially investigated opinions of auditors and public, regarding the roles and duties of auditors. In the second approach (Chowdhury and Innes, 1998), based on the public sector auditing, the audit expectations gap is investigated in the context of accountability. In this approach, accountability is regarded as fulfilment of standards in the process of auditing and reporting. Since this approach aimed to investigate the perceptions of auditors, seven concepts were chosen in the context of accountability: auditor accountability, auditor independence, auditor competence, audit materiality and audit evidence, truth and fairness, and performance audit (p.247).
As mentioned earlier, unlike the literature on private sector auditing, research on audit expectations gap was very limited in the context of public sector. Until now, only Pendlebury and Shreim (1990; 1991), Chowdhury and Innes (1998), and Chowdhury et al. (2005) have conducted research on the audit expectations gap in the public sector of different countries.

Aims and Objectives:

In Turkey, researches on audit expectations gap in the public sector have not been carried out at all. This study will attempt to fill this research gap in the auditing literature. In order to establish a sound research framework, an approach based on ‘accountability’ has been employed for this research. This study will be concerned with the TCA[1] auditors’ accountability to the PBC[2] and the auditees in the context of performance audit. The following objectives are set in order to achieve the aim of the research:

• To evaluate TCA auditors’ and the report users’ opinions about the performance audit function and the performance audit reports in the context of accountability,
• To assess performance audit reports produced by TCA in the context of accountability.

Methods:

This study aims to investigate the presence and the characteristics of the audit expectations gap in the public sector of Turkey. It also seeks to understand participants’ perspectives, perceptions, and interpretations. This study, therefore, has an explorative approach. For these reasons, interpretivist paradigm will be employed. To accomplish the aim of this study, a qualitative methodology will be selected owing to its connection with the research paradigm and appropriateness in identifying objectives of the study. The researcher will choose two different methods to accomplish the objectives of the study. The first method will be composed of semi-structured interviews with the auditors of the TCA and two groups of users: PBC, as the recipient of the TCA audit, and the auditees. The purpose is to explore the perceptions of auditors and other users which may cause expectations gap and to identify the characteristics of the gap. The second method will be the analysis of performance audit reports of TCA as a secondary source. The purpose is to support the findings gathered from the interviews in respect to the reasons and components of the gap. A software will be used in order to analyse both interview transcripts and audit reports.

References:

Chowdhury, R., and Innes, J., 1998. A qualitative analysis of the audit expectations gap in the                                          public sector of Bangladesh. International Journal of Auditing, 2(3), pp.247-261.
Chowdhury, R. R., Innes, J., and Kouhy, R., 2005. The public sector audit expectations gap in Bangladesh. Managerial Auditing Journal, 20(8), pp.893-908.
Cohen Commission, 1978. AICPA Reports, Conclusions, and Recommendations of the
Commission on Auditors’ Responsibilities. New York: American Institute of Certified Public Accountants. Available at: http://documents.routledge-interactive.s3. amazonaws.com/9780415508117/articles/commission.pdf [Accessed 05 December 2014]
Liggio, C. D., 1974. The expectation gap: The accountant’s legal Waterloo? Journal of
Contemporary Business, 3(3), pp.27-44
Pendlebury, M., & Shreim, O., 1990. UK auditors’ attitudes to effectiveness auditing. Financial Accountability & Management, 6(3), pp.177-189.
Pendlebury, M., & Shreim, O., 1991. Attitudes to effectiveness auditing: Some further evidence. Financial Accountability & Management, 7(1), pp.57-63.
 
 
 
 
 
[1] Turkish Court of Accounts, Supreme Audit Institution of Turkey.
[2] Plan and Budget Committee of Turkish Grand National Assembly.

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