James and Izedonmi - 2010 - Evidence of Audit Expectation Gap Between Auditors and Users of...

8/9/2019 James and Izedonmi - 2010 - Evidence of Audit Expectation Gap Between Auditors and Users of Financial Reports in

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EVIDENCE OF AUDIT EXPECTATION GAP BETWEEN AUDITORS AND USERS OFFINANCIAL REPORTS IN NIGERIA

Odia James and F.I.O IzedonmiDepartment of Accounting

University of Benin, Benin City, Nigeria.E-mail: [email protected]

ABSTRACTThe paper considers evidence of audit expectation gap between auditors and users offinancial statement s which include investors and bankers in Nigeria. It was found thataudit expectation gap existed in the following areas: auditors exercising judgment in theselection of audit procedures, auditors are responsible for preventing and detecting fraudsand errors, auditors are responsible to produce financial statements, extent of assurancegiven by auditors is clearly communicated and educating the public will reduce theperception towards auditors. However, there was improvement in investors knowledgefollowing reading the auditors report.Key Words:Audit, audit expectation gap, investors, bankers

INTRODUCTIONThe term audit expectation gap was first introduced to audit literature by Liggio in 1974.He defined it as the difference between the levels of expected performance as envisionedby both the users of financial statement and the independent accountant. Following the

massive 1970s corporate failures in the U.S.A such as Equity funding in 1979, the U.SAccounting Profession set up the Cohen Commission on Auditors Responsibilities in 1974.In 1978, the Commission extended Liggios definition of audit expectation gap andconcluded that there was an expectation gap between what the auditors do and whatthe public expects of them.

From the 1970s, the audit expectation gap has received much attention owing to thedivergent notions of the auditors responsibilities and the different perceptions between

the financial statement users and the auditors. For decades, the accounting professionhas been troubled with the issue of the audit expectation gap because it has brought thecredibility and work of the external auditors into increased questionings in many countries

among the world. This is evidenced by the widespread criticisms and high levels oflitigations which have become more pronounced following various corporation failures andcollapses.

The purpose of this paper is to examine the existence of expectation gap between

auditors and users of financial reports in Nigeria. Actually, all over the world, researcheshave been done that reveal audit expectation gap. This paper intends to ascertainwhether the gap exists in Nigeria and to find out the effectiveness of the auditors report

as a communication medium between auditors and users of financial statements. Themain focus of the paper is to measure the existence of audit expectation gap in Nigeria byconsidering the differences between the expectations of users of audited financial reportsand auditors perception of their roles and responsibilities. Basically, financial statementsare useful to users in assessing the financial performance, financial position and change infinancial position. They are communicating and reporting tools which enable users in

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making economic decisions. Auditors report communicates opinion regarding their auditwork and the audited financial statement in line with Section 359 of the Companies andAllied Matters Act of 1990.

The rest of the paper is divided into five sections. The next section depicts the relevant

companies acts relating to the auditors duties and responsibilities as well as the auditorsreport in Nigeria as well as reviews prior literatures on the audit expectation gap. SectionIII is the research materials and method used in the study. Section IV shows the results

and discussions of the results while the last section is the conclusion.

COMPANIES ACTS AND FINANCIAL REPORTING IN NIGERIAThe Companies and Allied Matters Acts (CAMA) 1990 deal with corporate financialreporting in Nigeria of all listed and unlisted incorporated companies in Nigeria. Also,various sections of CAMA specify the roles and responsibilities of the management andthe auditor in the preparation and presentation of financial statements. For instance,Section 334(1) places the responsibility for the preparation of financial statements for the

financial on directors. They were to prepare the following financial statements(section334(2):statement of accounting policies, profit and loss account (incomestatement),balance sheet, notes on the account ,the auditors report, directors report,

cash flow statement, value-added statement and five-year financial summary.

Section 343(1) states that a companys balance sheet and every copy of it which is laid

before the company in its annual general meeting (AGM) or delivered to the CorporateAffairs Commission must be signed by two of its directors on behalf of the board ofdirector.

Normally the auditor is appointed at the annual general meeting to audit the financial

statement of the company and to hold office from the conclusion of that AGM to the next(section 357).Again, persons appointed as auditors of a company are members of thebodies of profession accountants in Nigeria(Section 358(1)) and if the person is not (1) an

officer or servant of the company (2) partner or in employment of an officer or servant ofthe company (3) does not provide to the company professional advise in a consultancycapacity in respect of secretariat taxation or financial management or (4) a bodycorporate.

Section359 (1) states that the auditors must make a report to the members of a companyon account examined by them including the balance sheet and the profit and lossaccount. The matters to be expressly stated in the auditors report must fully comply with

schedule 6 of CAMA 1990 as:(1) Whether they have obtained all the information and explanations which to the best(2) of their knowledge and belief were necessary for the purpose of their audit.(3) Whether in their opinion proper books of account have been kept by the company

so far as appears from their examination of those books and proper returnsadequate for the purpose of their audit have been received from branches notvisited by them.

(4)

(1) Whether the company balance sheet and profit and loss accounts dealt with bythe report are in agreement with the books of account and returns.

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(2) Whether in their opinion and to the best of their information and according to theexplanations given them, the said statements give the information required by the Act inthe manner so required and give a true and fair view.Section 360 dwells on auditors duties and power. S360(1) states that it shall be the dutyof the duty of the companys auditors ,in preparing their report to carry out such

investigations as may enable them to form an opinion as to the following matterswhether:(a)

Proper accounting records have been kept by the company and proper returns

adequate for their audit have been received from branches not visited by them.(b) The companys balance and profit and loss account are in agreement with the

accounting records and returns.

The auditors were to state in their report where there is consistent or inconsistentinformation in the accounts presented to them and whether proper accounting recordshave been received of branches not visited by them (Sections 360 (2&5) )

Users Perceptions of Auditors Roles and ResponsibilitiesThe existence of the gap has been found to be due to the different perceptions betweenthe public (including clients) ,students, bankers, investors etc and auditors with respect to

their actual or uncertain roles and responsibilities of auditors regarding fraud detectionand prevention, preparation of financial statements, internal control [3,9] the clientssatisfaction with the services provided by the auditors, issues of auditors independence

and objectivity etc [7,28,32] differences in perception of audit objectives , differences inperception or audit report [11], differences in users and auditors attitude [14,15,34],Laxness of the auditing standards and auditors perceived and somewhat differentinterpretation or failure to comply with standards set by the auditing profession [6,32],difference between the materiality levels of auditors and users of financial statements (3],

differences in belief.

Causes of the Audit Expectation Gap

While reviewing the contributory factors that caused audit expectation [27 ], it was foundto be due to: the complicated nature of the audit function, auditors conflicting roles,retrospective and subjective evaluation of auditors performance, time-lag in theaccounting profession responding to changing and expectations of users [13,15] and theself- regulation process of the auditing profession. A self-regulatory framework createsprofessional monopoly which likely compromises the audit quality at clients expense andtolerates the deficient performance of auditors [14,4,37,34,28]. It is believed that theprocess of self-regulation and its attendant factors enlarge the expectation gap [10].

Also, the ignorance, naivety and misconception of the public in terms of the nature,purpose and capacities of an audit have caused unreasonable expectations (such as theexpectations by users for the detection and disclosure of illegal acts by company officials,guarantee that financial statements are accurate, verify every transaction of auditcompany, examine and report on the efficiency and effectiveness of companysmanagement and administration, etc) imposed on the auditors [15,34,8].Also,

expectation gap have been attributed to users confusion, widespread misunderstanding,ignorance and/or lack of education and communication gap [7]

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Unreasonable expectation is argued to have harmful implications on the auditingprofession as the public may not be able to recognize the contribution of auditors tosociety and thereby undermine the value of audit function and limit auditors work. Porter[34] decomposed the total audit expectation gap has been decomposed into sub-standard performance by auditors where the auditors fail or perceived to comply with

legal and professional requirement (16%), unreasonable expectations in societysexpectations (34%) and deficient standards (50%).[34].It is clear from her analysis that alarger part of the gap lies with the auditors and the profession.

The unreasonable expectations and deficient performance [34,8,28] are shown in thetable below

Unreasonable Expectations by thepublic

Deficient Performance by Auditors

-Guarantee financial statements areaccurate-Guarantee auditee company is solvent

- Verify every accounting transaction- Prevent fraud and error in the company- Plan the accounting and internal controlsystem- Examine and report on efficiency andeffectiveness of companys managementand administration.- Examine and report on fairness of non-financial information- Examine and report on reliability offinancial information presented on

auditees annual report- Disclose illegal acts which do not directlyimpact on companys account.

- Disclose illegal acts by companysofficials which do not directly impact oncompanys account.

- Disclose in audit report theft ofcompanys assets by non-managerialemployees.- Report tax breaches to tax authority

-Detect theft of corporate assets by non-managerial employees- Detect theft of corporate assets by

companys directors and senior management- Detect illegal acts by companys officialswhich directly affect companys account-Disclose deliberate distortions of financialinformation in the audit report- Disclose illegal acts by companys officialswhich directly affect companys account- Disclose illegal acts which directly affectcompanys account- Express doubts in the audit report aboutcompanys continued existence.

- Report suspicious circumstancesencountered in the audit suggesting thattheft or deliberate distortion of financial

information may have occurred in theauditees financial statement.

-In the absence of a regulated industryduty,report to an appropriate authorityillegal acts by auditees officials.

The audit expectation gap is also due to the probabilistic nature of auditing, theevaluation of audit performance upon information or data not available to the auditor atthe time the audit was completed, evolutionary development of audit responsibilities

which create time lags in responding to changing expectations, corporate crises.

Based on the role theory [1] the role of the auditors can be viewed in terms of the

interactions of the normative expectations of the various role senders in society havingsome direct or indirect relationships to the role position [28], these different groupsinclude: management, security commission, institutional investors, analysis etc, which



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may hold varying expectations of the auditors which may change from time to timedepending on the role expectations of the groups. The confrontation of the auditor bydivergent role expectation results in role conflict because he is placed in multi-expectationsituations. The auditors compliance with one role requirement may make it more difficultto comply with another or the two or more roles expectations are mutually contradictory

[10], the difference in role perception by the auditor and role expectations by the groupsas well as the different expectations between the auditors and the role senders has giverisen to the expectation gap.

The provision of non-audit services for audit clients has also resulted in conflict of interestwhich leads to the expectation gap [10], as non-audit services fees has increasedsubstantially in the recent. It has been remarked that auditors are playing multiple rolesat the same time because of these extra services such as (i) Independent attestator to theshareholders and (ii) advisor to management, auditors are placed in conflicting positionbecause shareholders want them to identify and report problems with the financialstatement while management may expect the auditors to ignore the manipulation

[22].Such conflicts of interest are regarded as inter- sender role conflict [35]. Auditorsrole conflicts have negative implications on auditors independence and their ability toperform a just audit [18]. They are sandwiched in a dilemma either to be obstinately

ethical and face replacement by management or buddle under managements pressure,resulting in compromise of their independence and secure more attractive remunerationand income.

Detection and prevention of FraudOne contending area which continues to spark off debate is the issue of the detection andprevention of fraud. The public expects the auditor to take over this responsibility. Theybelieve that until the auditors are duty-bound or expand their responsibility over frauds

detection and prevention the gap will continue to exist. Nevertheless, it is doubtful if theprofession will change its defensive approach and will descend to nailing itself and theauditors owing to the users demands. It must be asserted that the area of fraud of

detection has the longest history [13] and widest expectation gap. On the other hand,some have argued that until fraud detection by auditors is expunged from the publicsconsciousness, no matter the attempts to inform them (the public) otherwise will changetheir thinking that the auditors are responsible for fraud detection [38]. Auditingeducation only will not change the public perception [7]. Regrettably, the issue of newauditing standards on fraud has not closed the expectation gap [32, 39, 38]. Even themost sweeping reforms of the Sarbanes Oxley (SOX) Acts of 2002 has not addressed thesituation because each emerging corporate crisis leads to new expectations and

accountability requirements, and hence create another expectation gap. For instance thecurrent global financial meltdown has put extra demands on the accounting professionand the auditors. More often than not, users hold auditors to be responsibilities for fraudprevention and detection [9,8,3]. Likewise, jurors acting as professional in law suitsperceived the actively search for the smallest fraud. This explained why the jurors heldthe auditors liable on occasions when a company failed or a fraud is uncovered (8]. It hasbeen noted that auditors responsibilities concerning fraud have been a recurrent problem

as it is clear that public expectation on this issue was not satisfied (15].



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Auditors ReportSome researchers have argued strongly that the content of the auditors report ought tocover not only the description of the audit work carried out but also specific comments onthe individual aspects of the companys performance and position (6] .Although this mightnot be possible but their proposal is because the auditors have always defended

themselves and try to exonerate themselves whenever the financial statements are callinto questioning. They argued that their responsibility is only to ascertain the level ofadherence to set standards, procedures, principles and policies. The expanded auditor

report that ensued has not solved completely the expectation gap (36,17] owing tofinancial statement reliability and difficulty of users understanding of the audited financialstatements etc. However, a reduction in the expectation through the use of long-formaudit report had been reported in Australia (36]. It was also found that the long-formreport has potential for communicating to audit report users a better understanding of thenature of the auditing function. The reduction in the audit expectation gap onlyaddressed specific issues in the scope section of the report such as the auditorsresponsibility for the prevention and detection of fraud and managements responsibility

for the maintenance of internal control system ( 3]. A doubled edged effect of theauditors report was indicated in Hong Kong being effective in reducing perpetualdifferences on a few dimensions but also creating greater disenchantment and devaluing

of the audit function which would lead to a larger expectation gap in the longrun.(29]The language of the auditors report had the ability to influence usersperception. on auditors responsibilities.

MATERIALS AND METHODThe research method adopted in the study is similar to that used by (3,4,36] because itprovides a reliable assessment of the audit expectation gap. We design a questionnaire ofsemantic differential belief statement to measure the message communicated by the audit

report in Nigeria. The questionnaires were sent to the users of audit report in Nigeriatogether with a sampled audit report. A total of 150 subjects were randomly consisting of50 subjects from each of the three groups auditors, bankers and investors. The

response rates were auditors (96%),bankers (100%) and investors(98%).The group ofinvestors included the general public who own shares in one company or another,brokers, financial analysts. Our subjects fall into the various respondents that have beenused to elicit opinions such as auditors and lawyers and judges, jurors, investors,shareholders, bankers etc.

The questionnaire used consisted of three sections. Section one contains six questionsrelating to respondents demographics. The second section has two parts: Parts Aand B .

Part A gathered data on the existence of expectation gap in Nigeria. It consisted of elevenlikert-scale questions with five-point rating scale which require respondents to choosefrom strongly agree to strongly disagree. Respondents were to choose a number from thescale which identified their level of agreement with each question. The questions werestructured following prior empirical researches and the responsibilities and duties ofauditors laid down in CAMA (1990).

Part B examines the users understanding of the auditors report as well as analyzes itsusefulness. It consists of an attached auditors report with ten likert-scale questions as in



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part A. The respondents were required to read the auditors report before answering thequestions based on their understanding on the report without applying previous auditingknowledge. The wording of questions in part B was changed to avoid the probability ofrespondents referring back to previous answered questions in part A.

The mean response for each group of respondents was scoring strongly agree as 5, agreeas 4 to strongly disagree as 1 and taking the average for each question. The t-test wasused to test for significant differences between the three groups and the pre and post

perceptions of each group of the duties of the auditor. The t-test was used because itcould test significant differences in means between two populations. Micro-Soft office(Excel) 2007 was used to generate the means, standard deviation and the t-values.Where significant differences existed between the three groups and it could be concludedthat expectation gap existed in Nigeria.

RESULTS AND DISCUSSIONDemographic of Respondents

The questionnaires were sent to 150 respondents \made of 50 subjects from of the threegroups- auditors, bankers and investors. The response rates and other demographics suchas accounting education, auditing experience are shown in table 1 below.

Table 1Demographics of Respondents

SampledGroups

SurveysSent

ResponsesReceived

No%

AuditingEducation

YesNo

AuditingExperience

YesNo

Investmentin

BusinessYesNo

ReadAuditors

ReportYesNo

Auditors 50 4896

480

480

480

480

Bankers 50 50100

1238

050

500

500

Investors 50 4998

2128

049

490

3910

Total 150 14798%

8166

4899

1470

13710

From table 1, the overall response rate of the questionnaires distributed was 98% .Theaccounting education relating the bankers and investors appears low. Also theserespondents do have auditing experience. It is assumed that they are less informed aboutthe responsibilities of auditors, the auditing process and the uses of financial statements.

Therefore, there is the likelihood of the existence of expectation gap notwithstanding that

a greater proportion of respondents read the auditors report.

Results from the Semantic Differential Belief StatementsTable 2 and 3 measure the level and nature of expectation gap in Nigeria by providing themean responses for each of the respondent groups both within groups and across groupsby using the t-statistic to test for significant differences between the three respondent

groups (see table 7). Table 3 specially tests perception of users of financial statements(investors and bankers) on the responsibilities of auditors after they have read the



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auditors report. Significant differences within and between groups reveals the existenceof audit expectation gap.Table 2Responsibility Statements

Statements Auditors(N=48) Bankers(N=50) Investors(N=49) AcrossGroups

1 Auditor is responsible toproduce financialstatement.

1.00 3.08 1.98 2.02

2 Auditor is responsible forpreventing fraud and

errors.

1.25 3.08 2.55++

3 Auditor is responsible fordetecting fraud and errors.

1.25 3.24## 3.41

4 Auditor should make 100%examination in auditprocedure

1.29 3.04 3.61

5 Auditor should report allomission discovered in thereport

1.00 4.56## 4.12

6 Extent of audit workperformed is clearlycommunicated

4.81 4.76 3.80++

7 Extent of assurance givenby auditor performed isclearly indicated

4.77 4.72 3.31++

8 Auditor is responsible formaintaining accounting

records.

1.00 3.00## 1.73**

9 Auditor exercise judgmentin selecting auditprocedure

4.75 2.92## 3.89**

10 Educating the public willreduce their perceptiontowards auditors

5.00 5.00 4.31** ++

11 Auditor is unbiased andobjective

5.00 5.00 4.22

** Significantly different from auditors at 5%## Significantly different from auditors at 5%

++ Significantly different between bankers and investors at 5%

Table 2 provides details of the responses concerning some of the users perception ofsome of the responsibilities of the auditors .An audit expectation gap indicated by a

significant was for found between the auditors and the two respondent groups in relationto the responsibility of auditors for maintaining accounting records( statement 8) and theauditors exercise judgment in selecting audit procedure (statement 9).The results showthat auditors believe management is responsible for the maintenance of accountingrecords whereas bankers and investors thought otherwise. Again auditors believe theyexercise considerable judgment in the selection of audit procedures, but bankers and



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investors seem to indicate some of this judgment by given to Manament. An auditexpectation gap was also found between the auditors and bankers regarding auditorsresponsibility to detect fraud and errors (statement 3) and auditors should report allomissions discovered in the report (statement 5).A gap was found between auditors andinvestors was found in respect of education of the public will reduce their perception

towards auditors (statement 10).All the three groups were in agreement that auditorsshould make 100% examination in audit procedures(statement 4),auditors are unbiasedand objective (statement 11).The agreement by them that auditors are to produce

financial statements (statement1) show and confirm their deficiency and low accountingeducation and auditing experience .

Audit expectation gap was also found to exist between investors and bankers that theauditor is responsible for preventing frauds and errors (statement 2), extent of audit workand is clearly communicated (statement 6) and assurance given by auditors are clearlycommunicated (statement 7).

Table 3 Post Users perception on auditors responsibilities based on theauditors report

Statements Auditors Bankers Investors Across

Groups

12 Auditor is responsible to producefinancial statement.

1.00 3.24 1.24++ 1.83

13 Auditor is responsible forpreventing fraud and errors.

1.00 3.16## 2.35 2.17

14 Auditor exercise judgment inselecting audit procedure

4.83 3.80## 4.00** 4.21

15 Auditor is responsible for

maintaining accounting records

1.00 3.40## 4.33 2.91

16 Extent of assurance given by

auditor performed is clearlyindicated.

4.83 2.68 3.86** 3.79

17 Auditor should make 100%

examination in audit procedure

1.44 3.28 3.33 2.68

18 Extent of audit work performed isclearly communicated

1.13 2.64## 3.65 2.47

19 Auditor is responsible fordetecting fraud and errors.

4.83 3.28## 2.67** 3.59

20 Educating the public will reduce

their perception towards auditors

5.00 5.00 4.37**

++

4.79

21 Auditor is unbiased and objective 5.00 5.00 4.16 ++ 4.72

** Significantly different from auditors at 5%## Significantly different from auditors at 5%++ Significantly different between bankers and investors at 5%

Table 3 shows the results of the mean responses of respondent groups after reading theauditors report. Audit expectation gap was found between the three groups in auditorsexercising judgment in the selection of audit procedures (statement 14) and auditors are



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responsible for detecting frauds and errors (statement 19).No evidence of an expectationgap appears concerning auditors should make complete examination in audit procedures.However, evidence of expectation gap between auditors and investors appears concerningauditors are responsible to produce financial statements (statement 12), extent ofassurance given by auditors is clearly communicated (statement 16) and educating the

public will reduce the perception towards auditors (statement 21).There tends to besignificant improvement after reading the auditors report by investors compared to thebankers auditors are responsible to produce financial statements.

Evidence of expectation gap between auditors and bankers is found in auditorsresponsibility for fraud and errors prevention (statement 13) and extent of audit workperformed is clearly communicated (statement 18).The perception of investors andbankers as regards prevention of frauds and errors as well as education of the publicreduce the expectation gap seems to be aspect of the audit expectation gap in Nigeria.Also there is significant difference between investors and bankers that auditors areunbiased and objective.

Table 4 PRE AND POST CHANGE IN AUDITORS VIEW ( Mean responses)

Statements Q1 Q2 Q3 Q4 Q6 Q7 Q8 Q9 Q10 Q11

PRE 1.00 1.25 1.25 1.29 4.81 4.77 1.00 4.75 5.00 5.00

POST 1.00 1.00 4.83 2.06 1.13 4.83 1.00 4.83 5.00 5.00

T-Value - 0.00015 1.269 0.257 3.645** 0.475 - 0.397 - -

** Significant at 5%

Table 4 shows the mean responses of the pre and post views of auditors. There is nochange in mean of statements Q1, Q2, Q8, Q10 and Q11 , indicating no change inknowledge following reading the auditors report .However, positive change was noticed in

statements Q3,Q4, Q6,Q7 and Q9 and negative change in Q6.A significant differencerevealing expectation gap by auditors was found in relation to the extent of audit workperformed was clearly communicated (Q6).

Table 5 PRE AND POST CHANGE IN INVESTORS (Mean responses)

Statements Q1 Q2 Q3 Q4 Q6 Q7 Q8 Q9 Q10 Q11

PRE 1.98 2.18 3.41 3.61 3.55 3.31 2.29 3.98 4.20 4.22

POST 1.24 2.35 2.67 3.33 3.65 3.86 4.43 4.00 4.37 4.16

T-Value 0.009 0.639 0.012 0.559 0.656 0.579 2.56** 0.490 0.440 0.784

** Significant at 5%

From table 5 expectation gap is revealed in the significant differences between investorsthat auditors are responsible for maintaining accounting records (Q8). Again, the decreasein the means in statements Q1,Q2,Q3,Q4 and Q11 showing investors disagree to someextent with regard to these statements. There seems to be better improvement in therespondents views after reading the report.



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Table 6 PRE AND POST CHANGE IN BANKERS (Mean responses)

Statement

s

Q1 Q2 Q3 Q4 Q6 Q7 Q8 Q9 Q10 Q11

PRE 3.08 3.08 3.24 3.08 4.76 4.72 3.00 2.92 5.00

5.00

POST 3.24 3.16 3.28 3.28 2.64 2.62 3.40 3.80 5.00

5.00

T-Value 0.692

0.8432

0.918

0.542

8.248**

9.892**

0.319

0.019

- -

** Significant at 5%In table 6, the increase mean in statements Q1 and Q8 shows that the respondentsknowledge did not really improve after reading the report. Again, the increase in themeans in statements Q2, Q3, Q4, Q8 and Q9 shows bankers agree to some extent withregard to these statements; a decrease of mean in statements Q6 and Q7 shows theirdisagreement with these statements. A significant difference indicating expectation wasalso found regarding Q6 and Q7.

CONCLUSIONThe paper has considered evidence of audit expectation gap between auditors and usersof financial statements in Nigeria. It was found expectation gap exists in auditorsexercising judgment in the selection of audit procedures and auditors are responsible forpreventing and detecting frauds and errors, auditors are responsible to produce financialstatements, extent of assurance given by auditors is clearly communicated and educatingthe public will reduce the perception towards auditors. No evidence of an expectation gap

appears concerning auditors should make complete examination in audit procedures.

The evidence of expectation gap between auditors and investors appears concerning

auditors are responsible to produce financial statements, extent of assurance given byauditors is clearly communicated and educating the public will reduce the perceptiontowards auditors.

There tends to be significant improvement after reading the auditors report by investors

compared to bankers in relation to auditors responsibility to produce financial statementsand maintain accounting records.

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Appendix

Calculated T-Statistic

Statements Auditors&Investors

Auditors&Bankers

Investors &Bankers

Q1 0.000176 1.812 0.0046

Q2 0.000671 1.834 5.477 ++

Q3 1.561 2.460 ## 0.8842

Q4 1.6072 1.056 0.1166

Q5 1.715 7.003## 0.023

Q6 1.469 0.555 2.488++Q7 1.178 0.605 9.213++

Q8 2.310** 6.800## 0.080

Q9 7.400** 2.711## 0.0019

Q10 6.475** - 4.230++

Q11 1.506 - 1.014

Q12 0.044 1.024 4.527++

Q13 1.407 4.487## 0.030

Q14 6.693** 4.865## 0.422

Q15 1.931 4.052## 0.002

Q16 6.229** 1.623 0.0004

Q17 0.072 0.078 0.8649Q18 1.656 7.431## 0.0005

Q19 7.800** 5.489## 0.0616

Q20 8.120** - 5.349++

Q21 1.743 - 9.995++

** Significantly different from auditors at 5%## Significantly different from auditors at 5%

++ Significantly different between investors and bankers at 5%


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