“The Expectation Gap”
By: Kiara Holmes

ACC 371 Intermediate Accounting I
Instructor: Lin Zheng
Writing Assignment 1
9/5/2012
The auditor’s role in fraud detection has had a long history of confusion and controversy. Despite increasing professional guidance, which has focused more attention on auditor responsibility to detect fraud, there’s still considerable uncertainty about where the auditor’s responsibility ends towards detecting fraud. This uncertainty leads to “The Expectation Gap”. Lee, Ali & Bien (2009) defined the expectation gap as, “The difference between what the public expects from an audit and what the audit profession accepts the audit objective to be.” Accounting profession argues that one cause of the expectation gap is the public’s failure to appreciate the nature and limitations of an audit. “People expect more of an audit than it can give in practical terms, such as detecting all instances of fraud.” (Frank, Lowe & Smith 2001). The phrase “Expectations Gap” was first coined when the AICPA put the Cohen Commission together in 1974 to investigate whether the expectations gap existed. Since then, events ranging from the collapse of Enron and World Com to the ongoing savings and loan problems seemed to have made the gap become more and more evident. Porter analyses the total expectations gap into three separate components. Those components are: sub-standard performance (16%), deficient standards (50%) and unreasonable expectations (34%). Sub-standard performance comes from the individual auditors; deficient standards from the audit profession and unreasonable expectations from the public. Deficient standards gap exists where statutes and professional standards fail to properly reflect the appropriate standard of performance deemed appropriate by the courts of law. There are positive signals that this component of the gap is