Do the Expectations Match Between the Auditor and Their Customers? An Analysis of the Expectation Gab Between Auditors and Their Customers and How to Reduce It

Abstract

Since 2006, there has been several changes in the audit obligation in Denmark. These changes aimed to increase trust and transparency in the auditor's work. However, this also impacts the expectations placed on the auditors, which are expected to increase as result. In this context, the purpose has been to investigate whether there is an expectation gap between the management and the auditors, and how this can be reduced. The thesis uses the theory of the expectation gap from Brenda Porter and Bent WarmingRasmussen to examine the current expectation gap between management and the auditors. This theory has been compared with qualitative data, consisting of 14 interviews with management members, accountants, and auditors. The primary data in the thesis has been qualitative, leading to an inductive method. The thesis has illustrated that there is a responsibility gap between management and the auditors. This responsibility gap arises due to an unconscious delegation of responsibility by the management, due to their lack of knowledge within the auditor's declaration. The analysis also illustrates an understanding gap, as the management is unaware of the type of declaration they receive or its level of assurance. The understanding is also evident in the fact that management lacks knowledge of the general actions auditors need to perform in relation to the declaration. The analysis suggests that this gap is increasing due to the accountants taking on more work than what is required of them. This is leading to customers not understanding their own responsibility or the auditor's responsibility in the declaration. The analysis shows that a higher level of trust in auditors among management members receiving an IRSR 4410 declaration. Due to their lack of understanding of responsibilities and tasks, they place a significant trust in the auditor, as they expect the auditor to bear all responsibility. The analysis has presented the solution to reduce the existing expectation gap through communication. However, a challenge arises as communication between auditors and management only occurs through digital communication, which is seen as a barrier to reducing the expectation gap. The expectation gap can only be reduced by creating greater transparency. This is achieved by strengthening communication, fostering an open dialogue between the auditor and the management.