Managerial Auditing Journal

The public sector audit expectations gap in Bangladesh

Riazur R. Chowdhury, John Innes, Reza Kouhy,
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Expectations gap
The public sector audit in Bangladesh
expectations gap in Bangladesh
Riazur R. Chowdhury
University of Dhaka, Dhaka, Bangladesh, and 893
John Innes and Reza Kouhy
University of Dundee, Edinburgh, Scotland, UK

Abstract
Purpose To explore whether there is an audit expectations gap in the public sector between the
Comptroller and Auditor Generals (CAG) auditors in Bangladesh and the users of the CAG reports
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namely the Public Accounts Committee (PAC) of the Parliament that examines the CAG audit reports
and the international funding agencies (IFAs) that provide external funding in the public sector in
Bangladesh.
Design/methodology/approach The perceptions of CAG auditors and users of their reports were
explored using a questionnaire based on a theoretical framework of accountability and six related
audit concepts.
Findings There were statistically significant differences in perceptions between 17 CAG auditors
and the 15 members of the PAC on 13 of the 25 variables and between these 17 CAG auditors and nine
representatives of the IFAs on 14 of these variables.
Research limitations/implications The relatively small number of respondents to this
questionnaire is a limitation of this research project.
Practical implications Better training for the CAG auditors into their report users information
requirements and expectations and better training for the members of the PAC and the representatives
of the IFAs coupled with more cooperation between the CAG auditors, the PAC and the IFAs might
help to reduce this audit expectations gap in the public sector in Bangladesh.
Originality/value This is the first time that statistical evidence has confirmed the existence of an
audit expectations gap between CAG auditors and users of their audit reports in the context of the
public sector.
Keywords Auditing, Bangladesh, Government agencies, Annual accounts, Public sector organizations
Paper type Research paper

Introduction
The first use of the term expectations gap is attributed to Liggio (1974) although the
basic idea was in existence before 1974 (Lee, 1970). The Cohen Commission (1978, p. 1)
defined the audit expectations gap as the gap between what the public expects or
needs and what auditors can and should reasonably expect to accomplish. Porter
(1991, p. 4) gave a more succinct definition as the gap between the publics
expectations of the auditors and auditors perceived performance. Although this

Riaz Chowdhury is grateful to the Commonwealth Scholarship Commission in the UK for

financial support during the research on which this paper is based. The authors are also grateful
Managerial Auditing Journal
to the CAG of Bangladesh and their auditors, the Chairman of the PAC of the Parliament of Vol. 20 No. 8, 2005
Bangladesh and all the PAC members, and the senior representatives of the IFAs in Bangladesh. pp. 893-908
q Emerald Group Publishing Limited
They acknowledge the constructive comments of other colleagues at the University of Dundee 0268-6902
(especially Donald Sinclair) and of David Hatherly of the University of Edinburgh. DOI 10.1108/02686900510619719
 MAJ definition refers to the publics expectations, research into the audit expectations gap
20,8 has been almost exclusively from a private sector audit perspective (Cohen
Commission, 1978; Crasswell, 1985; Canadian Institute of Chartered Accountants,
1988; Steen, 1990; Holt and Moizer, 1990; Porter, 1991; Hatherly et al., 1992; Humphrey,
1992; Sikka et al., 1992; Turley and Benau, 1994; Innes et al., 1997; Australian
Educational Research, 2002). Power (2000, p. 111) has argued in relation to the Audit
894 Society that many of the claims require further empirical support and that more
research is needed, particularly to demonstrate that the audit explosion is not simply a
UK phenomenon. There is a need for empirical research to explore whether or not an
audit expectations gap exists in the public sector between auditors and users of their
audit reports.
In the private sector context, the overwhelming conclusion of existing research is
that there is an audit expectations gap (Fadzly and Ahmad, 2004; Lin and Chen, 2004).
Much earlier, the Cohen Commission (1978) concluded that a gap did exist and the main
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responsibility lay with the auditing profession rather than with the users. The
Commission attributed the primary cause of this gap to the failure of the profession to
react and evolve quickly enough to keep pace with the changing business environment.
Both the Canadian Institute of Chartered Accountants (1988) and Porter (1991, 1993)
viewed the audit expectations gap from an expectations-performance point of view.
The two main aspects of the gap were identified as a feasibility or reasonableness gap
(related to what were regarded as unreasonable expectations by the public) and a
performance gap (related to deficient auditing standards and/or performance). This
paper discusses the audit expectations gap in relation to the public sector and then
examines the accountability framework and six audit concepts used in this research
study followed by sections on the research design, results and conclusions.

Expectations gap and public sector

Research into the audit expectations gap has centred on the private sector and has
generally ignored the public sector. As the raison detre of audit is similar for both
sectors, it is important to research whether or not there is an audit expectations gap in
the public sector. Humphrey (1992, p. 1) pointed out the importance of the
expectations issue derives from notions of stewardship and public accountability.
These aspects are as relevant in the public sector as in the private sector (Batra and
Kaur, 1993). Public sector auditors need to consider the information requirements of
audit report users as much as private sector auditors. Buttery et al. (1993, p. 42)
suggested that public sector auditors should have the recipients of their reports in
mind at all times whilst preparing such documents. Lovell (1996, p. 271) pointed out
that the audit client of the NAO is the Committee of Public Accounts in the UK and a
similar situation applies in Bangladesh. However, the NAO also has an indirect
relationship with the public. Indeed, audit reports of the NAO in the UK or the CAG in
Bangladesh can become issues not only for Parliamentary Committees but also for
wider public debate.
Harris and Spannier (1976, p. 253) suggested selecting accountee groups on the
basis of direct and indirect influence on the provider of information. A direct influence
on the accounter by the accountee exists when there is a bond of accountability
between the two groups. The Constitution of the Peoples Republic of Bangladesh
stipulates the Public Accounts Committee (PAC) as the recipient of the CAG audit
 report. Under Article 132 of the Constitution of Bangladesh, comments of the Expectations gap
Comptroller and Auditor General (CAG) on public organisations are to be submitted to in Bangladesh
the President for each fiscal year who shall cause it to lay before the Parliament.
The PAC examines the CAG reports on behalf of MPs who, in turn, represent the
electorate and the general public. In Bangladesh, 83 per cent of the annual development
expenditure relates to the public sector and the public sector is audited by the CAG,
whose audit reports are reviewed by the PAC of Parliament. The PAC in Bangladesh 895
has 15 members, eight of whom are from the ruling party and seven from the
opposition. The PAC is chaired by a senior government MP. The CAG has to inform
the PAC how far each public organisation has complied with its operational objectives
and, in particular, how funds were spent. The reports must also bring to the notice of
the PAC important financial and procedural irregularities. In Bangladesh the CAG
reports are not published outside the Parliament although these reports are submitted
not only to the PAC but also to all members of the Parliament. However, the PAC is the
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most important user of the CAG reports. Because of the Constitutional stipulation,
the PAC can be regarded as the direct influence on the provider of information, i.e. the
CAG.
The other user group may be identified on the basis of indirect influence on the
provider of information. The economy of Bangladesh is heavily dependent on foreign
assistance with 41 per cent of the Annual Development Programme being provided by
the international funding agencies (IFAs) according to the Bangladesh Economic
Survey (2003/2004). The IFAs in Bangladesh consist of bodies such as the Asian
Development Bank, International Monetary Fund, United Nations agencies, USAID
and World Bank. The CAG reports may be considered a useful mechanism for the IFAs
alongside their own monitoring and reporting process. Indeed, the CAG audit office has
a separate audit directorate named Foreign Aided Project Audit Directorate.

Accountability and audit concepts

Public sector performance reporting has received increasing attention as part of the
recently growing analysis and commentary on public sector change (Christensen and
Yoshimi, 2001). These changes have been largely brought about by increased
awareness in the public domain, the greater demand placed upon the reporting
agencies by a multitude of stakeholder groups, and a willingness on the part of such
agencies to be contemporary and objective in their performance. Simply put, this
advancement can be attributed to the continued rise of a single phenomenon:
accountability. Accountability in its broadest sense refers to the giving and
demanding of reasons for conduct (Garfinkel, 1967; Silverman, 1975; Harre, 1979;
Roberts and Scapens, 1985). A theoretical framework based on accountability focuses
on the relationship between the providers and users of information in justifying this
conduct. Stewart (1984) argued that it is public accountability that is exercised to
transform arbitrary action into the legitimate exercise of government power. Stewart
and Longley (1992) suggested that those who exercise power in society should be
accountable for that power. The issue of exercising government power brings to the
fore a much wider recipient group than is normally understood. Gray et al. (1996, p. 10)
argued that the accountability framework is the most useful one for analysing
accounting information transmission in general. This argument sits comfortably with
the public sector audit scenario whereby society in general could be regarded as
 MAJ a potential interest group. Parker and Guthrie (1993, p. 71) suggested that it is public
20,8 expectations that will dominate and determine ultimate public sector accountability
directions.
Accountability is a pervasive concept. In order to apply the accountability
framework in a given area, there is a need to construct a boundary of that particular
area so that the application results in meaningful outcome(s). Otherwise, it runs the
896 risk of losing relevance and objectivity. Keeping this justification in view, six audit
concepts were examined, namely auditor independence, auditor competence, audit
materiality, audit evidence, true and fair view and performance audit. With the
exception of the performance audit, the other five concepts have been thoroughly
examined in the private sector auditing literature (Mautz and Sharaf, 1961; Normanton,
1966; Schandl, 1978; Hatherly, 1980; Howladar and Parry, 1984; Brown et al., 1982;
Canadian Comprehensive Auditing Foundation, 1987; Gray et al., 1987; Gwilliam, 1988;
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Flint, 1988; Hatherly et al., 1991, 1992; Humphrey, 1992; Lee, 1993; Bowerman, 1994).
For the purpose of constructing the important boundary for the accountability
framework, these audit concepts were adapted for the CAG audit in the public sector.
In the private sector, auditor independence refers to auditors being independent of
corporate management in conducting audits and in the subsequent reporting process.
In the public sector, however, auditor independence relates to a broader group where
the CAG auditors integrity must be protected against groups not only represented by
management but also civil servants and politicians. Commenting on the role of public
sector auditors, Percy (2001) argued that auditors appointed to report will be both
independent and competent and will carry out their work not only to maintain
confidence in public sector spending but also to add value by constructively reporting
to achieve improvement in service delivery. This highlights the presence of a social
role for the CAG auditors in addition to their professional role. In the area of auditor
competence, an important difference between the private sector auditors and the CAG
auditors in the public sector is the performance audit. For example, CAG auditors will
need to be more competent on non-financial performance measures than private sector
auditors. In other words, the CAG audit needs to be more output based than the
traditional audit which is more systems oriented.
In relation to audit materiality, Jones and Bates (1990) suggested that public sector
auditors needed to consider the level of assurance required by the user groups
requesting the audit work and the expected reactions of the audit report readers.
Similarly, in relation to audit evidence, Jones and Bates (1990) argued that the time and
cost involved in the audit process, the scope of the audit and the perceived information
needs of the users were some of the factors influencing the evidence gathering process.
The marked difference that is observed here is the dual set of responsibilities of the
CAG auditors in the public sector. On one hand, the economic cost of the decision has to
be borne in mind; on the other hand, the social aspects need to be high on the agenda.
The materiality level for the public sector in Bangladesh needs to be established in
conjunction with such issues as resource accountability and social priorities. The
experience and professional expertise of the CAG auditors in Bangladesh would also
influence the materiality level on a case-by-case basis for each audit. As Price and
Wallace (2002) highlighted, concepts such as political sensitivity and public goodwill
need to be integrated into non-business guidance.
 In the public sector context, the report by CAG auditors in terms of a true and fair Expectations gap
view has similarities with the true and fair view expressed by private sector auditors. in Bangladesh
For example, both CAG auditors and private sector auditors need to ensure that the
management of an organisation are communicating information to users that
represents the underlying reality of the organisation. However, again because of the
performance audit concept CAG auditors also need to report on the communication of
non-financial performance information (McCrae and Vada, 1997). 897
Unlike private sector auditors, CAG auditors have to report on management
performance with particular emphasis on the economy and efficiency of operations and
the effectiveness with which results are achieved. As public sector performance cannot
be gauged by a single indicator or measure, judging performance or output becomes all
the more significant. As Bozec et al. (2002, p. 385) observed the goals or objectives
imposed on public firms are not equivalent to those of private firms. They are multiple
and blurred. They encompass political and social dimensions. A pilot study conducted
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as part of this study in both the UK and Bangladesh with public sector auditors
revealed a general agreement that, at least for an exploratory study such as this, it
would be reasonable to compare the perceptions of the CAG auditors with the
perceptions of the users of the CAG audit reports in terms of the accountability
framework and these six audit concepts to assess whether or not an audit expectations
gap exists in the public sector.

Research design
The first stage of this research project was interviews of an exploratory nature that
suggested that an audit expectations gap might exist in the public sector in
Bangladesh (Chowdhury and Innes, 1998). However, these interviews gave only
qualitative evidence and the second stage in this research was to obtain some
quantitative evidence in relation to the perceptions of CAG auditors and two of the
main CAG audit report user groups in Bangladesh namely the PAC and the IFAs. For
the second stage of this research, a questionnaire was designed with the objective of
discovering information on various aspects of CAG audit in Bangladesh. The 25
questions in this questionnaire were designed to explore the specific dimensions
selected that in turn were linked to CAG reporting, accountability and the six audit
concepts chosen for this research project. These were seven questions on CAG
reporting, two on accountability, four on auditor independence, four on auditor
competence, two on audit materiality, two on audit evidence, one on the true and fair
view and three on performance auditing. As the focus was on the expectations gap, the
same set of questions was used for the CAG auditors and the audit report users. This
research project on the public sector audit expectations gap was the first of its kind in
Bangladesh. It was, therefore, important to keep the questions as simple and
straightforward as possible and the size of the questionnaire within a manageable
length for the first time respondents.
Owing to the inexperience of some of the respondents in completing such a
questionnaire, one of the researchers was present when each respondent completed the
two-page questionnaire. This questionnaire was personally handed over to 41
respondents from three main groups, namely 17 CAG auditors, all 15 members of the
PAC of the Parliament and nine representatives from the nine largest IFA contributors
to the public sector in Bangladesh. The 17 CAG auditors consisted of the CAG,
 MAJ nine Audit Directors and seven Audit Managers. These Managers were all senior field
20,8 auditors just below the level of Audit Director. The questionnaire was based on a
25 dimensional description of various aspects of audit with the respondents perception
of each dimension being recorded on a seven-point Likert scale with 1 indicating
strong agreement and 7 indicating strong disagreement. The questions in this
Likert scale questionnaire were based on the literature survey subject to certain
898 modifications arising from the experience gained from a pilot study with public sector
auditors both in the UK and in Bangladesh. The Mann-Whitney U-test which is a
non-parametric equivalent to the t-test, was considered appropriate for ordinal
measurements, such as the Likert scales employed in this study. It tests whether two
independent samples are from the same population. It is considered more powerful
than the median test because it uses the ranks of the cases.
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Results
In line with the main objective of the research, namely finding out whether or not a gap
exists between the auditors and users perceptions of audit in the public sector,
statistical tests were carried out to compare the responses given, firstly, by the CAG
auditors and the PAC members, and secondly, by the CAG auditors and the IFA
representatives. A level of 5 per cent was used as the criterion for identifying statistical
significance.

CAG auditors vs members of PAC

These two are the most important groups in the context of public sector audit in
Bangladesh. The CAG auditors have a Constitutional obligation to report to the PAC
on audits of public sector enterprises. The PAC is considered as the top Parliamentary
Committee for securing public sector accountability through the CAG audit function as
stipulated by the Constitution.
Table I gives the results of the CAG auditors and the PAC members responses and
highlights those dimensions for which statistically significant differences were
observed. The table shows that, out of the 25 dimensions, 13 had statistically
significant differences between the two groups. This provided evidence that an audit
expectations gap did exist between the perceptions of the CAG auditors and the
members of the PAC.

CAG reporting
A number of questions were asked about the factors associated with the CAG reporting
responsibility. Out of a total of seven questions, the responses on five questions
revealed significant differences between the two groups. In respect of the timeliness of
the reporting, the p-value of 0.00 and the median auditors responses of 3 against the
median of the members of the PAC of 6 indicated the extent of the difference between
the views of the CAG auditors and the members of the PAC. Of the remaining six
responses, four were statistically significant indicating that, relative to the CAG
auditors, the user groups considered that the CAG reports could be improved in terms
of communicating clear objectives, addressing more relevant problems, making more
effective recommendations and involving more extensive audit work. With the
reporting by the CAG being such a vital element in helping to secure public sector
 Expectations gap
Dimensions p-value Median
in Bangladesh
AUD PAC
CAG report
CAG reports are timely *0.00 3 6
CAG reports communicate clear objectives *0.00 2 3
*0.01
CAG reports address relevant problems 2 3 899
CAG reports are publicly available 0.13 6 7
CGA reports are presented in a useful format 0.58 2 2
CAG reports make effective recommendations *0.00 2 3
CAG reports involve extensive audit work *0.03 3 5
Accountability
CAG reports are effective mechanism to ensure
public sector accountability *0.00 2 3
CAG reports take account of users information
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needs *0.04 2 5
Auditor independence
CAG auditors are independent of management *0.00 1 3
CAG auditors are independent of civil servants *0.00 1 3
CAG auditors are independent of politicians 0.11 1 1
CAG auditors have high ethical standards *0.02 2 3
Auditor compentence
CAG auditors are competent *0.03 2 3
CAG auditors competence depends on
(a) Professional qualification 1.00 2 2
(b) Multi-disciplinary audit teams 0.88 1 2
(c) Training programmes 0.48 1 1
Materiality
CAG reports confirm that no material fraud exists 1.00 5 5
Scope of CAG audit is restricted by lack of resources 0.88 2 2
Audit evidence
CAG auditors gather sufficient evidence for their
reports *0.00 2 3
CAG auditors rely on internal audit departments 0.26 5 5
True and fair view
The phrase true and fair view implies that CAG
reports can be used for effective monitoring and
control 0.39 3 3
Performance audit includes
(a) Economic purchase of inputs 0.16 1 2
(b) Effective utilisation of inputs 0.22 1 2
(c) Effectiveness of policies *0.04 1 2
Notes: p-value: significance value using two-tailed Mann-Whitney U-test; *difference between CAG Table I.
auditors and PAC members significant at 5 per cent; mean 1 strong agreement and 7 strong Auditors vs members
disagreement; AUD: CAG auditors; PAC: members of PAC of PAC

accountability, overall it could be concluded that there were significant differences in

perceptions between the two groups in relation to CAG reporting.

Accountability
Two questions were asked to assess how the respondents perceived the CAG audit
function in terms of ensuring public sector accountability. The p-values of 0.00 and 0.04
 MAJ indicated that there were significant differences in perceptions between the CAG
20,8 auditors and the members of the PAC with regard to the audit report being an effective
mechanism to ensure public sector accountability. The CAG auditors (median of 2)
agreed more strongly than the members of the PAC (median 3) that their reports
ensured public sector accountability.
A significant difference in perceptions between the two groups was found in
900 relation to whether users information needs were taken into account. The CAG
auditors (median of 2) agreed that they considered the information requirements of the
members of the PAC. In contrast the members of the PAC (median of 5) were not
convinced that this was happening. Given the fact that there is direct face-to-face
contact between the CAG auditors and the PAC members at the PAC meetings, this can
be viewed as a surprising finding. It might have been expected that the members of the
PAC would ensure that the CAG auditors were fully aware of their information needs.
It appears that this is not happening.
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Auditor independence and competence

Three groups were identified as having the potential of influencing the CAG auditors
in discharging their normal functions. In the cases of the management and civil servant
groups there were significant differences in the auditors and the PAC members
perceptions. The auditors (median of 1 in both cases) agreed strongly that they were
above any influence from the two groups; whereas, the members of the PAC (median of
3 in both cases) did not share this strong view. In contrast, the two groups shared the
perception that politicians were not a major threat to auditors independence.
The question on whether the CAG auditors had high ethical standards resulted in a
significant difference in the responses of the CAG auditors and the members of the
PAC. The auditors median of 2 against the PAC members median of 3 suggested that
the members of the PAC saw room for improvement in the ethical standards of the
CAG auditors.
Four questions were asked on the competence of auditors. There was only one
statistically significant difference at the 5 per cent level between the auditors and the
PAC members perceptions of the factors affecting auditors competence. The auditors
were more convinced of their own competence than were the members of the PAC as
indicated by the medians of 2 and 3. However, the auditors and members of the PAC
both agreed on professional qualifications, multi-disciplinary audit teams and training
programmes as ways of improving auditors competence.

Materiality, evidence and truth and fairness

Two dimensions were used in relation to the audit materiality concept. The p-values of
1.0 and 0.88 suggested that the views of the auditors and the members of the PAC were
not significantly different for the two assertions made under materiality. Both groups
of respondents disagreed with the statement that the CAG reports confirm that no
material fraud existed. However, both groups agreed with the statement that lack of
resources is one of the factors restricting the scope of CAG audit.
The statement about evidence gathering to support the findings by the CAG
auditors resulted in significant differences in responses between the two groups with a
p-value of 0.00. The members of the PAC (median of 3) agreed less strongly than the
auditors (median of 2) with the statement that auditors gathered sufficient evidence to
 support their findings. The second question relating to the CAG auditors reliance Expectations gap
on auditees internal audit departments did not reveal a significant difference in in Bangladesh
perceptions between the CAG auditors and the members of the PAC.
The question on the true and fair view resulted in a p-value that was not statistically
significant. As the median of 3 in both cases would suggest, the CAG auditors and the
PAC members displayed similar sentiments, with slight support for the proposition
that the phrase true and fair view implies that CAG reports can be used for effective 901
monitoring and control.

Performance audit
The three questions covering the performance audit resulted in one significant
difference in perceptions about performance audit ensuring the effectiveness of policies
( p-value 0.04). From the median values of the two groups the members of the PAC
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agreed less strongly than the auditors that a CAG performance audit includes the
effectiveness of policies. The differences in perceptions between the auditors and
members of the PAC about the economy and efficiency aspects of the performance
audit were not significant at the 5 per cent level.

CAG auditors vs international funding agencies

A number of IFA are very important for the economy of Bangladesh due to their
extensive funding of public sector operations. In accordance with the importance of
their status, the CAG office has a separate audit directorate to conduct audits of the
projects funded by these agencies and reports either directly to the funding agencies or
indirectly as stipulated in the agreement between the CAG and the IFAs. Table II gives
the results of the CAG auditors and of the representatives of the IFAs and shows that
out of 25 dimensions, 14 had statistically significant differences. As with the members
of the PAC, this provided evidence that an audit expectations gap did exist between the
perceptions of the CAG auditors and the representatives of the IFAs.

CAG reporting
The same seven questions were asked on various aspects of the CAG auditors
reporting responsibility. The responses revealed significant differences in perceptions
between the CAG auditors and IFA representatives for five of the seven questions.
In respect of the timeliness of the reporting, the p-value of 0.01 and the medians of 3
and 6 for auditors and IFAs, respectively, reflected the extent of the problem and the
user groups concern with the lack of timeliness of CAG reports.
In respect of communicating clear objectives, addressing relevant problems,
usefulness of format of reports and effective recommendations, the funding agencies
views differed significantly from those of the auditors. The funding agencies disagreed
with the statements while the auditors agreed. In respect of the availability of CAG
audit reports (although statistically not significant), both groups disagreed with the
proposition, with the funding agencies showing stronger disagreement. The medians
of 3 and 4 for auditors and funding agencies, respectively, indicated that the auditors
agreed that CAG reports involve extensive audit work whereas the funding agencies
were only neutral but this difference between the two groups was only significant at
the 10 per cent level. Overall it can be concluded that there were significant differences
 MAJ
Dimensions p-value Median
20,8
AUD IFA
CAG reporting
CAG reports are timely *0.01 3 6
CAG reports communicate clear objectives *0.00 2 5
*0.00
902 CAG reports address relevant problems 2 5
CAG reports are publicly available 0.18 6 7
CGA reports are presented in a useful format *0.02 2 5
CAG reports make effective recommendations *0.00 2 5
CAG reports involve extensive audit work 0.07 3 4
Accountability
CAG reports are effective mechanism to ensure
public sector accountability *0.00 2 6
CAG reports take account of users information
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needs *0.00 2 6
Auditor independence
CAG auditors are independent of management *0.00 1 4
CAG auditors are independent of civil servants *0.00 1 4
CAG auditors are independent of politicians *0.00 1 4
CAG auditors have high ethical standards *0.00 2 4
Auditor competence
CAG auditors are competent *0.00 2 5
CAG auditors competence depends on
(a) Professional qualification 0.18 2 1
(b) Multi-disciplinary audit teams 0.60 1 2
(c) Training programmes 0.34 1 1
Materiality
CAG reports confirm that no material fraud exists 0.24 5 6
Scope of CAG audit is restricted by lack of resources 0.34 2 3
Audit evidence
CAG auditors gather sufficient evidence for their
reports *0.00 2 4
CAG auditors rely on internal audit departments 0.96 5 4
True and fair view
The phrase true and fair view implies that CAG
reports can be used for effective monitoring and
control 0.06 3 5
Performance audit includes
(a) Economic purchase of inputs 0.63 1 1
(b) Effective utilization of inputs 0.40 1 2
(c) Effectiveness of policies *0.04 1 2
Table II. Notes: p-value: significance value using a two-tailed Mann-Whitney U-test; difference between CAG
Auditors vs auditors and IFAs significant at 5 per cent; mean 1 strong agreement and 7 strong disagreement;
representatives of IFAs AUD: CAG auditors; IFAs: representatives of IFA

in perceptions between the auditors and the IFA representatives in terms of the CAG
audit reporting function.

Accountability
Two questions were asked to assess how the respondents from the two groups
perceived CAG audit reports in relation to public sector accountability. In response to
 the first question, a p-value of 0.00 indicated that the auditors (median of 2) agreed that Expectations gap
CAG reports are an effective mechanism to ensure public sector accountability; in Bangladesh
whereas, the funding agencies (median of 6) disagreed with this view. In response to
the second question, a p-value of 0.00 also revealed significant differences between the
perceptions of the respondents in taking users information needs into account. The
auditors (median of 2) indicated that efforts were made to explore the funding agencies
information requirements; whereas, the IFAs (median of 6) clearly suggested that the 903
IFAs considered that the CAG reports did not take account of users information needs.

Auditor independence and competence

Three groups were identified as having the capacity to influence the opinion of the
CAG auditors and thereby affect the normal course of the audit. The p-values of 0.00,
0.00 and 0.00 for management, civil servants and politicians, respectively, indicated
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significant differences in perceptions between the auditors and the funding agencies.
The funding agencies medians of 4, 4, and 4 (neutral) against the auditors medians of
1, 1, and 1 (strongly agree) for management, civil servants and politicians, respectively,
suggested that, according to the IFAs, all three groups could constitute a potential
threat to CAG auditor independence.
The question on the issue of CAG auditors ethical standards resulted in a
significant difference between the auditors and funding agencies perceptions with a
p-value of 0.00. The medians of 2 and 4 for the auditors and the IFAs, respectively,
indicated that the auditors had some confidence in their own ethical standards,
whereas, the funding agencies expressed a relatively neutral view on this point.
Four questions were asked on auditor competence. There was a significant
difference in response to the first question. A p-value of 0.00 indicated that the funding
agencies (median of 5) were in disagreement with the auditors (median of 2) on the
issue of the level of auditors competence, implying that there was a lot of improvement
required to meet the funding agencies expectations. The differences between the
responses of the groups to the next three questions on CAG auditors competence
depending on professional qualifications, multi-disciplinary audit teams and training
were not statistically significant. However, both groups agreed that these three factors
contribute to auditors competence.

Materiality, evidence and truth and fairness

Two questions on materiality resulted in responses that were not significantly different
with p-values of 0.24 and 0.34, respectively. Both groups were of the view that CAG
reports did not confirm that no material fraud existed and both groups tended to agree
that lack of resources suffered by the CAG office restricted the scope of audit.
Two questions were asked on evidence. The first response resulted in a significant
difference in perceptions between the auditors and the funding agencies with a p-value
of 0.00. This indicated that whereas the auditors (median of 2) agreed that sufficient
evidence was gathered to support their audit findings, the IFAs (median of 4)
expressed a relatively neutral view. The response to the second question was not
statistically significant indicating that both groups disagreed with the statement that
CAG auditors relied on auditees internal audit departments.
The auditors agreed that the phrase true and fair view implies that CAG reports
can be used for monitoring and control as shown by the median of 3. The IFAs, on
 MAJ the other hand, disagreed with this statement as shown by the median score of 5.
20,8 However, these differences in the perceptions of the CAG auditors and the
representatives of the IFAs were not significant at the 5 per cent level although they
were significant at the 10 per cent level.

Performance audit
904 Of the three aspects highlighted as constituting the scope of performance audit, only
the policy related response with a p-value of 0.04 proved statistically significant at the
5 per cent level. Despite their broad agreement, the IFA representatives were less
convinced than the CAG auditors regarding whether the performance audit includes
effectiveness of policies.

Conclusions
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Out of the seven dimensions used in the questionnaire under CAG reporting, four
dimensions showed significant differences in perceptions at the 5 per cent level
between both CAG auditors and members of the PAC and CAG auditors and IFA
representatives. These four dimensions were timely reporting, communication of clear
audit objectives by the reports, reports addressing relevant problems, and reports
making effective recommendations. The two dimensions under accountability in the
questionnaire, namely, the CAG audit reports being an effective mechanism to ensure
public sector accountability and CAG audit reports taking account of users
information needs, showed significant differences in perceptions between the CAG
auditors and both the user groups. For example, the IFA representatives disagreed that
CAG audit reports ensured public sector accountability and both user groups
disagreed that CAG auditors explored users information needs; whereas, the CAG
auditors agreed in both cases.
This research project revealed differences in perceptions between CAG auditors and
both user groups on two dimensions under auditor independence. The Likert scale
analysis revealed significant differences in perceptions between CAG auditors and
members of the PAC for the two dimensions of auditors being independent of
managers and civil servants, with the members of the PAC agreeing less strongly than
the CAG auditors. There were also significant differences between CAG auditors and
the IFA representatives on all three dimensions of auditors being independent of
managers, civil servants and politicians, with the IFA representatives being relatively
neutral and the CAG auditors agreeing on these dimensions.
There were significant differences in perceptions between CAG auditors and the
two user groups on auditors ethical standards with the members of the PAC agreeing
less strongly than the CAG auditors and the IFA representatives being relatively
neutral that the CAG auditors had high ethical standards.
On the issue of auditors competence, there was one statistically significant finding
between the CAG auditors and each user group on the question of overall auditor
competence. These results suggest that the users are less certain about the overall
competence of the CAG auditors than the CAG auditors themselves. The three
determinants of the auditors competence received positive responses from both
user groups. The auditors shared the users perceptions in respect of professional
qualification, multi-disciplinary audit teams and training programmes affecting
auditor competence.
 With materiality there was no statistically significant finding. The auditors and the Expectations gap
two user groups all disagreed that CAG reports confirmed that no material fraud in Bangladesh
existed. There was general agreement amongst all the groups that the CAG audit scope
was restricted by a lack of resources. This is an important finding for the future
planning of CAG audits.
However, there were statistically significant differences in perceptions between the
CAG auditors and both user groups regarding the sufficiency of the evidence gathered. 905
The CAG auditors agreed about the sufficiency of evidence but the members of the
PAC had weaker agreement and the IFA representatives were neutral about CAG
auditors gathering sufficient evidence for their reports.
The two user groups had differences in their perceptions on the reliance placed on
the phrase true and fair view. The funding agencies expressed their reservations but,
in contrast, the members of the PAC agreed with the CAG auditors that the phrase
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true and fair view implies that CAG reports can be used for effective monitoring and
control.
The significant p-value in respect of effectiveness of policies in both cases proved
that there were differences in perceptions between the CAG auditors and the two user
groups regarding their strength of agreement about whether the effectiveness of
policies should be included as an aspect of performance audit. Nevertheless, the
respondents generally recognised the three dimensions, namely economic purchase of
inputs, efficient utilization of inputs and the effectiveness of policies as the scope
of performance audit.
The members of the PAC and the representatives of the funding agencies disagreed in
a few areas. For example, the two user groups had particularly large differences in views
on politicians influence on the audit process. The medians of 1 for the members of the
PAC and 4 for the IFAs indicated that the IFAs were less convinced than the members of
the PAC that the CAG auditors were independent of politicians. Overall, looking at the
median scores of the 25 dimensions, the IFAs were more critical than the members of
the PAC of the CAG audit and reporting process. The IFAs disagreed more strongly than
the members of the PAC on such issues as reports communicating clear audit objectives,
reports addressing relevant problems, presentation of the CAG audit reports in a useful
format, reports making effective recommendations, CAG auditors taking account of
users information needs, auditors being competent and the true and fair view phrase
implying that CAG reports can be used for effective monitoring and control.
However, although there were some differences between the two user groups of the
members of the PAC and the IFAs, the major finding of this research project was that
on 12 of the 25 dimensions both user groups had significant differences in perceptions
from the CAG auditors. Table III summarises the 12 dimensions of the audit
expectations gap that were significant for both the CAG auditors versus the members
of the PAC and also for the CAG auditors versus the representatives from the IFAs.
In summary, the research findings revealed significant differences in perceptions
between the CAG auditors and each of the two user groups, namely the members of the
PAC and the IFA representatives. The findings confirmed the existence of an audit
expectations gap in such key areas as CAG reporting, accountability, auditor
independence, auditor competence, audit evidence and performance audit. This is the
first time that statistical evidence has revealed that an audit expectations gap exists
between CAG auditors and the users of their audit reports in the public sector.
 MAJ
Dimensions AUD vs PAC AUD vs IFA
20,8
CAG reports are timely S S
CAG reports communicate clear audit objectives S S
CAG reports address relevant problems S S
CAG reports make effective recommendations S S
906 CAG reports are effective mechanism to ensure public S S
sector accountability
CAG reports take account of users information needs S S
CAG auditors are independent of management S S
CAG auditors are independent of civil servants S S
CAG auditors have high ethical standards S S
CAG auditors are competent S S
Table III. CAG auditors gather sufficient evidence for their reports S S
Performance audit includes effectiveness of policies S S
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Significant dimensions
between auditors and Notes: S differences significant at 5 per cent using two-tailed Mann-Whitney U-test; AUD:
both user groups CAG auditors; PAC: members of PAC; IFAs: representatives of IFA

The members of the PAC do not have any mandatory training programme and their
learning process is very much informal and voluntary. From time to time, the United
Nations Office for Project Services organises workshops for Members of Parliament.
The IFA representatives, on the other hand, have more training than their PAC
counterparts with the IFAs having a global training network. Similarly, although the
CAG auditors receive a lot of technical training, perhaps more training is required for
CAG auditors on their report users information needs and expectations. One way
forward to bridge this gap between the expectations of CAG auditors and users
expectations is through, firstly, better training for all parties involved and, secondly,
more understanding and co-operation between these strategic partners for the sake of
public sector accountability and democratic governance.

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