Methods for Measuring Expectation Gap in Thesis

In order to determine which of the information users' expectations will constitute the reasonable gap (RG), the standard gap (DS), the audit quality gap (DP), the thesis partly inherits the method of Porter (1993). Accordingly, the audit expectations already in the current regulations are used to determine the existence and measure the audit quality gap (DP). The expectations not in the current regulations are first determined to be whether the information users have expectations in reality or not, if so, the expectations will then be classified into reasonable expectations and unreasonable expectations.

Specifically, with expectations not included in current regulations, the thesis is based on the average score of information users for the question "Should auditors perform the following tasks?". The answer "no" corresponds to 0 points, the answer "yes" corresponds to 1 point. If the average score of responses from information users ≥ 0.5, the thesis determines that this is the content that information users expect in reality. On the contrary, if the average score < 0.5 means that information users do not expect this task in reality, so these indicators will be excluded from the study.

After identifying the actual expectations of information users, the thesis continues to classify these expectations into reasonable and unreasonable expectations. To classify these expectations, Porter (1993) based on the consensus in the views of the audit client group and those who directly benefit from the audit. However, with the research context of the thesis in Vietnam, information users do not have experience or deep understanding of auditing, so the thesis relies on the auditor's views as the basis to determine whether the indicators are reasonable or unreasonable expectations. If the auditor believes that these are the jobs they are capable of performing (average score ≥ 0.5), the indicators are determined to be reasonable expectations. If the auditor believes that they are not capable of performing this job (average score < 0.5), the indicators are determined to be unreasonable expectations. Thus, similar to Porter's (1993) study, the expectations contained in current regulations will be used to determine the audit quality gap (DP), reasonable expectations will be used to determine the standard gap (DS) and unreasonable expectations will be used to determine the reasonable gap (RG). However, with the aim of determining the specific level of each component as well as the general expectation gap, the thesis uses a 5-point Likert scale to survey the level of information users' assessment of the quality of implementing expectations.

This is in practice instead of using 4 levels of assessment as in Porter's study (1993). Based on Limperg's (1926) theory of affective beliefs, the thesis relies on the highest level of satisfaction of possible audit expectations of information users to measure the components of the expectation gap. Accordingly, the assessment of information users on the quality of implementation of all expectations (including expectations that are or are not included in regulations, reasonable or unreasonable expectations) are compared with the corresponding 5-point benchmark on the Likert scale to determine the level of the corresponding gap components.

The expectation gap in auditing financial statements of non-financial companies listed on the Vietnamese stock market is determined based on the measurement results of the gap components as follows:

 Reasonable gap i (RGi) = 5 – Unreasonable expectation performance assessment i Total reasonable gap (∑RG) =

Reasonable Distance (RG) =

 Standard gap i (DSi) = 5 – Reasonable expected performance assessment i Total standard gap (∑DS) =

Standard Distance (DS) =

* Audit quality gap i (DPi)= 5 – Assessment of expected performance contained in current regulation i

Total audit quality gap (∑DP) =

Audit quality gap (DP) =

* Total audit expectation gap (∑AEG) =

= ∑RG + ∑DS + ∑DP

Audit expectation gap (AEG) =

The steps to implement the expectation gap measurement method in auditing are shown in Figure 3.3.

Audit expectations contained in current regulations

NSD evaluates audit results

Audit Quality Gap (DP)

Audit Expectations

- Auditor's responsibility

- Level of assurance

of audit

- Message conveyed

through newspaper

audit report

Benchmark (=5)

Audit expectations not included in current regulations

Have

Do users have realistic expectations?

KCKV does not exist

Are not

Have

Can KTV do it?

Are not

Standard Distance (DS)

NSD evaluates audit results

Benchmark (=5)

Reasonable expectations

Unreasonable expectations

NSD evaluates audit results

Benchmark (=5)

Reasonable Distance (RG)

Figure 3.3: Method of measuring the expected gap in the thesis

The research hypotheses related to the expectation gap in auditing are stated as follows:

H1.1: There is a reasonable gap in auditing financial statements of non-financial companies listed on the Vietnamese stock market.

H1.2: There is a standard gap in auditing financial statements of non-financial companies listed on the Vietnamese stock market.

H1.3: There is an audit quality gap in auditing financial statements of non-financial companies listed on the Vietnamese stock market.

H1.4: There is an expectation gap in auditing in auditing financial statements of non-financial companies listed on the Vietnamese stock market.

3.1.2.2. Model and research hypotheses on factors affecting the expectation gap in auditing

Based on the fundamental theories as well as the results of previous studies, the research model proposes the factors affecting the expectation gap in auditing financial statements of non-financial companies listed on the Vietnamese stock market as follows:

Components and Expectation Gaps in Auditing

Excessive expectations of information users

Education and training on auditing for information users

Information user needs

Auditor independence

Auditor's competence

Audit reporting standards

Inadequate auditing standards

Figure 3.4: Research model on factors affecting the expectation gap in auditing

Accordingly, the research hypotheses are stated as follows:

- Factors affecting reasonable distance:

H2.1: Information users' excessive expectations affect the reasonableness distance.

H2.2: Audit education and training of information users affects the reasonable distance.

H2.3: Information users' needs affect the reasonableness distance. H2.4: Auditor independence affects the reasonableness distance.

H2.5: Auditor competence has an impact on the reasonableness gap. H2.6: Audit reporting standards have an impact on the reasonableness gap. H2.7: Inadequate auditing standards have an impact on the reasonableness gap.

- About factors affecting standard distance:

H3.1: Information users' excessive expectations have an impact on the norm gap.

H3.2: Auditing education and training of information users has an impact on the standard gap.

H3.3: Information user needs influence the norm gap.

H3.4: Auditor independence has an impact on the standard gap. H3.5: Auditor competence has an impact on the standard gap.

H3.6: Audit reporting standards have an impact on the standard gap. H3.7: Inadequate auditing standards have an impact on the standard gap.

- Regarding factors affecting audit quality gap:

H4.1: Excessive expectations of information users have an impact on audit quality gap.

H4.2: Information users' education and training on auditing have an impact on the audit quality gap.

H4.3: Information users' needs affect audit quality gap.

H4.4: Auditor independence has an impact on audit quality gap.

H4.5: Auditor competence has an impact on audit quality gap.

H4.6: Audit reporting standards have an impact on audit quality gap.

H4.7: Inadequate auditing standards have an impact on audit quality gap.

- On factors affecting the expectation gap in auditing:

H5.1: Excessive expectations of information users have an impact on the expectation gap in auditing.

H4.2: Information users' education and training on auditing have an impact on the audit expectation gap.

H4.3: Information users' needs affect the expectation gap in auditing.

H4.4: Auditor independence has an impact on audit expectation gap.

H4.5: Auditor competence has an impact on audit expectation gap.

H4.6: Audit reporting standards have an impact on audit expectation gap.

H4.7: Inadequate auditing standards have an impact on the audit expectation gap.

3.2. Research methods

3.2.1. Qualitative research methods

3.2.1.1. Data collection methods of qualitative research

a. Collect secondary data on audit expectation gap

The thesis approaches the concept of audit expectation gap from the information user's perspective and considers it in terms of: auditor's responsibility, audit assurance level, message conveyed through audit report. On the other hand, the structure of audit expectation gap in the thesis inherits Porter's (1993) including reasonable gap (RG), standard gap (DS) and audit quality gap (DP). Therefore, the process of collecting and analyzing secondary data to build the first draft scale for the expectation gap is divided into the analysis process to determine the scale related to audit expectations already in current regulations and the scale with expectations not yet in regulations. Audit expectations are collected and analyzed in relation to

regarding the auditor's responsibilities, the level of audit assurance, and the message conveyed through the audit report.

Regarding audit expectations already included in current regulations : The thesis collects relevant written documents including: legal documents on auditing such as the Law on Independent Auditing, the Law on Securities, Auditing Standards, Decrees and guiding circulars; textbooks of universities related to auditing; Articles, scientific documents, theses related to auditing and the gap in auditing expectations.

First of all, the thesis collects legal documents such as the Law on Independent Auditing, the Law on Securities, Auditing Standards, relevant Circulars and Decrees as a basis for building scales related to expectations already in current regulations. Because of approaching the gap in expectations from information users, including those who are not experts in auditing, the thesis eliminates technical contents and selects general contents related to the responsibilities of auditors, information conveyed in audit reports, and the level of audit assurance. In particular, the contents on the responsibilities of auditors are considered, including: responsibilities related to detecting, preventing and reporting fraud, acts of non-compliance with laws and regulations; responsibilities for the internal control system of the audit client, responsibilities for the ability of the audit client to continue operating.

Table 3.2: Legal documents that serve as the basis for determining audit expectations are already included in current regulations.

STT

Legal documents

The terms

section

Control expectation component

maths

Law on Independent Audit of the National Assembly, No. 67/2011/QH12

Section 2

Article 8

Auditor's responsibilities (on compliance with professional ethics)

Securities Law of the National Assembly, No. 54/2019/QH14