Degree Name

Doctor of Philosophy


School of Accounting and Finance, Faculty of Commerce


The audit profession is a social function, which provides services to associated parties based on confidence between auditors and users of financial reports. Despite the importance of the audit profession, currently it faces litigational problems with increased criticism of the performance of its role and function, and its inability to meet the expectations of society. This has resulted in auditors being subjected to excessive liabilities (Zhang 2007). One of the main reasons for this criticism and this critical problem is what is termed the “Audit Expectation Gap” (AEG). This refers to the difference between levels of expected performance as understood by the auditor, and as perceived by users of the financial statements (Sidani and Olayan 2007). This problem has decreased the reputation of and the public’s trust in the auditing profession, and affects the profitability and the ability of the auditing profession to provide the best possible service. As a result of this “expectation gap”, various studies have been conducted, to examine the occurrence of the expectation gap in several countries; however the extent of such a gap has not been investigated in many developing Arab Muslim countries, including Libya. Therefore, this study attempts to expand on the existing literature, by assessing the attitudes and perceptions of auditors and users of financial reports in the Libyan context, thereby uncovering the possible existence and the nature of such a gap in the Libyan environment. Most of the previous studies of the audit expectation gap (AEG) were conducted in developed countries using a quantitative approach; there are however numerous such studies using the quantitative methodology. This study, conversely, employs qualitative vi data collected through fieldwork based on interviews with the appropriate groups. The study also involves analysing samples of Libyan audit reports and other relevant official documents (regulations and laws related to the accounting profession). In order to understand the relationship between the different factors of this research problem, this study adopted the interpretative ethnographic methodology within the accountability framework. Libya has a unique culture which includes many different regulations in religious, legal, and economic situations. Libya, as Arab Muslim developing country was chosen as an environment for the study, in order to examine the viability of the framework. The aim of this study is to investigate the existence, nature and range of the AEG in Libya and attempt to provide conclusive suggestions that are able to conform and effectively work within the Libyan environment. By examining the perception of the relevant professionals (Libyan auditors, shareholders, academics, internal auditors, private investors, bankers, tax officers, managers and other interested groups), an AEG can be found. By inspecting and checking Libyan audit reports, it can be noted that there are various audit report forms, however most of these forms are dissimilar to the actual forms recommended by professional standards. Although the Libyan profession body had been established in 1973 (Alhsadi 2007), there is a deficiency in Libyan legislation that relates to the organisation of the accounting profession. The audit firms in Libya are currently not in full accordance with the professional standards and regulation present in Libya, due in large to weaknesses, and lack of enforcement of existing regulations and laws. vii The state of professional ethics of auditors and the auditors’ religious values affect an auditor’s performance. Religion plays an important role in shaping interests, attitudes, values, goals, behaviour and relationships (Baydoun et al. 1999 and Gaffikin 2007). This study introduces a number of recommendations of procedures and methods, useful in the elimination or minimisation of the AEG in Libya. As in any study, limitations are acknowledged and suggestions for future research have been proposed.

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