IntroductionIn the current crisis of confidence in the accounting profession following the Enron debacle and a series of high-profile bankruptcies of financial services firms, Questions related to the “audit expectation gap” have never been more important. Although it would take an enormous amount of effort to resolve these issues, I will argue that considerable effort could be made to narrow the gap. In this essay I will address some of these questions and in particular strategies to narrow the gap. Definitions Different definitions have been proposed for the audit expectation gap. Humphrey, Moizer, and Turley (1992) suggest that the common element among different definitions of discrepancy is that auditors act in a way that is inconsistent with the beliefs and desires of other stakeholders or interested in the audit. . The expectation gap can be decomposed into two components: the likelihood gap and the performance gap. The first occurs when people expect more from the audit than what it can provide in practical terms, such as detecting all cases of fraud. The latter refers to the gap between what auditors can reasonably be expected to do and what they are perceived to do. The “performance gap” can be divided into two: a deficient standards gap and a deficient performance gap. “Deficient standards gap” refers to situations in which auditors are not required by standards to report certain problems, while its equivalent refers to situations in which auditors have not complied with existing standards . This analysis is particularly important when I later examine each of the problems separately and look for the respective solutions. The Beginning Since the early 1970s, the auditing profession has been under increased pressure and scrutiny from government and users of audit reports. The term “audit expectation gap” was first coined when the AICPA convened the Cohen Commission in 1974 to investigate whether an “expectation gap” existed. However, the history of the expectation gap dates back to the beginnings of corporate auditing in the 19th century (Humphrey and Turley, 1992). Since then, events ranging from the collapse of Arthur Anderson to ongoing savings and credit problems appear to have made this gap increasingly apparent. I believe that it is possible to gradually reduce the gap despite the gap that is currently widening.