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The IUP Journal of Audit Practice

January '09

Credit crisis and the fallout of the subprime meltdown caught the financial systems in the world economies off guard. It has not only resulted in US recession.

Towards an Understanding of the Audit Expectation Gap
Audit Market Competition: Causes and Consequences
Provision of Non-audit Services, Low Balling, Audit Tenure and Auditor Type
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Towards an Understanding of the Audit Expectation Gap

-- Teck Heang Lee, Azham Md. Ali and Doria Bien

The auditing profession believes that the increase in litigation and criticism against the auditors can be attributed to the audit expectation gap. The audit expectation gap is defined as the difference between what the public expects from an audit and what the audit profession accepts the audit objective to be. The audit expectation gap is critical to the auditing profession because the greater the unfulfilled expectations from the public, the lower is the credibility, earnings potential and prestige associated with the work of auditors. The objectives of the paper are: to review the definition of audit expectation gap; uncover the causes of audit expectation gap; review previous studies on the audit expectation gap; and evaluate the suggested solutions in reducing the audit expectation gap. It is hoped that such an attempt will provide some valuable insights into the audit expectation gap.

Audit Market Competition: Causes and Consequences

-- Zulkarnain Muhamad Sori

The aim of this paper is to examine the impact of competition in audit market and client importance to perceived auditor independence from the perspective of Malaysian auditors, loan officers and senior managers of public listed companies. It is found that auditor independence would be threatened if auditors were to receive significant fees from a single client. The dependence on a single client would cause auditor to face a `self-threat' risk, where they were economically and financially reliant on a single customer. The interview survey disclosed that regulatory authorities should closely monitor the profession by persistently scrutinising each audit firm's revenue and expenses.

Provision of Non-audit Services, Low Balling, Audit Tenure and Auditor Type

-- Arvind Patel, Veer Singh Varma and Pranil Prasad

This paper investigates the reasons for supply of Non-Audit Services (NAS) by the incumbent auditor.The audit and nonaudit fee data for listed companies in New Zealand is used in the study. The results suggest that the simultaneous provision of audit and NAS are for efficiency reasons rather than maximizing the revenue for auditors. Hence the regulations in place to restrict the amount of NAS that an auditor can provide the client may result in inefficiencies or incurrence of unnecessary costs for the client and auditor.



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Automated Teller Machines (ATMs): The Changing Face of Banking in India

Bank Management
Information and communication technology has changed the way in which banks provide services to its customers. These days the customers are able to perform their routine banking transactions without even entering the bank premises. ATM is one such development in recent years, which provides remote banking services all over the world, including India. This paper analyzes the development of this self-service banking in India based on the secondary data.

The Information and Communication Technology (ICT) is playing a very important role in the progress and advancement in almost all walks of life. The deregulated environment has provided an opportunity to restructure the means and methods of delivery of services in many areas, including the banking sector. The ICT has been a focused issue in the past two decades in Indian banking. In fact, ICTs are enabling the banks to change the way in which they are functioning. Improved customer service has become very important for the very survival and growth of banking sector in the reforms era. The technological advancements, deregulations, and intense competition due to the entry of private sector and foreign banks have altered the face of banking from one of mere intermediation to one of provider of quick, efficient and customer-friendly services. With the introduction and adoption of ICT in the banking sector, the customers are fast moving away from the traditional branch banking system to the convenient and comfort of virtual banking. The most important virtual banking services are phone banking, mobile banking, Internet banking and ATM banking. These electronic channels have enhanced the delivery of banking services accurately and efficiently to the customers. The ATMs are an important part of a bank’s alternative channel to reach the customers, to showcase products and services and to create brand awareness. This is reflected in the increase in the number of ATMs all over the world. ATM is one of the most widely used remote banking services all over the world, including India. This paper analyzes the growth of ATMs of different bank groups in India.
International Scenario

If ATMs are largely available over geographically dispersed areas, the benefit from using an ATM will increase as customers will be able to access their bank accounts from any geographic location. This would imply that the value of an ATM network increases with the number of available ATM locations, and the value of a bank network to a customer will be determined in part by the final network size of the banking system. The statistical information on the growth of branches and ATM network in select countries.

Indian Scenario

The financial services industry in India has witnessed a phenomenal growth, diversification and specialization since the initiation of financial sector reforms in 1991. Greater customer orientation is the only way to retain customer loyalty and withstand competition in the liberalized world. In a market-driven strategy of development, customer preference is of paramount importance in any economy. Gone are the days when customers used to come to the doorsteps of banks. Now the banks are required to chase the customers; only those banks which are customercentric and extremely focused on the needs of their clients can succeed in their business today.


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