In recent years there has been considerable debate about the nature and scope of audit practices, and the so called, audit expectation gap—namely the differences between what auditors actually do and what third parties think auditors do or should do in conducting the audit practice. So far, three components of audit expectation gap have been identified. According to some researchers, the nature of the expectation gap may never be eliminated, but it may be reduced. In this paper, the author focuses on the reasonableness expectation gap and believes that for reducing such a gap, a possible way is through increased public awareness of the nature and limitation of audit.

The demand for an auditor arises from the potential conflict of interest that exists between shareholders and managers. The contractual range between these parties normally requires that the management issue a set of financial information that purports to show the financial position and results of operations of the entity. Furthermore, the demand for audit services, has been explained by professionals such as Policeman theory, Lending credibility theory, Moderator of claimants theory, Quari-judicial theory, Inspired confidence theory, and Agency theory, which emphasize that the need for audit function is inevitable, since it plays an important role in the confidence of users in investments and decision-making. For example, the Agency theory analyzes the relationship between two parties: investors and managers. The agent (i.e., manager) undertakes to perform certain duties for the principal (i.e., investors) and the principal undertakes to reward the agent (Jensen and Meckling, 1976).

It is argued that in a corporation, in which share ownership is wide-spread, managerial behavior does not always maximize the returns of the shareholders (Donaldson and Davis, 1991). The degree of uncertainty about whether the agent will pursue self-interest rather than comply with the requirements of the contract represents an agent risk for an investor (Fiet, 1995). Given that principals will always be interested in the outcomes generated by their agents, agency theory demonstrates that accounting and auditing have an important task in providing information, and this task is often associated with stewardship, in which an agent reports to the principal on the companies events (Ijiri,1975).

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