Prior research has documented the continued existence of an expectation gap, defined as the divergence between the public’s and the profession’s conceptions of auditor’s duties, despite the auditing profession’s attempt to adopt standards and practices to close this gap. In this paper, we consider one potential explanation for the persistence of the expectation gap: the role of media bias in shaping public opinion and views. We analyze press articles covering 40 U.S. corporate fraud cases discovered between 1992 and 2011. We (...) compare the auditor’s duties, described by the auditing standards, with the description of the fraud cases as found in the press articles. We draw upon prior research to identify three sources of the expectation gap: deficient performance, deficient standards, and unreasonable expectations. The results of our analysis provide evidence that the performance gap can be reduced by strengthening auditor’s willingness and ability to apply existing auditing standards concerning fraud detection; the standards gap can be narrowed by improving existing auditing standards; and unreasonable expectations, however, involve elements beyond the profession’s sphere of control. As a result, the expectation gap is unlikely to disappear given the media’s tendency to bias, with an overemphasis of unreasonable expectations in their coverage of frauds and press articles tending to reinforce the view that the auditor should take more responsibility for detecting fraud, irrespective of whether this is feasible at a reasonable cost. In addition to the primary role of the press in perpetuating the expectation gap, a second reason for continuation of the expectation gap is that the rational auditor will have difficulty in assessing subjective components of fraudulent behavior. (shrink)

Based on evidence from press articles covering 39 corporate fraud cases that went public during the period 1992-2005, the objective of this article is to examine the role of managers' behavior in the commitment of the fraud. This study integrates the fraud triangle (FT) and the theory of planned behavior (TPB) to gain a better understanding of fraud cases. The results of the analysis suggest that personality traits appear to be a major fraud-risk factor. The analysis was further validated through (...) a quantitative analysis of keywords which confirmed that keywords associated with the attitudes/rationalizations component of the integrated theory were predominately found in fraud firms as opposed to a sample of control firms. The results of the study suggest that auditors should evaluate the ethics of management through the components of the TPB: the assessment of attitude, subjective norms, perceived behavioral control and moral obligation. Therefore, it is potentially important that the professional standards that are related to fraud detection strengthen the emphasis on managers' behavior that may be associated with unethical behavior. (shrink)

All organizations have gray areas where the border between right and wrong behavior is blurred, but where a major part of organizational decision-making takes place. While gray areas can be sources of problems for organizations, they also have benefits. The author proposes that gray areas are functional in organizations. Gray areas become problematic when the process for dealing with them is flawed, when gatekeeper managers see themselves as more ethical than their peers, and when leaders, by their own inattention, inaction, (...) and poor modeling, minimize the importance of building a moral community by delegating gray area issues to second-tier administrators. Gray areas provide wiggle room in coping with ethical dilemmas in organizations. (shrink)