The audit expectation GAP of public auditors in Malaysia

The audit expectation gap (AEG) has been a long-standing issue in the auditing profession and continues to exist until today. The continued existence of the AEG can negatively impact the public's trust and confidence in auditors and the audit profession. While much research has been conducted, it has primarily focused on the private sector with the public sector has received less attention, especially in financial statement audits. In recognition of this gap, this study explores the AEG in the public sector, especially in financial statement audits. The main objective of this research is to examine the difference in perceptions between auditors and auditees in the Malaysian public sector. To achieve the main objective, the study focuses on two (2) critical aspects, namely auditor competence and auditor independence. This study employs a quantitative research approach, utilizing primary data collected through a survey questionnaire administered 100 respondents from auditors of National Audit Department (NAD) of Malaysia and 100 respondents from NAD’s auditees who are directly involved in financial statements. A Five-point Likert scale is used to measure the AEG and the data is analyzed using SPSS version 29. Theoretically, this study extends the application of Agency Theory to the AEG in Malaysia. In practice, this study emphasizes the need for public sector auditors to enhance their professional development. The results of the study revealed significant differences in how auditors and auditees perceived auditor competence, highlighting a gap in expectations. However, the results were different for auditor independence, with results showing no statistically significant differences in perceptions between NAD