New Poole Research Reveals Major Expectation Gap Between Auditors and Investors Regarding CEO Misconduct

Phys.org Science•Published: Oct 9, 2026 08:30 PM IST

Recent research from Poole College of Management reveals that auditors are significantly more likely to rate CEO misconduct as a material concern when adopting an investor mindset, compared to their traditional professional perspective. The study highlights a persistent 'expectation gap' between how auditors evaluate financial materiality and how the investing public views executive criminality.

Auditor Perspective Study: Researchers surveyed 163 participants, predominantly current or former audit professionals, split into auditor and investor roles to compare judgment criteria.
Materiality Disconnect: Participants assigned the auditor role were more likely to dismiss illegal acts as irrelevant to financial statements, whereas investors saw strong connections to performance.
Built-In Industry Tensions: Co-author Eileen Taylor pointed out that the financial relationship between auditing firms and their clients creates inherent independence issues and professional conflicts.

The Context & Background

The findings underscore longstanding debates within corporate governance regarding the scope of auditing responsibilities. While the public increasingly expects auditors to scrutinize executive behavior and legal compliance, the auditing profession traditionally focuses strictly on quantitative financial statements.

Why it matters:This research illuminates critical flaws in corporate oversight and market transparency. As investors increasingly demand accountability for executive behavior, closing the expectation gap between auditors and the public is vital for restoring trust in financial markets and preventing corporate scandals.

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