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The financial statements expectations gap in a small state economy: a Maltese perspective

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posted on 12.06.2018 by Norbert Tabone
Over the years, there has been a lot of discussion about the audit expectations gap. Research on the expectations gap has focused exclusively on the audit aspect, with limited attention being given to the possibility of the existence of other elements that may in fact contribute to an even wider expectations gap. This study has focused on the financial statements expectations gap. Financial statements are the public face of an organisation. It is therefore crucial that users understand their objective, message, scope and limitations. This study explores and evaluates the existence of a financial statements expectations gap in a small state economy, namely Malta. The data for this study was collected from shareholders and auditors in Malta using a mixed methods approach with a sequential explanatory design through the use of a survey questionnaire and semi-structured interviews. The findings have shown that the financial statements expectations gap exists in various areas, some of which are fundamental to the understanding of financial statements. There is a clear lack of clarity, or confusion, about the objective of financial statements. This appears to be the result of the over-emphasis on decision-usefulness as an objective of financial statements, the imprecision of the word stewardship and the failure to communicate clearly the scope and limitations of financial statements. The study has shown that the attempts by standard setters to satisfy various user needs with the same set of financial statements were unsuccessful in Malta. Communicating financial information has been identified as the primary purpose of financial statements. However, the understandability of financial statements was negatively impacted primarily by the complexity of information, the frequent changes to standards, information overload and the use of technical jargon. The study has accordingly identified those factors that are considered to be conducive to the understandability of financial statements in Malta. Based on the research findings, the study has provided recommendations to the accountancy profession and policy makers on how to address the financial statements expectations gap. Potential areas for future research were also identified.



  • Business and Economics


  • Business


© Norbert Tabone

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This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at:

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A Doctoral Thesis. Submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.