The study investigates the perceptions of external auditors and loan officers regarding external auditor's independence in Palestine. Data were gathered using a questionnaire developed by the author and include 5 main issues related to the perception of external auditor’s independence. The sampling population identified for this study consists of external auditors working in domestic and international audit firms and financial statement users mainly loan officers in Palestine. The sample included 79 auditors and 76 loan officers. The findings revealed that there are significant differences in the perceptions of external auditors and loan officers in relation to provision of non-audit services, auditor’s economic dependence on a single audit client, and long relationship between an auditor and a client. The results revealed mixed results about the effect of presence of active audit committee on independence of the external auditors. Furthermore, acceptance of significant gifts from the client was considered an important factor that may influence auditor independence by loan officers and external auditor and thus significant differences between the two respondent groups were found in relation to acceptance of significant gifts from the client. These findings can be useful to policy makers and professional auditing bodies in Palestine on setting new regulations or strengthening existing ones to enforce auditor’s independence in Palestine.

There is a concern that auditors and the public may have different beliefs about the auditors’ responsibilities and the messages delivered by audit reports. During the past few years, some spectacular and well‐publicized corporates such as Anderson consulting collapse and the subsequent implication of the reporting auditors have emphasized on the audit expectation gap. It appears that public misperceptions represent a major reason for the legal liability crisis facing the accounting profession. The objective of this paper is to present an empirical investigation on the audit expectation gap for some privately hold firms in Iran. The population of this survey includes two groups of official auditing officials and management of some privately held firms. The results of the survey have indicated that there were some meaningful difference between management and audit group’s perceptions in terms of the auditors’ roles and responsibilities. However, there was no meaningful relationship between management and audit group’s perceptions in terms of the auditors’ independence.