Running head: AUDIT FAILURE 1
Causes of Audit failures
Name
Institutional Affiliation
, AUDIT FAILURE 2
1.1 Introduction
Audit failure arise when there is significant distortion of financial statements not included
and reflected in the final audit report, and the auditor has committed grave error in the conduct of
the audit process (Bubilek, 2017). Audit that is poorly conducted does not automatically lead to
serious distortions in accounts; however, a properly conducted audit leads to less likely serious
flaws. Therefore, audit failure can only occur when there is serious auditor error or misjudgment
(Power, 2003)
WorldCom and Enron and good examples of companies that went through significant
audit calamities that resulted in financial harm not only to the companies but to whole national
economies. Below are examples of the causes of audit failures categorized into external and
internal factors.
2. The causes of audit failure
2.1 External causes
In the current business environment, the business is increasingly operating in a global
context whereby many external factors affect the business beyond the sphere of its control. Such
factors influence business operations and even audit.
The expansion of the business and consequent potential business risks that the demand
has not been accurately estimated is a major factor that leads to the use of information and issue
of results that do not accurately reflect the true financial position of the firm (Healey &
Kim2003). Such expansion involves the firm engaging various changing dynamics in the larger
industry market whereby the economic variables affect the business beyond the controlled
Causes of Audit failures
Name
Institutional Affiliation
, AUDIT FAILURE 2
1.1 Introduction
Audit failure arise when there is significant distortion of financial statements not included
and reflected in the final audit report, and the auditor has committed grave error in the conduct of
the audit process (Bubilek, 2017). Audit that is poorly conducted does not automatically lead to
serious distortions in accounts; however, a properly conducted audit leads to less likely serious
flaws. Therefore, audit failure can only occur when there is serious auditor error or misjudgment
(Power, 2003)
WorldCom and Enron and good examples of companies that went through significant
audit calamities that resulted in financial harm not only to the companies but to whole national
economies. Below are examples of the causes of audit failures categorized into external and
internal factors.
2. The causes of audit failure
2.1 External causes
In the current business environment, the business is increasingly operating in a global
context whereby many external factors affect the business beyond the sphere of its control. Such
factors influence business operations and even audit.
The expansion of the business and consequent potential business risks that the demand
has not been accurately estimated is a major factor that leads to the use of information and issue
of results that do not accurately reflect the true financial position of the firm (Healey &
Kim2003). Such expansion involves the firm engaging various changing dynamics in the larger
industry market whereby the economic variables affect the business beyond the controlled
