Describe and Discuss a Reason for Audit Failure

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Examlex · Accepted Answer

The Answer is a) Inadequate internal accounting and control systems. An accounting and internal control system that fails to pick up incorrect or fraudulent transactions can be the root cause of financial scandals and audit failures; b) Another possible cause for problems is the possibility that the existing disclosure rules have loopholes and some questionable financial practices are not disclosed; c) Sometimes, auditors can be the source of the problem. In their quest to keep clients, the auditor may be convinced by their clients to allow some questionable reporting practices; d) Sometimes internal control systems and auditors are just not good enough. Ethics always plays an important role. Rules and accounting systems cannot make up for the lack of ethical behavior. When individuals collude, they can often overcome internal controls and perpetuate an undetected fraud, at least for a period of time.

Describe and Discuss a Reason for Audit Failure

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