Essay Example on Audit Failure

An audit failure refers to a situation whereby an audit makes a statement that the accounts of a company are correct while they are myriad mistakes and false statements that need to be corrected. Until an audit failure has been looked into, there is no knowing if it is because of negligence or wrongdoing. It is worth mentioning that the moment an audit i.e. an official examination of a corporations financial records, does not realize things that it ought to have found; this means that there is a possibility of a fraud. The issue of audit failure us very serious in both public and private firms; whats more, it is worth mentioning that it is paramount for public companies to be in possession of statutory financial statements audit. Many stakeholders in the corporate world have also embraced auditing and are very much demoralized the moment an audit goes wrong, and figures become confusing. This paper will give invaluable insights regarding what audit failure is all about and how it can be remedied within and without an organizational setting.

Common Causes of Audit Failure

When it comes to matters of audit failure, there are myriad reasons for failing, more so when it comes to all matters of the corporate world. It does not matter whether it is an audit required by a government provision or an audit needed by ordinary customers of an organization, the cost of failing can be very expensive. And in as much as the whole audit team receives praise the moment an audit is completed successfully, there are a select few that bear the burden of audit failure. The top four reasons for audit failure include the human error; compliance vs. business as usual; lack of supplier control; and lack of documentation and organization.

Human Error

It does not matter what industry a company is in; human error is most likely to take place. The solution here is for a company to be able to limit the chances of human error as much as possible. As a manager of quality assurance, it is very relevant to see to it that all employees are trained in the right manner and fully understand the main aim of carrying out particular functions of their job in a specialized way. The moment members of staff decipher the why when it comes to processes, it will be very much easier to remember going forward. In addition to that, there is a need for systems and internal audits to be kept in place to make sure that what is happening is happening.

Compliance versus Business as Usual

During the times when the audit is conducted within a company, there is usually a conflict of interest when it comes to matters revolving around quality assurance and the want for the business to operate as usual. As part of the process of ensuring that an audit is well prepared for, the management of any one given company needs to make sure that everything is according to standards, and this could probably include putting a halt to production lines, which interferes with an operations manager strict schedules. The most relevant thing for companies to consider here is that compliance ought to come before anything else. The disadvantage of failure to align to compliance standards will definitely cost more than a delay in matters of product delivery.

Lack of Supplier Control

All the processes and guidelines on the planet that companies use to keep their firms compliant would not be of help a great deal if the suppliers were not in sync. And with present day global corporate world supply chain, it is becoming very much difficult to better manage the risk of low quality of goods and services. A single solution to this issue is called supplier score-carding. Automatic score carding assists all parties conduct an examination of the information and data with respect to similar information, facilitating close teamwork, data exchange, review of best and standard practices, as well as the sporadic revision of element specifications, such that all the stakeholders in the picture can work towards similar goals.

Lack of Organization and Documentation

The most important part regarding preparing for an audit is to gather all the needed documents, said none ever. A refusal to be organized on the part of the management could lead to a hindrance of chances of successfully completing an audit. And with several affiliates of the business offering several different documents, remaining organized can be very much of a challenge. A shelf full of files or a filing cabinet never cuts it anymore. As a quality assurance manager in a company, one is not hired as a paper clerk, but fast document management is critical to the success of the business. At this moment it is best that automation comes into place. The management of any one given company ought to ask them about what they could do to get the information and data right out of documents that would improve the business; can the auditors be content just with several mouse clicks. Bringing automation into the process not only helps the business at large, but also assists all the quality assurance heroes to save valuable energy and time.

What An Organization Can Do In The Event Of Audit Failure.

Audit failure is a common scene in many organizations because many a time there are too many figures which auditors need to oversee their crunching. A good example is when a firm needs to assess its own tax liability and pay for tax with respect to the provisions of business law. In the event that an auditor e.g. internal auditor has made a mistake or has materialized a filing of an incorrect tax return, it is advisable to be open about it and tell individual stakeholders regarding the whole deal before it is discovered in some other manner.

All business firms ought to routinely audit the business records that have to do with its internal and external environment. In the event that internal auditors of a business make a discovery that an individual is not meeting their responsibilities right; or in case an individual has been linked to fraud; there should be penalties applied with respect to the gravity of the mistake they have committed and worse still they can face a prosecution.

It is worth mentioning that it is not advisable for a company to only depend on internal auditors solely for their book keeping. Perspectives from external auditors ought to be sought. There are several myriad ways that any one given company can bring an element of correction to audit failures with respect to the type of error and the tax that a particular error relates to. Subject to the correction process, an organization has to consider the subject of genuine errors, late GST claims and all the expenses that accrue all the adjustments to tax returns, and voluntary disclosures among other things.

Summary

An audit failure is somewhere between the publication of materially misstated financial records and a slight mistake in the audit. In as much as this may sound simple, auditing ion general is never an easy task. Sometimes the principles and management of a company are usually at a loss regarding how what is and what is not a misleading financial statement. Just because a company is in compliance with GAAP does not mean that all or some of its financial statements are not misleading. A single most important of the audit opinion is that the financial statements present fairly the financial position of a corporation in resonance with the provisions of statutory and business law at large.

As a phenomenon, audit failure comes about as a result of the disadvantages and the limitations that come with the audit process at large. The disadvantages of audit include the fact that the payment of audit fees brings about extra cost burden to a firm. In addition to that, it is disadvantageous that in the course of an audit the auditor in charge of the process needs the attention of several company employees and thus brings about disruption.

Secondly the limitations of audit are in no way an assurance that the organization in question will be viable in the future. In addition to that, an audit is never an assurance of the effectiveness and work ethic of the management. Finally, it is common knowledge that auditors basically express opinion and therefore they are not able to present the solid assurance of the true fair representation of annual reports.

Conclusion

Despite the fact that the entirety of an organization could be made up of genuine and faithful employees and auditors who never take part in pilferage, audit failures may occur. The most important thing that should be done the moment a mistake is realized is for everyone to be informed. Openness removes all doubts of bad intentions and gives employers confidence that human err and not malice was the real reason of an audit failure. The most practical way to address the issue of audit failure is to make sure that all financial data and information is recorded the moment transactions are affected. Urgency and immediateness is the key to realize clarity in the audits of a business. Good auditing makes the work easier for everyone such that both internal auditors and the external auditors never get to rack their brains too much to find missing figures or to play cat and mouse with the accountants within a firm.

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