An audit failure occurs when
A) a client goes bankrupt or has serious financial difficulty.
B) auditors fail to conduct the examination in accordance with generally accepted auditing standards, which results in the failure to identify material misstatements in the financial statements.
C) auditors cannot collect audit fees owed to them by the client.
D) auditors are sued by a third party.

Question

Quizplus · Accepted Answer

An audit failure occurs when auditors fail to conduct the examination in accordance with generally accepted auditing standards, which results in the failure to identify material misstatements in the financial statements. This means that the auditors did not perform their duties properly and did not provide reasonable assurance that the financial statements were free from material misstatement. The other options are not necessarily related to an audit failure, although they may impact the audit engagement in some way.

An Audit Failure Occurs When