Write 2 discussion responses:

1. An audit failure occurs when an audit, which is the official examination of an organization’s financial records, fails to present the expected findings (Wu et al., 2016). One of the most notable recent public failures was the BHS audit failure conducted by Price Waterhouse Coopers (PWC) Company in 2014.

Why the audit failure occurred?

• The audit failure at BHS was caused by several mistakes made by Steve Denison, who was supposed to oversee the audit. Denison’s first oversight in the audit process was delegating most of the auditing work to junior members with less experience. As a result, the auditing process could have been better coordinated because junior members of the audit team needed to know to whom they should report progress (Kleinman, 2018). Furthermore, whenever they encountered a problem, failure to address it resulted in an audit failure. Second, Denison provided a false statement on the audit file by backdating his opinion simply because he did not participate in the audit process as required (Kleinman, 2018).
  Furthermore, his failure to effectively oversee the audit process meant that he would believe the information provided by junior members of the audit team even when it was incorrect. The second reason for the BHS audit failure was that the document’s conclusion must be revised. This was due to a failure to request the necessary documentation, which would have provided the necessary information from the audit.

How the audit failure could have been avoided.

Steve Denison could have avoided the audit failure at BHS if he had used a robust oversight process. An effective oversight process would have allowed Denison to ensure that junior members of the audit team carried out the audit according to the established regulations (Bianchi & Tampieri, 2013). The failure of the BHS audit confirms the assertion that the integrity of an organization’s financial reports is currently heavily based on the level of oversight applied to a given audit process. This is because if the oversight process is not robust, regulators and other stakeholders will call the audit reports into question. The Audit failure at BHS was caused by numerous failings in the part of Steve Denison who was supposed to oversee the audit. The first mistake Denison made in the audit process was to delegate most of the auditing work to junior members who were less experienced. This resulted in the auditing process being poorly coordinated since junior members of the audit team didn’t know who to report progress they making to (Kleinman, 2018). Additionally, whenever they were faced with an issue, the failure to deal with it resulting in an audit failure. Secondly, Denison ended up providing a false statement on the audit file by backdating his opinion simply because he did not participate as was required in the audit process (Kleinman, 2018). Additionally, his failure to oversee the audit process effectively meant that he would believe the information provided by the junior members of the audit team even when the information was wrong.

The second reason as to why the BHS audit failure occurred is because the conclusion in the audit document was based on insufficient information. This was as a result of failure to request the much-needed documentation that would have provided the much-needed information from the audit. How the audit failure could have been avoided. The audit failure at BHS could have been avoided if a robust oversight process was to be utilized by Steve Denison. An effective oversight process would have enabled Denison to ensure that junior members of the audit team will end up carrying out the audit as per the set regulations (Bianchi & Tampieri, 2013). BHS audit failure confirms the assertion that currently, the integrity of an organization’s financial reports

is heavily based upon the level of oversight that was applied to a given audit process. This is in relation to the fact that if the oversight process is not robust, regulators and other stakeholders will end up questioning the audit reports.

2.One trend that caught my eye was the increasing usage of cloud technologies in the audit industry.  Cloud technology provides auditors with flexibility, as they can work from wherever they please, as well as enabling collaboration between team members.  However, cloud computing raises some concerns in my eyes that must be considered.  As we’ve seen over the years through various scandals, information held in the cloud is not guaranteed to be secure.  Data loss and cyber-attacks are two examples of how information held in the cloud can end up in an unintended destination.  All it takes is one incident for a firm to lose the trust of its clients, so data security must be of utmost importance to a CPA firm.  Furthermore, employing cloud technology opens a firm up to the risk of service disruption.  Speaking from personal experience, I would much rather be working than sitting on the phone with the IT desk, and this can certainly disrupt workflow and interfere with deadlines.