Audit Failure Model with a Meta-Analysis Approach

Subject Areas : Ethics and accounting

Omidali Khaledi ¹ , Bahareh Banitalebi Dehkordi ² , Hamid Reza Jafari Dehkordi ³

1 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran
2 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran
3 - Department of Accounting, ShK.C., Islamic Azad University, Shahrekord, Iran

Received: 2025-07-21 Accepted : 2025-10-31 Published : 2025-11-23

Keywords: Audit failure, audit quality, audit risk, meta-analysis.,

Abstract :

Introduction: Audit failure occurs when auditors provide an incorrect report due to error or fraud, even though the company’s financial statements are accurate. This indicates a failure to adhere to fundamental accounting principles by auditors. This phenomenon became a common topic in accounting in the late 20th and early 21st centuries. Research on audit reports and their quality has a long history, and audit quality has always been central to the audit services market. However, in recent decades, major audit scandals have reduced public trust in auditors’ reports, leading to the term “audit failure” being used to describe this situation. Generally, audit failure occurs when an auditor deviates from applicable professional standards in such a way that the opinion expressed in the audit report is incorrect. When material misstatements exist in a client’s financial statements, they can pose serious problems, potentially leading users of financial statements to make incorrect decisions. Audit
failure highlights the importance of financial reporting and ensures accurate and reliable financial information for stakeholders. Typically, audit failure has been linked to financial statement fraud.
According to the American Institute of Certified Public Accountants, fraud encompasses all human-made misrepresentations where an individual gains an advantage over another through false recommendations or concealment of the truth.

Method: This study employed a mixed-method approach combined with meta-analysis, allowing the researchers to utilize existing scientific data while also incorporating the perspectives of auditing experts. In the qualitative phase, a comprehensive review and analysis of valid Persian and English articles related to the study topic were conducted. The goal of this phase was to identify the
key components and factors affecting audit quality and audit risk. The extracted components were subsequently validated through expert interviews, and their feedback was used to refine and finalize the research model. The study population consisted of experts and professionals in the field of auditing. Using a purposive sampling approach, 15 experienced auditors were selected to participate in the interviews. Following the initial analysis, and according to pre-established criteria, 17 domestic articles published between 2012 and 2022 and 18 international articles published between 2000 and 2024 were selected as the research sample. These articles were analyzed to extract components and indicators influencing audit quality and audit risk.To assess the importance and effect size of each component, Cohen’s d was employed, enabling a systematic evaluation and ranking of the impact of each factor on audit quality and risk. This mixed-method approach allowed the researchers to integrate literature findings with expert opinions to develop a comprehensive, scientific, and reliable model for analyzing the factors affecting audit quality and audit risk. Furthermore, this methodology provides a framework to examine the relationships between audit quality components and audit risk, allowing a systematic and scientific comparison and ranking of the various factors involved.

Findings: Literature review and expert interviews revealed that audit failure stems from audit risk, which itself is caused by low audit quality. Therefore, the researchers designed a study model to identify the most important factors affecting audit quality and audit risk. The model consists of two main components—technical quality and auditor service quality and includes 18 subcomponents. Meta-analysis results for identifying and ranking factors showed that auditor expertise has the greatest effect on audit quality. Auditor independence, auditor size, and audit fees had a moderate effect on audit quality. Auditor reputation, experience, ethics, stress, and tenure had a small effect on audit quality. Additionally, in examining factors influencing audit risk, six prior studies indicated that both audit report quality and auditor size have a small and negative effect on audit risk.

Conclusion: Based on the findings, the proposed audit risk model includes two main components—technical quality and auditor service quality—and 18 subcomponents, such as auditor expertise, independence, size, audit fees, reputation, experience, ethics, stress, and tenure. It was confirmed that audit failure stems from audit risk, which itself results from low audit quality. Furthermore, ranking the research factors showed that auditor expertise has the highest effect on audit quality, while independence, size, and audit fees have moderate effects, and reputation, experience, ethics, stress, and tenure have small effects. Additionally, the impact of audit report quality and auditor size on audit risk is both small and negative. The study model indicates that low audit quality leads to audit risk, which is the main factor driving audit failure.

 

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