17 Pages Posted: 25 Nov 2011
Date Written: October 21, 2011
The Economic cost of business failure is relatively large, Government, providers of capital, as well as management and employees are severely affected. More critical are the reporting accountants who are likely to face potential litigation if their report failed to provide an early warning signal. The paper studies and makes a critical analysis on the concept, causes and resolution of business failure, with emphasis on auditing and accounting resolution option. The paper is purely analytical, as it utilizes previous studies to draw an inference.
From the analysis it’s found that distress is mostly caused as a result of poor corporate governance. To stem distress and its debilitating effect, there is a need for the adoption of new audit framework which stresses on time limit of audit tenure with a client, forensic audit, retrospective audit procedure, and auditor’s skepticism. This will ensure and yield effective corporate governance that can curve and detect potential failure.
Keywords: Corporate Failure, Accounting, Auditing
JEL Classification: G33
Suggested Citation: Suggested Citation