Skip to content
Review Open access

Bridging the expectation performance gap in fraud detection: A systematic review of external auditors' responsibilities, audit failures, and regulatory responses

Aug 2026 · International journal of business management · 0 citations

Abstract

Financial statement fraud remains a persistent threat to the integrity of global capital markets despite extensive auditing standards and regulatory reforms. This study systematically reviews literature on external auditors' responsibilities in fraud detection and evaluates why significant audit failures continue to occur. Following the Preferred Reporting Items for Systematic Reviews and Meta Analyses framework, 1,232 studies were initially identified from Google Scholar and Crossref, of which 32 studies published between 2002 and 2025 met the inclusion criteria. The findings reveal a persistent expectation and performance gap between auditing standards, particularly ISA 240, and actual audit practice. Although auditors are required to obtain reasonable assurance that financial statements are free from material misstatement due to fraud, high profile corporate failures such as Enron, Wirecard, Carillion and Steinhoff demonstrate recurring deficiencies in fraud detection. The synthesis identifies four dominant factors influencing audit effectiveness: regulatory environment, auditor independence, professional competence and scepticism, and the complexity of fraud schemes. The review further shows that audit failures are driven not only by technical limitations but also by behavioural biases, institutional pressures and increasing fraud sophistication. Regulatory reforms such as the Sarbanes Oxley Act and CLERP 9 have improved compliance but have not eliminated audit deficiencies. The study contributes a multidimensional conceptual framework integrating behavioural, institutional and technological perspectives to explain persistent audit failures. It concludes that improving fraud detection requires a shift from compliance based auditing toward a more integrated approach that combines behavioural insight, enhanced professional training and advanced audit technologies such as artificial intelligence and data analytics.

Read PDF

Similar papers

Review Open access Jul 2026

Internal Audit Quality and Fraud Detection Effectiveness in Manufacturing, Banking, and Oil and Gas Sectors: A Systematic Review

Fraud remains one of the most significant threats to organizational performance, accountability, and long-term sustainability across both public and private sectors. Despite considerable investments in internal control systems, organizations continue to experience financial losses resulting from fraudulent activities s...

Adesina Olugoke Oladipupo, Ajabor Azuka Elvis · 0 citations
Open access Aug 2026

What drives auditor effectiveness in fraud detection? the moderating effect of independence

This research examines the influence of auditor experience, professional skepticism, and auditor personality type on auditors’ ability to detect fraud, as well as the moderating role of independence. Questionnaires were distributed to 115 auditors from Public Accounting Firms in Surabaya using convenience sampling, and...

Tiffany Almadea Carlita Ardiansyah, AcynthiaAyu Wilasittha · 0 citations
Open access Aug 2026

The Effect of Fraud Star on Financial Statement Fraud with Audit Quality as a Moderating Variable

Background: Financial statement fraud can materially distort stakeholders' assessment of corporate performance and remains difficult to detect when managerial incentives and monitoring weaknesses coexist. Objective: This study examined the effects of Fraud Star elements—pressure, opportunity, rationalization, capabilit...

Ibnu Aburizal Nashruddien, A. Juanda, Eko Handayanto · 0 citations
Review Open access Sep 2026

Role of Risk-Based Auditing in Enhancing Accounting Information Reliability

Accounting information serves as the cornerstone of financial decision-making for internal and external stakeholders. However, traditional auditing methods often struggle to mitigate complex financial misstatements and fraud in increasingly dynamic business environments. This study investigates the role of risk-based a...

B. T. Silaban, Gratia Tehilla Yustus, Deka Veronica et al. · 0 citations
Review Open access Aug 2026

Strengthening internal controls to reduce fraud in U.S. financial institutions: Enhancing financial integrity and public trust

Financial fraud remains a constant and evolving threat to U.S. financial institutions, damaging market integrity, diminishing public trust, and causing significant economic losses. Internal control systems serve as the first line of defense against such fraud, yet many institutions still face control failures that allo...

Abdoulie K Darboe · 1 citation

We use cookies to run the site and, with your consent, for analytics and to show ads. See our Cookie Policy.