Auditing is a systematic process of obtaining and examining the transparency and truth of financial records of a business entity or the

government .This accounting tool determines whether the financial statements of a particular company is accurate and without a trace of deceit. The three types of auditors are internal, governmental and external .Internal auditors are employees of the company whose financial statements are being examined .The purpose of internal auditing is to check the companys policies ,procedures ,and records, and evaluate the companys plan and attainment of goals. External auditors , on the other hand ,are not employees of the company being audited .They evaluate the honesty of a companys financial statements and issue a written report that contains the opinion that they have formed regarding the companys financial statements . Basically auditing is done in a systematic manner following four steps: planning, gathering evidence, evaluating evidence, and issuing a report. Auditors are required to go through detailed education and training that prepare them for the pressure and stress of handling complicated auditing tasks. Certified accountants employ a systematic and carefully planned manner of auditing in order to accurately gauge a companys financial status.The work they perform provides useful information to potential stockholders , managers and even external players such as lenders because auditing allows the internal and external clients to accurately assess a companys financial stability, thus making way for investments to push through and aiding in the managements decision-making. A company need auditing in order to ensure that the path the organization is taking gears toward the goals the have been set and does not stray from the regulations set by the international body, government and the company itself. Thus , it is important to have unbiased , independent auditors to check on the consistency of these goals. Now, in the process of audit, the auditors also need to be honest . He/she should not take any bribe in preparing audit report. If he is dishonest , the cost of dishonesty may be very devastating and interest of the entitys information users may be destroyed .The consequences may be further devastating that may result in bankruptcy of the entity and dismissal of the audit license. Integrity is also very important in the audit process. A true verification of an entitys financial position cannot be identified unless everything of the entity is scrutinized. So in maintaining the integrity honesty is very important. Furthermore, there are some established techniques of auditing which auditor must apply while conducting audit so as to find out actual financial position of an entity by checking books of accounts, ensure compliance of international accounting standards and company policies, and check whether any illicit activity has been done .Finally , the task of an auditor is to make an audit report that contains all the findings and compelling the concerned authority to correct anything found wrong or otherwise including in the report. If audit success, in this case , can be ensured, then honesty, integrity and dedicated professionalism will surely be establish in the world. But in the case of audit failure, the consequences is devastating not only for the entity being audited but also for the audit firm itself .It can not only bankrupt the company but also harm the entire economic system. The best example of audit failure is Enron. The Enron scandal was a corporate scandal involving the American energy Enron corporation and the auditing firm Arthur Anderson that was revealed in October 2001. The scandal eventually led to the bankruptcy of Enron , at threat point, the largest in

American history, Arthur Anderson , which at the time was one of the five largest accounting firms in the world, was dissolved. Enron was formed 1985 by Kenneth Lay. Several years later ,when Jeffrey Skilling was hired , he instituted mark-to-market accounting and developed a staff of executives that would later bring the downfall of the company . Along with chief Financial Officer Andrew Fastow and other executives , the company used accounting loopholes, special purpose entities , and poor financial reporting to hide billions in debt from failed deals and projects. Enrons audit committee failed to follow up on high-risk accounting issues and Anderson was pressured by the company to ignore accounting practices. Enrons auditor, Arthur Anderson , was accused of applying reckless standards in their audits because of a conflict of interest over the significant consulting fees generated by Enron . In 2000 , Arthur Anderson earner $25 million in audit fees and $27 million in consulting fees(this amount accounted for roughly 27% of the audit fees of public clients for Arthur Anderson s Houston office) .The auditors method were questioned as wither being completed for conflicted incentives or a lack of expertise or adequately evaluate the financial complexities Enron employed. Andersons auditors were pressured by Enrons management to defer recognizing the charges from credit risks as the special purpose entities became clear .To pressure Anderson into meeting Enrons expectations, Enron would occasionally allow accounting firms Ernst & Young or PricewaterllouseCoopers to complete accounting tasks to create the illusion of hiring a new firm to replace Anderson. In the aftermath of the scandal , many executives at Enron were indicated for a variety of charges and were later sentenced to prison. Anderson was found guilty in a state court , but by the time the ruling was overturned at the U.S Supreme court , the company had lost the majority of its customers and had shut down . Employees and shareholders received limited returns in lawsuits, despite losing billions in pensions and stock prices. In 2002 , the Sarbanes-Oxley Act was passed as a result of the first admissions of fraudulent behavior ,made by Enron. The act expanded criminal penalties for destroying , altering ,or fabricating records in federal investigations or for any attempt to defraud shareholders. Enrons shareholders lost $74 billion in the four years before the companys bankruptcy ($40 to $45 billion was attributed to fraud). As Enron had nearly $67 billion that it owed creditor , employees and shareholders received limited , if any, assistance aside from severance from Enron. To pay its creditors, Enron held auctions to sell its assets. Many executives at Enron were indicated for a variety of charges and were later sentenced to prison. Enrons auditor, Arthur Anderson , was found guilty in a state court , but by the time the ruling was overturned at the US Supreme Court , the firm had lost the majority of its customers and had shut down. Employees and shareholders received limited returns in lawsuits, despite losing billions in pension and stock prices. As a consequences of the scandal , new regulations and legislations were enacted to expand the reliability of financial reporting for public companies. One piece of legislation , the Sarbanes-Oxley Act., expanded repercussions for destroying , altering or fabricating records in

federal investigations or for attempting to defraud shareholders .The act also increased the accountability of auditing firms to remain objective and independent of their clients. Conclusion: From the above discussion it is found that honesty , integrity and dedicated professionalism are part and parcel for every organization to be sustained and successful l .Any sort of fraudulent activity will, today or someday in future , cause failure for the business . In the case of auditors ,honesty, integrity and dedicated professionalism play a crucial role in correctly preparing audit report on the true financial position of the entity being audited and the entitys compliance with the international accounting principles and company policies. If auditors fail in this case , audit failure may occur resulting in a very devastating situation both for the entity being audited and the auditor itself. This audit failure may cause the company loose customers and ultimately be bankrupt.