Abstract
Organizations rely heavily on audits and compliance related activities to prove their competency, credibility, and firm performance. Sustainability audits encompass entire supply chains and are very complex due to, firstly, the global nature of supply chains and, secondly, the expansive scope of sustainability, which may include financial, manufacturing, social, and environmental audits. Adding to this dilemma is the absence of a consensus on standards related to sustainability, resulting in differences, variations, and multiple interpretations. While the frequency, complexity, and scope of audits has increased, unfortunately so has the incident of audit fraud, which has seen increasing media coverage in recent times, often implicating major multinationals and their supply chains. We posit that this trend of increasing audit activity is causing “audit fatigue”, which, in turn, may influence the audit outcome, i.e., either audit fraud or a clean audit. This study proposes that audit fatigue is a genuine issue faced by organizations and needs to be conceptualized.
Highlights
Audits have become a regular feature in the day to day affairs of competitive organizations
Some scholars have made a fleeting reference to audit fatigue as an outcome of multiple audits [19,20,101,102] but have stopped short of exploring audit fatigue beyond the basic definition or studying its antecedents and effects. Almost all of these scholars were mainly focused on other aspects of audit activity, such as sustainability initiatives/associations and supplier audit standards, e.g., Business Social Compliance Initiative (BSCI), Supplier Ethical Data Exchange (SEDEX), Fair Factory Clearinghouse (FFC) [9,10], sustainability assessment schemes [10,19], ethical audit regimes [16], information asymmetries in multi-tier supply chains [103], etc
The simplicity in the term audit fatigue has conveniently concealed its impact on audit outcome
Summary
Audits have become a regular feature in the day to day affairs of competitive organizations. Under the global quest for sustainability and tremendous from pressure of regulators, consumers, NGOs, and shareholders [7], this scope has grown [8] to encompass environmental impact (responsible sourcing, carbon footprint, energy usage, resource wastage, reuse, recycling, landfills, etc.) and social impact (working conditions, equal opportunity, child labor, corporate social responsibility (CSR), diversity, community involvement, etc.) These numerous factors cannot be covered in one audit; the need for multiple audits has grown. Once audit fatigue sets in, it has the potential to distract the auditee from the true objective of the audit (self-improvement, transparency, and compliance) and forces them to view the entire process as a mundane and routine task that needs to be completed as quickly as possible, sometimes using wrongful claims, data, and documentation This can be observed from the extraordinary rise in reported corporate fraud cases worldwide and increasing countermeasures in the form of institutionalized fraud prevention programs and whistle blower laws [21]. Effective management of audit fatigue will assist practitioners and stakeholders in ensuring the reliability of an audit outcome, which will help in achieving true sustainability
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