Audit failures and organisational misconduct: a critical analysis of Big 4 accountability through multiple theoretical lenses

Document Type

Article

Source of Publication

International Journal of Ethics and Systems

Publication Date

9-2-2026

Abstract

Purpose – Persistent audit failures involving the Big 4 accounting firms (ernst & young, PricewaterhouseCoopers, Klynveld Peat Marwick Goerdeler, Deloitte & Touche) raise a pressing question: why have decades of regulatory intervention failed to prevent them? Organisational misconduct theory is applied to examine these failures and the structural conditions sustaining them. Design/methodology/approach – The study employs a narrative literature review methodology, synthesising academic literature, regulatory documents and documented audit failures through an integrated theoretical framework combining institutional theory, stakeholder theory, legitimacy theory and accountability frameworks. The analysis integrates insights from accounting, organisational behaviour, sociology and regulatory studies to examine audit failures across multiple theoretical perspectives. Findings – Audit failures emerge from complex organisational dynamics, not individual incompetence or moral failings. Institutional theory exposes isomorphic pressures that normalise client-favouring practices; stakeholder theory reveals structural conflicts between fiduciary duties and economic dependence on management; legitimacy theory explains post-scandal symbolic reforms that preserve underlying business models; and accountability frameworks identify enforcement gaps enabling failures without meaningful consequences. Originality/value – Building on critical accounting scholarship (Sikka, 2015; Otusanya, 2011; Bakre, 2007; Lauwo and Olatunde, 2010), the study integrates institutional, stakeholder, legitimacy and accountability perspectives to reveal how multiple mechanisms interact to perpetuate failures, a perspective absent from prior single-lens analyses. Analysis of the NMC Healthcare and Wirecard cases demonstrates that sophisticated regulatory environments produce the same failure patterns as developing economies, supporting structural over context-specific explanations. The study also shows how social-control agent fragmentation and regulatory capture operate through technical dependence alongside economic channels, explaining why post-scandal reforms consistently fail. The analysis identifies grassroots activism as an alternative change pathway where institutional reforms have proven inadequate.

ISSN

2514-9369

Publisher

Emerald

First Page

1

Last Page

28

Disciplines

Business

Keywords

Accountability, Audit failures, Audit regulation, Institutional theory, legitimacy theory, Stakeholder theory, The Big 4 accounting firms

Scopus ID

105049838293

Indexed in Scopus

yes

Open Access

no

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