Audit findings rarely come out of nowhere. They build over time through repeat issues, internal control gaps, and governance decisions that go unchecked.
To better understand where risk actually starts, we conducted a large-scale study using federal Single Audit (Uniform Guidance) filings and IRS Form 990 disclosures. Using multivariate logistic regression analysis, the study examines the determinants of audit outcomes, including adverse opinions, material weaknesses, and going concern determinations.
Key findings include:
- Auditee risk is the single strongest predictor of adverse outcomes. High-risk auditees are:
- 9–11 times more likely to receive an adverse audit opinion
- 4 times more likely to receive a going concern disclosure
- Repeat findings and control gaps continue to drive risk. Approximately one-third of findings are repeat issues, and organizations with internal control deficiencies are nearly twice as likely to report material weaknesses
- Certain factors materially reduce risk. Each additional board member is associated with a 1–2% reduction in significant deficiencies, and stronger operating margins reduce going concern risk by over 60%
Watch this recorded session to walk through the data and better understand how governance, risk designation, and financial condition interact to drive audit outcomes.