BUS707-Significance Of Ethics In Accounting And Auditing Essay

Question:

Analyze significance of ethics in accounting and auditing and identify ethical rules for auditing profession.

Answer:

Introduction

The purpose of this study is to analyze significance of ethics in accounting and auditing and identify ethical rules for auditing profession. Ethics is mainly concerned with needs for well- being of people and requires moral principles knowledge and skills in implementing them to the problems and decisions. Auditing and accounting are complex as well as technical procedure. An ethical audit usually measures cultures as well as behaviors of the enterprise and determines the degree to which its business values are embedded across its processes and people. Ethical audit enables the enterprise to establish proper guidelines about the limitations of acceptable behavior that are consistent globally while identifying societal differences. Ethics in auditing also determines internal as well as external consistency of the organization’s value base (Kermis and Kermis, 2014). Ethics in accounting makes its vital for the accountants to hold professional knowledge as well as skills in their work so that they have the ability to present efficient as well as effective services to the customers. The study focuses on the common and different themes relating to auditing and accounting ethics. The limitations and future directions are provided to the organizations for development of ethical auditing process.

Brief Summary of the theory and progression in the field

As per Talebian (2013), existence of ethical conduct is considered essential for various areas of work involving auditing profession. The ethical conduct provision is important requirement to win trust in service providers who possess objectivity as well as integrity in adding to confidence in financial statements provided. The ethical guidelines in auditing or accounting is vital to attain the objectives of accounting profession. Each accounting professional mainly develops their own morals and increase efficiency, credibility, reliability for providing better services to customers. The auditing ethics involves critique of legal as well as professional norms as well as regulatory system within which the auditors feature, involving improper legal frameworks where accounting occurs. Kermis and Kermis (2014) states that adherence to accounting ethics helps to assure internal control system compliance with the standards. However, this aids the accountants to recognize as well as measure resource wastage and perform roles, which can contribute to policy formation improvement as well as fraud recognition in an enterprise. There has been huge progression in the field of ethical auditing procedure. Ethical auditing now- a- days act as an instrument for managing corporate communication. It exists as a convenience and an opportunity in the procedure of producing public information system regarding fulfillment of enterprise’s ethical commitment. Ethics in auditing has enabled the organization

  • to clarify actual values in which it operates, provides baseline for measuring future improvement
  • provide stakeholders opportunity for clarifying their predictions about the business,
  • recognizing particular issues within the business
  • recognizing specific areas of vulnerability.

Overall, the progression in this field aids the company to secure fidelity of financial processes and business transactions.

Common themes across four articles

The common findings across four articles reflects the significance of ethics in accounting and auditing. According to Prasad (2018), the objectives of ethics in auditing and accounting are two fold, which includes- it has been intended for providing transparency as well as accountability towards stakeholders, intended to improve internal control for meeting ethical objectives of an enterprise. The growing significance of ethics within auditing profession is mainly due to high resonating financial scandals that adversely affected the auditors in few organizations. As a result, the audit service users questioned the integrity as well as morality of auditors. Kermis and Kermis (2014) found out that ethical conduct has been important when performing audit for meeting the defining features of auditing profession that are – trust, integrity and independence. However, the standards of auditing along with ethical codes highlights the ethical behavior. Auditors with ethical behavior compelled in having ethical conduct as they becomes aware of values of work performed for audit report beneficiaries. Thus, ethical code in auditing is vital as it set limits in ethical behavior as well as intends to provide guidance in uncertain circumstances.

Different themes across the articles

The different themes that are been discussed across the articles are the different ways adopt ethical auditing. Different organizations implement varied methods of ethical auditing. Few enterprises makes approach based on the moral laws in those cases where the actions of the auditors are taken into account as vital for ethical choices relating to work. Sometimes, the competent authorities have made the moral choices. Another theme that has been illustrated in these articles is accountability of auditors and public trust. This public trust is the foundations of auditors existence on market as well as measures confidence degree that various parties have in services given by profession. Recent evidences reflect that the public trust has declined in present years owing to certain unethical behavior within auditing profession (Ardelean, 2013). Lack of trusts on abilities of auditors have led to questioning of legitimacy. Thus, auditors faced problems to draw attention on the financial issuers and thus resulted in public mistrust regarding auditing profession.

Managerial implications of the articles

As per Ardelean (2013), ethical principles are specifically vital for the internal auditors because of certain reasons that includes- the internal auditors are mainly faced with certain ethical dilemmas that might challenge their ethical standards. They might face situations that require them for speaking out specifically when pressure has been exerted by the senior management. With the present importance on the corporate governance, it has been becoming identified that the internal auditors may play important role to strengthen corporate integrity and business ethics. Moreover, the auditors are the predictors to work with the audit committees and the management for ensuring that proper ethical behavior flows down to lower employees. The articles reflects that the sensitivity of auditors to the ethical dilemmas and thereby examine whether the mechanisms of corporate governance affect their ethical decision- making.

Study limitations and future research direction proposed in the four articles

There are several limitations to this study and because of which it offers opportunities for the further research. The sample that have been drawn from the internal auditors for conducting the survey are motivated members of auditing profession. This sample might not be the representative of the internal auditors as respondents were those interested in ethical issues. The data collected might not be reliable that the respondents have interpreted scenarios. The scenarios that this study presents might oversimplify reality of ethical dilemmas that is faced by internal auditors. There are several avenues for the future research directions. The effect of other processes such as- risk management process and board independence may be explored. This study might incorporate individual factors that are- enterprise and national culture, moral development and organizational commitment.

Conclusion

From the above discussion, it can be concluded that ethics in accounting or auditing will outcome in recognition of enterprise values on one hand and the way in which the enterprise needs to develop value system. If ethical auditing is performed by every organizations, then it might have the ability to track their progress on the basis of baseline information by varied elements of ethical audit. As the multinational corporations are face problems relating to ethical auditing, it must adopt effective strategies as well as code of ethics and consider consumer perceptions on ethics so that it helps them to identify ethical issues and improve its business operations accordingly.

References

Ardelean, A., 2013., Auditors’ ethics and their impact on public trust. Procedia-Social and Behavioral Sciences, 92, pp.55-60.

Kermis, G.F. and Kermis, M.D., 2014., Financial reporting regulations, ethics and accounting education. Journal of Academic and Business Ethics, 8, p.1.

Prasad, V., 2018. Ethics And Auditing : An International Perspective. [online] Article.sapub.org. Available at: < [Accessed 26 August 2018.

Talebian, M., 2013., Professional ethics in accounting and auditing: A necessity or choice. European Online Journal of Natural and Social Sciences: Proceedings, 2(3 (s)), pp.pp-518.

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