Homework answers / question archive / The growing importance of ethics within the audit profession is due to the highly resonating financial scandals (Enron, WorldCom, Waste Management, etc) which had a negative impact on the auditors
The growing importance of ethics within the audit profession is due to the highly resonating financial scandals (Enron, WorldCom, Waste Management, etc) which had a negative impact on the auditors. The consequence of these financial scandals led to auditors' integrity and morality being questioned by users of audit services. Since auditing relies heavily on trust and the fulfillment of fiduciary responsibilities, the significance of ethical behavior and judgment is fundamental.
According to Louwers et al, there are three key elements of ethics; questions requiring reflective choice, guides of right and wrong, and consequences of decisions. The international authority entrusted with the regulation of ethics of the audit profession is IFAC (International Federation of Accountants), whose declared scope is the protection of the public interest. When auditors are faced with an ethical problem, they must always conform to the code of ethics presented by IFAC. The fundamental principles that must be respected by auditors and accountants include: integrity, objectivity, professional competence and due care, confidentiality and professional behaviour (Ardelean, 2013). Integrity means that the auditor will be honest while performing an audit. Objectivity relates to the absence of any conflict of interest which may impair the auditor's business judgement. Professional competence and due care implies an ongoing education to ensure that a client receives competent professional service based on current developments in practice. Confidentiality suggests that the auditor will not divulge client information he acquired during his or her work without proper authority. And finally, professional behaviour pertains to the auditor complying with relevant laws and regulations while avoiding any conduct which is likely to harm the reputation of the entire profession (Ardelean, 2013).
Ethical decision making presents itself in both large and small situations; to novice workers and the most experienced. For example, small decisions like an intern completing their own time sheet for the week may seem harmless. However, practicing numerous small unethical decisions can place workers on a slippery slope that can interfere with their decisions on a larger scale. Case in point, the Enron scandal. Enron executives constantly used incorrect accounting practices that ultimately led to their demise. Overall, practicing good ethical decision making is important because it instills integrity and honesty, which are both vital to the long-term success of any individual. Proverbs 11:3 states, "The integrity of the upright shall guide them: but the perverseness of the transgressors shall destroy them." God teaches us as auditors that integrity in our work will guide us to be ethical. However, if we as auditors do not practice integrity, then our reputations will be destroyed. Thus, having integrity to guide our ethics is essential in the auditing community.