The purpose of this paper is to consider how ethics is currently taught to trainee auditors and to evaluate whether some ethical instruction techniques can be assessed as more…
Abstract
Purpose
The purpose of this paper is to consider how ethics is currently taught to trainee auditors and to evaluate whether some ethical instruction techniques can be assessed as more effective than others.
Design/methodology/approach
Two separate cohorts of auditing students (262) provided responses to audit/accounting ethical scenarios. Each cohort was then subject to three separate ethics teaching techniques (either active or passive), from the two different teaching methodologies (active v. passive) over a semester. Their ethical attitudes to the scenarios were then re‐assessed and the teaching techniques evaluated.
Findings
Both methodologies were found to impact positively, as both cohorts selected more ethical responses to the scenarios post instruction. Some evidence of active techniques having more effect than passive techniques, on ethical decision making was revealed.
Research limitations/implications
More research is needed into the impact of active and passive teaching methodologies on trainee auditors, in the ethics area.
Practical implications
Teaching ethics to the audit practitioners of tomorrow is critical. If the optimum mix of ethical teaching methodologies can be assessed, it will result in more effective ethical instruction. This study's results imply careful consideration must be taken in designing ethical training programs for trainee auditors.
Social implications
Improvement in the ethical behaviour of auditors will provide more confidence for users of accounting information in the business environment.
Originality/value
This paper is original in that it evaluates the impact of a series of ethical instruction methods, as opposed to a single teaching method (the focus of many previous papers) on ethical training. The tentative finding of active methods proving more effective than passive methods is significant, and paves the way for future research.
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Conor O’Leary, Errol Iselin and Divesh Sharma
Internal control evaluation is a critical component of the overall audit process, mandated by auditing standards worldwide. These standards divide internal control structures into…
Abstract
Internal control evaluation is a critical component of the overall audit process, mandated by auditing standards worldwide. These standards divide internal control structures into a number of elements, summarised as the control environment, information systems, and control procedures. Significant research exists as to auditors’ evaluations of internal controls. However, little work appears to consider the elements’ inter‐actions and relative significance. This study attempts to gauge the relative importance external auditors assign to the three elements. 94 practicing auditors evaluated internal control structures in two fictitious companies, one with strong internal control elements throughout, the other with one of the three set at a lower reliability level. The results indicate auditors consider control environment the most important element of internal control. The effect of weakening this element was that auditors assessed all three elements and overall evaluation as less reliable. Varying the other two elements did not have such significant effects. The findings carry ramifications for the auditing profession, particularly in drafting auditing standards on risk assessment.
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Conor O’Leary and Derry Cotter
Ethical behaviour is a critical component of the accountancy/auditing profession. This study examines ethical attitudes of final year accountancy students in Ireland and…
Abstract
Ethical behaviour is a critical component of the accountancy/auditing profession. This study examines ethical attitudes of final year accountancy students in Ireland and Australia. Students were surveyed as to whether they would accept a bribe and/or cheat in an exam. Their attitudes towards whistleblowing – if they became aware of improprieties such as bribery and cheating – were also reviewed. Of the students, 58 per cent of Irish and 23 per cent of Australian appeared willing to participate in fraud. These percentages plummeted when the risk of being caught was introduced. Males appeared between two and four times more likely than females to act unethically. A total of 56 per cent of Irish and 28 per cent of Australians appeared willing to cheat in an exam with the difference between male and female students being significantly reduced. Again the risk of being caught drastically reduced these figures. Just greater than 50 per cent of Australian and just under 50 per cent of Irish students appeared willing to be whistleblowers. It appears as if educators still have a long way to go as regards providing effective ethical education for trainee accountants/auditors.
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This article examines the area of auditors’ liability to third parties. It commences by reviewing landmark historical cases, from Ultramares (USA 1931) to the most recent…
Abstract
This article examines the area of auditors’ liability to third parties. It commences by reviewing landmark historical cases, from Ultramares (USA 1931) to the most recent watershed case Caparo (UK 1990). Three subsequent Australian cases in the 1990s which yielded interesting judgements are then summarised. First in Re Lowe Lippmann Figdor & Franck (1992) it was held auditors did not owe a duty of care to a third party creditor, who had lent money to a client. In contrast, the Columbia Coffee (1993) case found an audit firm liable to a third party as the audit firm’s own audit manual included a statement acknowledging third party interest on occasion. In Esanda Finance v Peat Marwick Hungerfords (1997) the High Court of Australia ruled auditors did not owe a duty of care to a third party but demonstrated such a liability might exist if for example the audit firm knew a particular third party was to rely on their work in relation to a specific transaction. The article concludes by summarising factors necessary for a successful third party claim, based on the cases already discussed.
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Australian auditing standard AUP 33 ‐ Performance Auditing is the first auditing standard to deal exclusively with a non‐“financial statements” audit topic. Auditing the…
Abstract
Australian auditing standard AUP 33 ‐ Performance Auditing is the first auditing standard to deal exclusively with a non‐“financial statements” audit topic. Auditing the performance of management and commenting on how economically, efficiently and effectively they have performed their duties is not a new subject. However, up until now the results of performance audits have usually been kept within the organization concerned. With the growth of perceived dissatisfaction with current auditing in Australia and the demand for more management accountability due to corporate collapses, considers the possibility of performance audits becoming mandatory. Problems to be overcome in establishing a performance audit framework include audit independence, cost/benefit decisions and the establishment of adequate measurement criteria. However, if the demands for performance audits escalate these problems will have to be overcome. Indeed they are not now seen as insurmountable.
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This study examines the consistency of external auditors in evaluating internal control structures using two different audit methodologies, their current firm procedures and a…
Abstract
This study examines the consistency of external auditors in evaluating internal control structures using two different audit methodologies, their current firm procedures and a standardised, structured matrix approach. Previous consistency studies have evaluated consistency over time. This study acknowledges that in the current audit climate auditors change firms more frequently than previously, therefore gaining exposure to different methodologies. Also, more public interest exists in the performance of auditors and their firms. Hence, evaluating consistency across methods rather than over time would appear beneficial. Irrespective of the method used, an auditor should arrive at the same evaluation. A total of 94 practising auditors from five different firms performed the evaluations. Overall a satisfactory level of consistency was achieved. This helps to support the concept of a self‐regulating profession maintaining a satisfactory level of performance among its members as regards to one professional trait, consistency.
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Conor O'Leary and Jenny Stewart
The purpose of this paper is to explore the ethical decision making of internal auditors and the impact of corporate governance mechanisms thereon. It also aims to explore whether…
Abstract
Purpose
The purpose of this paper is to explore the ethical decision making of internal auditors and the impact of corporate governance mechanisms thereon. It also aims to explore whether ethical decision making is influenced by years of experience in internal auditing.
Design/methodology/approach
A total of 66 internal auditors were presented with five ethical dilemmas. For each scenario, a key element of corporate governance was manipulated to assess its impact on ethical decision making. These were audit committee support; management integrity regarding accounting policies; management integrity regarding pressure on internal audit; external auditor characteristics; and organisational code of conduct.
Findings
Participants were generally sensitive to ethical dilemmas but were not always confident that their peers would act ethically. A higher quality external audit function was positively associated with internal auditors' ethical decision making. However, the strength of other governance mechanisms did not appear to influence ethical decision making. Finally, more experienced internal auditors adopted a more ethical stance in some cases.
Research limitations/implications
The sample was self‐selected and may not be representative of internal auditors in general. The lack of significant results may be due to insufficient variability in the manipulations and/or an oversimplification of reality in our scenarios.
Practical implications
The study has implications for the internal audit profession with respect to training and the provision of support mechanisms to strengthen the ability of internal auditors to withstand pressure when dealing with ethical dilemmas.
Originality/value
This paper is the first to study whether the strength of other governance mechanisms influences internal auditors' ethical decision making.
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Aylin Ates, Peter McKiernan and Akwal Sunner
Strategic management is traditionally seen as an exclusive managerial task rather than inclusive where accountability is reserved for top managers. However, contemporary strategy…
Abstract
Strategic management is traditionally seen as an exclusive managerial task rather than inclusive where accountability is reserved for top managers. However, contemporary strategy management practices increasingly pay attention to equality, diversity, and inclusion (EDI) by engaging with broader internal and external stakeholders via more open business models such as ecosystems. Hence, central to our examination is the concept of openness disposition, which in the context of strategic management refers to the tendency of individuals, collectives, and managers to make strategy transparent, participatory, and/or inclusive, or look for closure. While openness in strategy is regarded as a positive means of contemporary management, fostering diversity, creativity, innovation, and empowerment, there are some researched downsides too. The purpose of this chapter is to address the openness puzzle in strategy and gain a deeper understanding of the dilemmas of bottom-up strategy initiatives, and investigate the associated dilemmas, if any in the context of manufacturing small and medium enterprises (SMEs). We contribute to addressing the performative effects of the dynamic expansion and contraction in openness within the SME strategy process while using the concept of openness dilemmas, tensions, and disposition. Using the Management Control Theory, this chapter will combine theory with SME practitioners’ experiences of bottom-up strategy initiatives to increase EDI in their organisations. Based on findings that emerged from a four-year longitudinal multiple case study research with 10 European SMEs, we found that bottom-up strategy exercises are more interactive. They consider a greater number of views, increase legitimacy, and EDI at the workplace, and yield more process benefits, but are time-consuming and difficult to organise that require special attention to the capability, reciprocity, and credibility dimensions.
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Infanticide stands out as a crime which, in England and Wales, has been marked for at least 200 years by deep-rooted continuities in its representation and treatment by both the…
Abstract
Infanticide stands out as a crime which, in England and Wales, has been marked for at least 200 years by deep-rooted continuities in its representation and treatment by both the criminal justice system and the media, despite the massive political, economic, social, legislative and cultural changes that occurred over this period. Particularly remarkable about this long-standing discourse is its routine emphasis that the guilty mother is also a victim of tragic circumstances that led to the crime and deserving of sympathetic treatment. It also invariably sets infanticide apart as a ‘special case’ which does not necessarily fit with either medical or legal definitions of diminished criminal responsibility. Perhaps surprisingly, this framing of women who commit infanticide stresses not only their ‘normality’ prior to the offence but also their ‘respectability’, a sharp contrast to the sometimes overtly misogynistic representation of other types of women offenders. This chapter argues that it is above all ‘respectability’ that profoundly shaped the cultural script relating to infanticide in England and Wales between 1800 and 2000, and that this continues to exert a powerful legacy on the relatively small number of cases that now comes before the courts in the twenty-first century.