Ethics plays a major role in the auditing process and profession. Discuss the et

Question

Ethics plays a major role in the auditing process and profession. Discuss the ethical theories that can be utilized to deal with issues that can arise during the audit process within 800-1,000 words. Address the following topics:

Explain how you could establish a framework using these theories to support an audit.

Highlight the key principles of the American Institute of CPAs (AICPA’s) Rules of Conduct.

Compare and contrast their rules against the rules used in international audits under the International Ethics Standards Board for Accountants (IESBA).

What does independence mean in an auditing context?

Compare and contrast in fact and in appearance, and illustrate their differences.

Explanation / Answer

ANSWER ...

Ethics or morality is concerned with well being or happiness of people living in the society. It requires knowledge of moral principles, and skills in applying them to problems and decissions. Ethical audit will enable a company to establish clear guidelines about the limits of acceptable behaviour which are consistent world wide, wile recognising where appropriate local societal differences. Ethical audit determines the internal and external consistency of a company's value base.

Ethical auditing is a process which measures the internal and external consistency of an organisation's value base. The value of the ethical audit is that it enables the company to see itself through a variety of lenses; it captures the company's ethical profile.

There are different authors who have started the development the audit theory such as Mautz and Sharaf (1961) _ ''The Philosophy of Auditins'' , Tom Lee (1986) _''Company Auditing'' and latter David Flint (1988) _ '' Principles of Auditing''. Following are the postulates stated by Flint(1988) to support the auditing .

1. There is a relationship of accountability or a situation of public accountability.

2. Accountability cannot be demonstrated without an audit.

3. An audit requires independence and freedom.

4. The subject matter of audit is susceptible to verification by evidence.

5. Auditors are skilled judges who are able to measure and compare actual performance aganist standards of accountability.

6. The meaning, significance, and intention odf statements to be audited must be clear.

7. An audit produce is an economic or social benifit.

PRINCIPLES OF ''AICPAs'' RULES OF CONDUCT;

PREAMBLE; Membership in AICPAs is voluntary. By accepting membership, a CPA assumes an obligation of self discipline above and beyond the requirements of laws and regulations. These principles of the code of professional conduct of AICPAs express the profession's recognitition of its responsibilities to the public, to clints, and to colleagues.

1. RESPONSIBILITIES; In carrying their responsibilities as professionals, members should exercise sensitive professional and moral judgments in all their activities.

2. THE PUBLIC INTREST; Members should accept the obligation to act in a way that will serve the public trust, and demonstrate commitment to proffessionalism.

3. INTEGRITY; To maintain and broaden public confidence, members should perform all professional responsibilities with the heigest sense of integrity.

4. OBGECTIVITY AND INDEPENDENCE ; A member should mantain objectivity and be free of conflicts of intrest in discharging professionals responcibilities.

5. DUE CARE; A mimber should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services and discharge professional responcibility to the best of the member's ability.

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