In the context of current global crisis, a series of questions regarding the professional accountant´s position need to be clarified in order to may understand the way in which the auditors, considered objective and independent due to their ethical and professional conduct, contribute to the confidence increase of those who found their decisions on an accounted financial situations basis. We also ask ourselves to what extent our society can sustain the development of a regulation based ethical behaviour and specific institutions, taking into account the existing pressures in crisis conditions. The increased number of financial scandals lead to a regression of confidence of the accounting information users, regarding the respect of ethical standards by the auditors, and there are real reasons of concern because of the increase of the non-ethical behaviour´s number of cases.audit, ethical dilemmas, independence, objectivity

Dana Simona Dragos

English

Research Papers in Economics

  851 
AUDITOR´S ETHICS IN THE CONTEXT OF GLOBAL CRISIS 
Dana Simona Dragos 
University of Oradea, Faculty of Economic Sciences 
 
In  the  context  of  current  global  crisis,  a  series  of  questions  regarding  the  professional 
accountant´s position need to be clarified in order to may understand the way in which the 
auditors, considered objective and independent due to their ethical and professional conduct, 
contribute  to  the  confidence  increase  of  those  who  found  their  decisions  on  an  accounted 
financial  situations  basis.  We  also  ask  ourselves  to  what  extent  our  society  can  sustain  the 
development of a regulation based ethical behaviour and specific institutions, taking into account 
the existing pressures in crisis conditions. The increased number of financial scandals lead to a 
regression of confidence of the accounting information users, regarding the respect of ethical 
standards by the auditors, and there are real reasons of concern because of the increase of the 
non-ethical behaviour´s number of cases. 
 
Keywords: audit, ethical dilemmas, independence, objectivity. 
 
JEL Classification: M 42 
 
Introduction 
Of  a  larger  approach,  ethics  can  be  defined  as  a  set  of  principles  or  moral  values  that  the 
organizations, the groups and each individual described in a separate way. There are many codes 
of  conduct, codes  of  professional  ethics  defined  by  different insitutions and group  of crafts, 
necessary and respected in order society function in a proper way. The International Federation 
of  Accounts  (IFAC)  established  the  International  Ethics  Standards  Board  for 
Accountants (IESBA) having the role of the elaboration and the issue of high quality ethics and 
other provisions for accountant professionists all over the world.  
The object of this article represents the analysis of the code regarding the ethical and professional 
conduct in the field of audit, in the context of current crisis, using a research methodology based 
on the review of the literature and legal regulations in this field. 
 
The solution of ethical dilemmas  
The ethical dilemma can be defined as a situation in which a professionist has to take a decision 
concerning a certain attitude. The auditor is the professionist confronting along its career with a 
series of ethical dilemmas, having to provide an objective and independent opinion regarding the 
financial  situations  of  an  individual.  The  solution  possibilities  of  ethical  problems  are  quite 
ample, but the auditor has to pay attention when chosing from these possiblities, because the 
provided services have an impact on different users, client representants, lenders, governments, 
financial and affairs communities and even on the economic welfare of the community that he 
joins. The threshold between a moral behaviour and an immoral justification conduct can be 
easily crossed. An example of frequently used justification mechanism is one in accordance with 
the principle ˝If it is legal, it is moral˝, using the argument according to which every conduct that 
doesn´t violate the law is as well moral and bases mostly on the hypothesis on the law´s perfect 
character. According to this reasoning an individual cannot be obliged to return a found object, 
but only in case the person who lost the object can prove that it belongs to him. Ethical dilemmas 
solution represents the permanent concern of the regulatory bodies in any field of activity and 
one of the easiest way of defining is the formal reference frame. 
Generally, but applicable in any field, the 6 steps method represents a simple form of ethical 
dilemmas´ solution, as it is described below:   852
-  Getting relevant information; 
-  Identification of ethical problems on the basis of the given information; 
-  Determination of the persons or groups affected by the dilemma´s final resolution and 
the way they will be affected; 
-  Identification  of  the  alternatives  that  the  person  who  has  to  solve  the  dilemma 
disposes of; 
-  Identification of the prospective consequences of each alternative; 
-  Decision regarding the proper actions to be undertaken. 
The  Code  of  Ethics  for  Professional  Accountants  in  the  field  of  audit  represents  the  formal 
reference frame, containing a set of principles and regulations which have to rule the auditors´ 
activity.  The  International  Accounting  Standards (IASs)  no.  100  and  the  International 
Standards Certifications  (ISC)  3000  forecasts  the  necessity  that  the  accountant  professionist 
conform himself to the ethics rules issued in the Code by the IFAC. 
 
Conduct and professional ethics national provisions 
The  mission  of  the  International  Federation  of  Accounts  (IFAC),  as  it  is  prescribed  by  the 
constitution, is ˝to strengthen the accountant profession at a global level, applying harmonized 
standards which are able to provide high quality services for public interest˝. Taking into account 
the  IFAC´s  mission,  there  has  been  established  the  Ethics  Standards Board  for Accountants 
having as objective the elaboration and the emission of high quality ethics standards. The code 
has  a  significant  impact  on  the  practitioners,  offering  fundamental  principles  regarding  the 
auditing practice and specific and correctly applicable conduct rules. The auditor´s activity must 
come up to the highest professionalism standards in order to guarantee confidence to the users 
regarding its services quality. To maintain this confidence, the auditor has the obligation first of 
all to have defined and to respect the ethical and professional conduct code.  
Romania  has  adopted  the  Code  through  The  Body  of  Expert  Accountants  and  Licensed 
Accountants,  entitled  The  National  Code of Ethics for  professional accountants,  and  it  is 
compulsory to be known and to be respected by all professionist accountant, no matter how they 
carry on their activity. The purpose of the Code supposes accomplishing the aim concerning 
professionalism, credibility, quality of services and the confidence conveyed by its users to reach 
the highest level of performance and to come up to the public interest needs. The accountant 
professionist has the responsability not only to satisfy the needs of a client, but also to act for 
public  interest.  The  auditor  helps  to  maintain  the  integrity  and  the  efficiency  of  financial 
situations, a role that imposes to him to respect and to adapt himself to the ethical provisions of 
the Code. 
The  code  regarding  the  ethical  and  professional  conduct  in  the  field  of  financial  audit  is 
structured as follows:  
-  Fundamental principles for the profession and practice of financial audit3￿that is the 
integrity, independence and objectivity, privacy, professional competence and political 
neutrality. 
-  Conduct rules that imposes the standard behaviour for auditors, which helps them to 
understand and put into practice the fundamental principles.  
Integrity supposes the professionist obligation to carry on its services in a modest, correct and 
incorruptible manner, acting in accordance with the profession´s requirements. The auditor has to 
avoid the conflict of interests and to present deliberately incorrect information. 
From objectivity point of view, it is stipulated the auditor’   s obligation not to discredit the 
professional reputation and the profession because of an unwanted influence. The accounting 
reports have to be precise and objective and the datas used for analysis to be employed from the 
provided documents according to audit standards.    853 
Professional competence oblige the auditors to maintain the knowledge and professional aptitude 
at an international standards level, carrying on their activity with careful attention, competence 
and conscientiousness, offering to the users of the information an assurance regarding the benefit 
of a service based on the most current pratical and legislative aspects.  
From privacy point of view, it is necessary that auditors keep privacy regarding the facts, the 
information and the documents they are acquainted with both for personal interest and the benefit 
of a third person. 
Political neutrality concerns the auditor´s attitude regarding the political convictions, he must 
keeps his independence to all political influences in order to accomplish his tasks in the most 
impartial way.  
Conduct rules represent minimal standards of ethical behaviour, set forth as specific rules that 
must  be  respected  by  any  professionist  in  practice  in  the  domain  of  accountancy  and  audit. 
Besides  the  previously  detailed  principles  regarding  independence  (rule  101),  integrity  and 
objectivity (rule 102), privacy (rule 301), auditors have also to know: 
Technical  standards  supposing  the  observance  by  the  auditor  of  some  techniques  regarding: 
general standards (rule 201), observance of standards (rule 202) and accountant principles (rule 
203). The auditors have to conform to technical and professional standards drawn up by: 
-  international audit standards; 
-  committee for international accountancy standards; 
-  professional member organizations or other organization with regulation competences; 
-  the current legislation. 
The interpretation of conduct rules meets the practitioners questions regarding a specific rule. 
The  interpretations  are  not  officially  applied,  but  their  violation  put  the  pactitioner  in  the 
impossible situation to justify his various conduct in comparison with the conduct rules. The role 
of the ethical verdicts is also to give explanations regarding some specific real circumstances 
which are published in the complete version of the Code. 
Besides the Code of Ethics for Professional Accountants issued by the IFAC, there are also other 
ways by means of which profession and even society can encourage the auditors and the experts 
in the field to behave properly to carry out high quality audit and other professional services. 
Other  similar  ways  are  the  exams  for  the  licence  of  expert  accountant,  licenced  accountant, 
quality control, colleagial evaluation, legal responsability, standards defined by stock exchange 
values and operations committee, classification of accounting expertize companies and others.  
 
Ethics development in crisis conditions 
According to specialists estimations, the problems the individuals confront with, especially on the 
Romanian  market,  are  linked  first  of  all  to  the  internal  factors  regarding  the  employees´ 
discrimination, social responsability, information disclosure, resources use for personal reasons 
and other problems having as starting point the ethical and moral responsability. The financial 
scandals in the last years, reaching the highest point with the contemporary financial crisis, have 
brought forth the problems regarding ethical behaviour and social responsability. The individuals 
and regulation organizations in the given field take more and more evident measures to help 
increase the lost confidence in accountancy.  
The Sarbanes – Oxley Act (SOX) represents one of legislative measures taken by the USA, 
regarding corporate governance, by means of which The Public Company Accounting Oversight 
Board has been established in order to set up standards for rate entities and for the leading of 
controls concerning the audit companies activities. The SOX Act extended over the American 
borders, influencing thus all companies having their headquarters in another country than USA. 
One of the regulation measures undertaken by IFAC represents the establishment of the Public 
Interest Oversight Board (PIOB), in February 2005, having as object the oversight of IFAC´s 
standardization activity regarding the audit missions. A series of conferences also debated the 
ethics problem in auditor´s profession.    854
A new structure appears within ˝the Ethics and Compliance Officer˝ association having as object 
the establishment of internal systems and procedures by means of which employees´ way of 
interaction is controlled and especially crisis situations are prevented. ￿ 
At the base of financial scandals lay a series of specific causes regarding economical and political 
policies, but the lack of transparency of financial reports represents a major problem.  
The reasons may vary, but they are especially due to the insufficient training of the managers 
who are obliged to find new resources and carry out their activities in a competitive environment. 
The economic environment goes through a stage of major transformations, under the influence of 
new technologies and the dinamics of production factors; thus, the transparency of accounting 
information becomes a guarantee of financial stability and performances.  
 
Conclusions 
The current economic environment in which we carry out our activity is very different from the 
past economic environment, accountant professionists find themselves every day in a competitive 
climate imposing them to obey the new rules and to adapt their activity to the requests of the 
market. The actual financial crisis put into evidence the necessity of solid, unitary regulations, 
having a real basis concerning ethics and morality in financial reference. The demand for audit 
and certification services depends especially on the confidence of the users in the respective 
profession. Thus, the management of professional activities in accordance with a Professional 
conduct  code,  known,  respected  and  understood  by  the  practitioners  in  the  given  field  is 
imperatively necessary. 
The aspects  regarding  the  ethics  code  are  and  have  to  be  permanently  an  effort  to  improve 
competition  and  quality  of  services.  The  behaviour  rules  recommend  the  auditors  to  remain 
independent and carry on faithfully their activities. Professional conduct code requires to the 
members ˝to respect the ethical and technical standards of the profession, to make a continuous 
effort  to  improve  the  competence  and  quality  of  services  and  to  practice  their  professional 
responsabilities  for  each  individual  at  as  highest  levels  as  possible˝,  these  requirements 
representing the necessary to improve the accountant information users´ confidence. 
The  Romanian  economy  confronts  with  the  lack  of  some  performant  management  practices, 
existing at the present insufficient studies and researches to help the elaboration of a solid basis 
regarding management possibilities. The managers don´t know how to protect themselves against 
some ethics and conduct problems which may appear during their activities. One of the reasons 
represents the reticence concerning the organization structures changes, the appearance of  ˝the 
Ethics and Compliance Officer˝ representing an essential part in defining the activity, but the 
Romanian companies aren´t yet used to transfer a part of their management responsabilities to a 
third person. As a reply to the current crisis, at the request of the professionists to focus on the 
civic  duties,  IFAC  improved  the  support  of  developing  countries  and  established  an 
Anticorruption Working Group and enlarged the independence and other ethics advices in the 
Ethics Code [3]. Similar additional measures have to be undertaken and the professionists who 
don´t respect the Code´s dispositions must be penalized so that they be obstructed in the future to 
justify  their  immoral  conduct.  The  concerns  for  ethics  and  social  responsability  have  to  be 
permanently in the attention of accountant professionists, of auditors and all professionists from 
any other field of activity. Only a proper behaviour may offer confidence and lead to the increase 
of the practiced profession´s prestige. The faster understand of the fact that ethics doesn´t mean 
only legality supposing a way of communication and development will lead to the proper and 
quicker pass over the current economic-financial deadlock.  
 
     855 
Bibliography. 
[1] Arens, A; Loebbecke, J., Audit. An integrated approach, Ed. Arc, Chisinau, 2003. 
[2] Dobroteanu, L.; Dobroteanu C.; 2002, Audit, concept and practice. National and international 
approach, Ed. Economica, Bucharest. 
[3]  IFAC  2008-  International  regulations  for  auditing,  insurance  and  ethics.  Financial 
Audit. 2008, coed. CAFR and IRECSON, 2009. 
[4] Financial Audit Revnue , year VII, no. 11/2009.  
[5] Feleaga, N.; Feleaga, L., Financial Accounting. European and international approach, 
Ed. Economica, Bucharest 2007. 
[6] Tara I., Financial Audit, Ed. GrafNet, 2006. 
 
   

AUDITOR´S ETHICS IN THE CONTEXT OF GLOBAL CRISIS

http://anale.steconomiceuoradea.ro/volume/2010/n2/135.pdf

AUDITOR´S ETHICS IN THE CONTEXT OF GLOBAL CRISIS

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics