Share
Explore BrainMass

Ethical Issues for External Auditors

Auditors are required to adhere to a set of principles in order to ensure that all audits are done to standard and are consistent.  For external auditors, there are a set of ethical issues that often come up when they are hired to audit a company that they are not employed by. 

The first issue is the question of integrity.¹  Auditors are required to report their truthful opinion based on their findings in the financial statements, even if the truth is not beneficial to the company.  They are legally responsible for reporting the correct information in their reports for potential investors and creditors. 

The second issue is objectivity.¹  The purpose of having an audit done is to get a truthful opinion on the financial position of a company, therefore, the auditor must be completely unbiased and impartial in their reporting.  If a conflict of interest arises, the auditor is expected to report that they cannot comment on the financial position of the company due to a potentially biased opinion.  The issue of objectivity may occur if the auditor has a familial relationship or friendship with an employee of the company that they were hired to audit. 

The third issue is confidentiality.¹  All information and evidence that an auditor sees while auditing a company must remain completely confidential because that information is private. 

The last issue is competency.¹  The auditor is expected to only report or comment on data that they have extensive knowledge in.  If they do not think they can make formulate an educated opinion  on the financial status of a company, then the auditor is expected to not comment. 

 

Reference:

1. Schermerhorn , J. (2012). The four most important ethical issues for financial auditors . Retrieved from http://www.examiner.com/article/the-four-most-important-ethical-issues-for-financial-auditors

 

Categories within Ethical Issues for External Auditors

Fraud and Earnings Management

Postings: 50

Fraud is the illegal accounting practice of manipulating or omitting numbers on financial statements to make the company's financial position appear positive. Earnings Management is the legal way to do the same.

AICPA code of conduct, Six Principles of Professional Conduct matching

Listed below are definitions of the six Principles of Professional Conduct. For each, identify the principle being defined. 1. ___ A member should observe the profession's technical and ethical standards, strive continually to improve competence and the quality of services, and discharge professional responsibility to the bes

Bernie Madoff Case Study

Do you think Bernard Madoff engaged in creating a Ponzi scheme because of greed or did he employ it as a short term strategy and just caught up in a process that he could not reverse?