Ethical Judgment of Accountants and Auditors - Essay Example

Critical Analysis: Ethical Judgment of Accountants and Auditors In the past there have been a number of cases within the business environment relatedto the practices of auditors and accountants who have violated the trust and confidence of public. A number of researches have been conducted to find the possible factors resulting in unethical, biased or inappropriate decision makings and judgments by the professionals. The aim of this paper is to review two articles and conclude on the credibility of the claims and assertions made by the authors. The paper follows a critique styles in order to gain some knowledge of the topic and enhance evaluation skills to critically assess the information provided in the research papers and published articles (Behren & Losen, 2005). The research paper by Pflugrath, Martinov-Bennie & Chen (2007) aims to analyze the impact of organizational codes of ethics on the auditors’ and accountants’ judgments and professional decisions making skills. The research is conducted on a sample of 112 professional accountants and auditing students and resulted in concluding that codes of ethics positively influence the judgments of professional accountants but not on the students’ judgments. On the other hand, the paper by Shafer, Morrid & Ketchand (2001) is based on the research of the professional auditors and the impact of their personal values on their ethical judgments and behavioral intentions. The study concluded that personal values do not affect the ethical considerations and judgments of professional auditors. However, the knowledge and understanding of moral intensity does have an impact on the judgmental abilities of the professionals. Pflugrath, Martinov-Bennie & Chen (2007) conducted the study basing their discussion on the new International Standard on Quality Controls 1’s (ISQC1’s) requirement for all organizations and accounting firms to implement policies and regulations which uphold the ethical and technical independence of the accountants. “The presence of a code of ethics appears to have a significant influence on the audit judgments of professional accountants” (Pflugrath, Martinov-Bennie & Chen, 2007). In terms of aggressive client preferences, the code of ethics may help in better judgments by the professional accountants and auditors. On the other hand, Shafer, Morrid & Ketchand (2001) suggest that in case of client’s pressure on aggressive financial reporting, “auditors ethical behavior is strongly influenced by economic or utilitarian considerations.” Shafer et. al., (2001) suggest that strong organizational norms should result in the standardization of behaviors. In this regard, the results of Pflugrath et. al. (2007) may be judged as fairly consistent that organizational codes of ethics may help in ethical decision making of employees and professionals in auditing and accounting fields specially. Unitary codes of ethics may help in standardization of norms for the accounting and auditing professionals and may result in similar findings for the similar scenarios or situations that prevail in different companies or businesses. Pflugrath et. al. (2007) gives arguments which are more persuasive and compatible with the existing literature. The research methodology of both the papers provides reasonable assurance of the validity of their judgments, however, Shafer et. al., (2001) has a weakness of the homogeneity of the values of the local sample which is the major portion of the participants used for the research. The results, hence, may not be reliable for the diversified population of today’s business environment where people with different values and social norms are working together. For such a diversified population in the business environment we may rely on the results of Pflugrath et. al.’s study which indicates the codes of ethics may end up affecting the professional judgment positively. Moreover, the respondents in Shafer et. al.’s study had not graduated. Most of the respondents have almost 20 years experience in public accounting. People with similar values, as stated by the Shafer’s study may choose similar fields. Hence, the results produced are biased and rely upon the majority of people with similar values. Both articles provide a wide number of studies in order to support their arguments. The supporting details of every argument belong to reliable sources and peer reviewed articles. The arguments in Shafer et al.’s study, however, provide the insight of impacts of personal values in different fields. The conclusion is not as straightforward as in the research of Pflugrath et. al. The study of Shafer et al. (2001) leaves enough space for the reader to judge if the personal values or organizational norm affect ethical judgment and decision makings of accountants and auditors. Whereas, Pflugrath et al. provide much evident information on the agreement and in support of the conclusion that codes of ethics do have a positive influence on the ethical judgments of auditors and accountants. Moreover, unlike Shafer et al.’s study, Pflugrath included much research and literature in support of their conclusion rather than providing the contrary information. Concisely, the articles under review provide an in depth analysis of the two factors that may affect ethical judgment and decision makings of accountant and auditors. The first factor is the existence or absence of codes of ethics and the other is the impact of personal values and norms in ethical decision makings of professionals. The wide known dilemma of lack of ethical decision making which has abandoned the public confidence and trust is then dependent on the codes of ethics which are being set and exercised within the business environment and the perceptions of moral intensity which affect the judgments of auditors. There are other determinants, as discussed by the articles, like clients pressure and personal interest which may affect the quality of judgments and decision making in the concerned fields of accounting and auditing but it is not justifiable to ignore the 2 factors being discussed. Ethical judgment, hence, depends on the exercise of codes of ethics which provide autonomy to the auditors and accountants to work in the best interest of the business and not at the discretion of the client’s orders and guidance. Moreover, such codes of ethics, if exercised appropriately may affect the values and preferences of auditors and accountants leading to the better and more just and independent judgments of the financial and non-financial data of the business under review. Bibliography Behrens, Laurence, and Leonard J. Rosen. Writing and Reading Across the Curriculum. New York: Pearson/Longman, 2005. Print. Pflugrath, Gary, Nonna Martinov-Bennie, and Liang Chen. "The Impact of Codes of Ethics and Experience on Auditor Judgments." Managerial Auditing Journal. 22.6 (2007): 566-589. Print. Shafer, William E, Roselyn E. Morris, and Alice A. Ketchand. "Effects of Personal Values on Auditors Ethical Decisions." Accounting, Auditing & Accountability Journal. 14.3 (2001): 254-277. Print. Read More