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The influence of ethics on auditing
Finance & Accounting
Pages 6 (1506 words)
Influence of Ethics on Audit (Author’s name) (Institutional Affiliation) Ethics connotes a system by which organizations are controlled and directed. It is a chain of relationships between the directors of a company, its shareholders, along with other stakeholders.
On a broader perspective, Gillan and Starks (2008) refer to corporate ethics as a system of rules, factors and laws affecting a company’s operations. Irrespective of the definition taken up, it is common for researchers to categorize corporate mechanisms into two groups; those that are internal to firms, and those that are external to firms. Ethics is charged with the responsibilities and duties of a firm’s board of directors in managing the firm in addition to the relationship they have with the firm’s shareholders as well as stakeholder groups (Duska, Duska & Ragatz 2011). Issues of corporate governance arise in a company with the presence of two conditions. First is in the event that there is a conflict of interest or an agency problem involving members of the company who might be the workers, consumers, or managers. The second condition is that the transaction costs are such that the problem dogging the agency cannot be ameliorated via contract. Another definition of corporate ethics is more comprehensive in that it argues ethics is involved with mechanisms through which a company’s stakeholders are able to exert control over corporate management and insiders in such a manner that their interests are protected (John and Senbet 2008). ...
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