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Auditing Ethics - Essay Example

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Auditing Ethics

However, auditing or attestation is the only professional service for which Auditors have a legal monopoly and the right to place restrictions on the form of practice. Professional associations are therefore unable to dictate the organizational forms through which nonauditing services, such as tax preparation and consulting, are provided.
In the past few years several publicly held "consolidators," including American Express and H&R Block, entered the public accounting market by acquiring the nonattestation practices of Auditor firms. Given that the performance of attestation engagements is restricted to traditional Auditor firms, the consolidators developed a variety of approaches that allow the Auditor firm and the financial services corporation to legally coexist subsequent to the consolidation of their practices. In cases like American Express, the employees of the Auditor firm work for the consolidator corporation, and the Auditor practice leases office space and employees from the corporation to perform attestation engagements. In other cases like H&R Block, the employees continue to work for the Auditor firm, and are leased on an as-needed basis to the consolidator corporation. ...
Questions arise over issues such as appropriate compensation schemes for partners with dual employment status, potential financial relationships between the public corporation and audit clients of the Auditor firm, and whether independence requirements should be extended to non-Auditor supervisors of Auditor employees (ISB 2003). Because it can be argued that, in substance, public corporations are performing audit engagements, at a recent New York State Board of Regents Conference on the Professions, the public accounting profession was criticized for allowing audits to be performed through these types of organizational arrangements (Huefner 2000).
Previous discussions of the consolidation movement focus primarily on the implications of APS arrangements for auditor independence (Huefner 2004). This article suggests that corporate ownership poses additional threats to Auditor professionalism and ethics. For example, if consolidation places Auditors under the effective control of nonprofessional managers of publicly owned corporations, it may place greater emphasis on commercialism and profitability, in lieu of traditional professional values such as objectivity and integrity. As consolidators grow in size and influence, they may adopt strategies aimed at modifying accepted standards of performance in public accounting.

If the current consolidation movement continues, for the first time a significant number of Auditors who serve the public will be employed by commercial corporations and controlled by nonprofessionals. The public accountant plays a greater role in serving and protecting the public interest than do other accounting professionals. Corporate employment may threaten the ability to appropriately ...Show more


A major issue currently facing the accounting profession is the effects of changes in organizational structures on Auditor professionalism and ethical standards. Public accountants, like other professionals, historically worked in professional partnerships or sole proprietorships…
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Auditing Ethics essay example
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