instance, ‘Compensation’ though is a legitimate action it can become unethical when the top executives of companies fix ‘excessive compensation’ for themselves (Anthony, 2004, p.28).
Accountants and auditors must have a code of conduct so as to coordinate their work and to fix a standard for their actions. The significance of the predetermined code of conduct is that it enables accountants and auditors to carry out their duties and responsibilities more accurately and transparently. The code of conduct remains to be an assessment tool for management to evaluate employees’ professional ethics based on their performance.
In order to uphold the reliability and integrity of the profession auditors must comply with legal and ethical norms of the firm. For instance, an auditor should not reveal the audit report or any information concerned with the firm under audit to any persons or companies other than to the management which assigned the audit work. It is very difficult to bring out a fraudulent action if it is committed by persons at the higher level of the management. However, auditor should take all possible efforts to reveal the organizational misconduct of any sort.
The auditor being held criminally liable under current regulations may suffer cash fine or imprisonment subsequent to his/her mistake on the concern. The punishment may also differ for intentional and unintentional mistakes which have committed during the course of audit.
An auditor can minimize his legal liability by submitting audit memorandum in order to prove that he has discharged the responsibilities correctly. Audit memorandum is a personal document of the auditor which consists of all details and explanations of audit work he/she had performed. This document helps to defend the auditor in case of lawsuits and thereby minimizes his/her legal liability.
Individuals like accountants, managers, and auditors play significant roles in the sustainable profitability of a firm. If the