CRITICAL REVIEW

Critical Review

Critical Review

Introduction

This paper will review the article Through the Ethics Looking Glass: Another View of the World of Auditors and Ethics. This article was authored by Roger D. Martin and appeared in the Journal of Business Ethics in January 2007. As the title implies, this article deals with the ethical considerations faced by the audit profession.

Critical Review

The first part of the article discusses the requirement that auditors must be looking within the organization. In other words the auditors must be independent (outside, looking in) of the firm being audited. This does not refers to the obvious problem of being employed by the firm being audited but rather the conflict of interest issues that have arisen in the past. The author mentions the practice of hiring auditors for positions in the accounting and finance departments after the audit is completed. Other potential conflicts came about because of lucrative non-audit business between firms. As Martin (2007) states, the Sarbanes-Oxley Act of 2002 addressed several of these potential sources of conflict. The article goes on to discuss the auditor's role in assessing client ethics. The author identifies three sources of the demand within the auditing process for auditors to understand and assess the integrity and ethical values of audit clients ? audit planning, consideration of fraud, and reporting on internal controls. (Martin)Audit planning highlights the tasks, checks, and balances in place within the organization. The core component of this is the control environment or the people within the organization. Without a strong and healthy control environment, the other components of internal control hardly matter because no amount of control over physical or processing activities can be expected to function well if the people devising and operating the controls are not likely to exhibit high integrity and ethical values. (Martin)Auditors need to look at the ethics of a client and evaluate the potential for fraud. Auditors use the fraud triangle in this evaluation: Is there an incentive to commit fraud? Opportunities to commit fraud. Auditors need to constantly evaluate and re-evaluate the environment when performing an audit.

The Sarbanes-Oxley Act of 2002 requires management and auditors to state their opinion of the effectiveness of internal controls. Auditors and management are now no longer faceless entities. They have an almost personal stake in the strength of the controls within the organization.

The article makes repeated references to the financial statements the auditors are to scrutinize. ...