ETHICS

Accounting and Business Ethics

[Name of the Institute]

Accounting and Business Ethics

Auditing

Audit plays a very important role in serving the interest of organizations and people in general. It strengthens the accountability and reinforces trust and confidence in financial reporting. It also maintains a check on the performance of managers, who can exploit the resources of the firm using their skill. Scandals like Enron and WorldCom in the U.S. or Parmalat in Europe have increased the significance of Auditing. It is now imperative for organizations and managers to comply with accounting principles and regulations in order to avoid such scandals in future. IAA has developed a code of ethics for the auditors, which contains five basic principles of conducting an audit. It includes objectivity, lack of conflict of interest, due diligence, lack of prejudice and professional secrecy. Auditing is a tool used for collecting data for decision making and the future activities of the organization (Westra, 1986, pp. 45-47).  

Control and Audit

Fraudulent financial statements or misreporting or any kind of deception on the part of organization may distort the business environment. Therefore there is a need for an independent examination of it. Audit in such conditions makes it through economic means to sustain economic life. The audit is an activity monitoring and advice which consists of an evaluation by a competent and impartial judgment on the organization, procedure, or any operation of the entity. Audit is primarily a tool for continuous improvement, because it helps to review the existing problems in order to identify weaknesses and / or non-compliance to the regulatory requirements set by the authorities (according to the audit repository). This is to eventually lead the companies to follow appropriate actions that will correct the deviations and dysfunctions. In this paper I will be focusing on a given scenario, analyze the issue and discuss the ethical constraints of an auditor.

Case Issues

The main issues that were highlighted in the case are as follows:

Betty is asked by her client to adopt their self established accounting standards for auditing the company's records.

As per the request of the client, international accounting standards were to be ignored in auditing the firm financial records.

Ignoring the established accounting standards will create difficulties for the client in presenting and maintaining the integrity of its operations.

Ignoring the international accounting standards will establishes issues of misrepresentation and investor may be deceived by the financial position of the company.

Regulatory authorities may take certain measures against the company on the issues of misrepresentation and not following the accounting guidelines outlined by IFRS.

This will however, affect the company's reputation in the market and the mistrust of investors in the company.

Case Analysis

Betty is an experienced auditor in a well established audit firm. One of her company's biggest clients has asked her services to audit the client's financial records. However, it was also made clear to her by the client that she should use the client's self establish accounting standards and to ignore the international accounting standards, that are outlined by IFRS in ...