David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
Learn more about PhilPapers
Journal of Business Ethics 52 (3):213-227 (2004)
This paper argues that independent auditors have lost sight of their obligation to be truly impartial, and have increasingly adopted an attitude of client advocacy. We argue that auditors have a professional obligation to go beyond merely passing judgment on whether client accounting methods are acceptable under GAAP, and to judge whether the principles adopted are the most appropriate under the circumstances. We then review recent evidence which suggests that auditors have abandoned this objective in favor of advocating client-preferred principles. The results of a survey of public accountants employed by small CPA firms indicates that, in a scenario in which an auditor did not feel that the client's accounting treatment was the most appropriate under the circumstances but it was recognized as an acceptable alternative under GAAP, advocacy of the client-preferred approach is considered appropriate and is very likely to occur in practice. In less subtle cases (e.g., when the auditor did not feel that the client's treatment provided the best reflection of the economic substance of the underlying transactions), survey participants as a group were ambivalent regarding the appropriateness of client advocacy, and felt that subordination of judgment was likely to occur in practice. The results also indicate that engagement risk, or the risk that the firm will be harmed by aggressive behavior, affects judgments of both the appropriateness and likelihood of subordination of judgment. These findings suggest that auditors have adopted an ideology of client advocacy, within the constraints of engagement risk.
|Keywords||subordination of judgment auditor independence client advocacy|
|Categories||categorize this paper)|
Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
|Through your library|
References found in this work BETA
No references found.
Citations of this work BETA
Thomas J. Frecka (2008). Ethical Issues in Financial Reporting: Is Intentional Structuring of Lease Contracts to Avoid Capitalization Unethical? [REVIEW] Journal of Business Ethics 80 (1):45 - 59.
Similar books and articles
Cynthia Jeffrey, William Dilla & Nancy Weatherholt (2004). The Impact of Ethical Development and Cultural Constructs on Auditor Judgments. Business Ethics Quarterly 14 (3):553-579.
Semra Karacaer, Raheel Gohar, Mehmet Aygün & Cem Sayin (2009). Effects of Personal Values on Auditor's Ethical Decisions: A Comparison of Pakistani and Turkish Professional Auditors. [REVIEW] Journal of Business Ethics 88 (1):53 - 64.
Charles J. Coates, Robert E. Florence & Kristi L. Kral (2002). Financial Statement Audits,a Game of Chicken? Journal of Business Ethics 41 (1-2):1 - 11.
Paul Weirich (1988). Trustee Decisions in Investment and Finance. Journal of Business Ethics 7 (1-2):73 - 80.
George Brockway (1993). Limited Paternalism and the Salesperson: A Reconsideration. [REVIEW] Journal of Business Ethics 12 (4):275 - 279.
Waymond Rodgers, Andrés Guiral & José A. Gonzalo (2009). Different Pathways That Suggest Whether Auditors' Going Concern Opinions Are Ethically Based. Journal of Business Ethics 86 (3):347 - 361.
Yves Gendron, Roy Suddaby & Helen Lam (2006). An Examination of the Ethical Commitment of Professional Accountants to Auditor Independence. Journal of Business Ethics 64 (2):169 - 193.
Elaine Waples & Michael K. Shaub (1991). Establishing an Ethic of Accounting: A Response to Westra's Call for Government Employment of Auditors. [REVIEW] Journal of Business Ethics 10 (5):385 - 393.
William A. Kerler & Larry N. Killough (2009). The Effects of Satisfaction with a Client's Management During a Prior Audit Engagement, Trust, and Moral Reasoning on Auditors' Perceived Risk of Management Fraud. Journal of Business Ethics 85 (2):109-136.
Nonna Martinov-Bennie & Gary Pflugrath (2009). The Strength of an Accounting Firm's Ethical Environment and the Quality of Auditors' Judgments. Journal of Business Ethics 87 (2):237 - 253.
Added to index2009-01-28
Total downloads6 ( #203,365 of 1,100,819 )
Recent downloads (6 months)2 ( #176,557 of 1,100,819 )
How can I increase my downloads?