Audit Firm: Personality of Auditor

There are a few personal characteristics that are important for an auditor to have:

• Auditors should possess a strong ethical framework and report on issues (or anticipated issues) as they come across them. There is a temptation to "let things go" as further investigation may require more work or reveal embarrassing processes, performance and/or fraud.

• Good communication skills allow auditors to have a rapport with a variety of employees, managers, directors and external parties. As auditors establish good rapport with a variety of individuals, however, they should keep in mind the objectives of the audit (for instance, the reliability, verifiability, accuracy and timeliness of information), as they can often be tempted to not report on issues discovered.

• Strong interpersonal skills are important, due to the variety of informational requests - and often, resistance to those requests - required from a variety of sources. Strong and/or ambitious types may attempt to dissuade auditors from revealing embarrassing findings.

• Auditors need to be team players. As the scope of the audit can be fairly large, it is beneficial to help in other areas of an audit when resource constraints warrant it.

• Finally, "professional skepticism" is an important trait to have, especially when reviewing a company's internal controls. One needs to assess how perpetrators of fraud can beat a company's controls, and auditors need to design and implement a system that can effectively protect the organization's assets.

Week-End: Right Decisions Matter!

I would like to present you a good story about the auditor and making right decisions in life:

"The accounting department dean had worked for the prestigious firm of Arthur Anderson for a number of years. He had been one of their rising stars until he had a tiff with upper management concerning how to report certain transactions for a client. Arthur Anderson management wanted the transactions recorded in a manner which would make the client look good. The Dean however insisted on full disclosure with the transactions being reported clearly and informatively. That wouldn't have been favourable for the client. So rather than compromise his integrity, he resigned from Arthur Anderson and found the job of dean of the accounting department at St. Martins College."  

From the Book: Odyssey of the Auditor Interns

Author: Thomas McGoldrick

Ethical Auditor: Being Holier than the Pope

     Ethics issues in business have been always matter of discussions. Audit profession is especially subject of this arguments. Probably only medical workers have as sound ethical principles as auditors do.

     In the beginning

     IFAC code of ethics explains this phenomena in following way: ‘A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest. Therefore, a professional accountant’s responsibility is not exclusively to satisfy the needs of an individual client or employer’. European Commission acknowledges this fact by emphasizing that auditor has to fulfill societal mandate.

     Unfortunately these statements do not stick in the mind of young beginning auditors. It is very rare if anyone from accounting firm’s HR or management would ask candidates during interview: “Do you really aware that you are going to hold societal mandate and act in public interest?” It a fantasy, isn’t? Especially for accounting firms operating in emerging markets with low level of law enforcement and legal awareness of society.

     Men and women of principles

     At this point I think I must list fundamental principals auditor’s ethics:

• Integrity
• Objectivity
• Professional Competence and Due Care
• Confidentiality
• Professional Behavior

     The principles are really very bright and constitute best moral qualities of humanity. For example, integrity means that auditor being honest should never allow his/her name to be associated with something dishonest. Professional behavior means that auditor must comply with relevant laws and regulations and avoid any action that may bring discredit to the profession. As my honorable lecturer, John Stead, says that ‘it is not just a coat you put on when you go to the work in the morning and leave the office in the evening, it is an attitude of mind’. May be it is not the newest thought in the world, but I like the reasonableness and fairness of these words.

     Of course! When students hear such things from their lecturers there are ironic smiles on their faces. They know that human beings tend to lie and act irresponsibly in their own interest, because human beings are not perfect from birth.

     Some illustrations. For example, I am shareholder and I do not want financials of my company to be audited by the guys who illegally download some software/music from internet. They commit crime and if this information becomes public this would negatively impact audit profession. Or, for example, audit partner is in cahoots with criminal authoritarian government members. Is it just a friendship or something related with corruption? We do not know, but reputation of audit partner willingly or not would be damaged at this case. There are no immaterial things here – even if you are stowaway in a bus, it still matters!

    Another good point is that ethics is not only, auditor knows if he is guilty (ethical) or not guilty (non-ethical). It is also about public perception of auditors’ actions.  If society believes that private relationships of audit partner and CFO matter even if auditor sure that it is 100% does not matter, the society is right.

     On the other hand, we are not saint. There is always compromise. The relevant rule here is: “Do not do silly things”. In my opinion, for different people different ethical issues matter. Moreover, I think that the most ethical values are grounded in childhood and youth. If future auditor failed to recognize an ethical issue at the age of 18 it most likely that he/she would struggle to recognize it in adult ages even after completing ethics courses.

     Ethics models

    David Campbell, the examiner of P1 in ACCA qualification, have several useful tips in his article in Student Accountant magazine. He briefly described features of two ethics models: American Accounting Association model with seven steps and Tucker’s 5-question model. I will place here just major points of model, the article is freely available and you can read details there.

       I think they are very clear and useful, even in daily live.

      

       

References:

Campbell, D. (2008). Work ethics. Student Accountant. March 2008, p. 56-59

IFAC (2006). Code of Ethics for Professional Accountants. IFAC, New York