Regulation and the Promotion of Audit Ethics: Analysis of the Content of the EU’s Policy

Accounting literature has commonly judged the impact of regulation on auditors’ ethical commitment by studying daily audit practice. We argue that the content of the regulations themselves is an important determinant of such an impact. This paper evaluates the capacity of the content of regulation to promote audit ethics by reference to the European Union’s (EU) audit policy. Anchored in the extant conceptual perspectives on ethics, our analysis of relevant policy documents shows that the EU’s approach to audit ethics relates most strongly to the deontological perspectives on ethics and leaves largely unexplored other means of promoting auditors’ ethical stance, such as by stimulating virtue ethics. We find that it is the EU regulators’ restricted view of the conceptual foundations of audit ethics that limits the capacity of their policy to effectively stimulate auditors’ ethical commitment. The paper also discusses the potential implications of our analysis for the design of future audit policy.     

An analysis of the ethical environment of the international accounting profession

This paper analyses the ethical cultures of the international accounting profession by using the concept of 'mainstreaming' to describe the commitment of an organisation to the ethical function in its operations. The objective of the research on which the paper is based was to rate the efforts of 62 respondent national associations of professional accountants worldwide to incorporate the ethics function into the core operations of their organisations. Sixteen environmental factors were used in the analysis. They were set up as a group of criteria to assess the ethics procedures and systems of the accounting associations, and were divided into two categories. The first group was code based and contained items on code of ethics development and functions which would indicate whether ethically-friendly management attitudes and systems were in place as a central focus of operations. Some of these elements were capable of fostering a 'proprietary interest' attitude on the part of members towards their codes of ethics, which in turn encourages code compliance. With the second group, other key operational aspects were examined to provide a balanced set of criteria. Interrelated elements among factors important to an ethical environment are included in the findings. The study concludes that on average the international accounting profession has attitudinal and systemic approaches that are 'mainstream'. In general addressees were involved in code authorship and the public had adequate access to codes. However, increased use could be made of ethics professionals in the development of codes, of professional development courses to further the ethics skills of members, and of communication channels to foster a unifying approach to ethics. The study provides criteria for individual associations to assess their mainstreaming status against the international findings.     

Through the Ethics Looking Glass: Another View of the World of Auditors and Ethics

Most people are familiar with the traditional view of the role of ethics in the auditing profession – the need for auditors with integrity and objectivity. This essay addresses a second dimension of ethics in the auditing profession – the demand for auditors to assess the integrity and ethical values of clients. This second dimension is a difficult task for auditors in practice and demands a deep and robust understanding of ethics, ethical infrastructures, and the products of those infrastructures. The essay proposes how educators and researchers might facilitate that understanding.     

The implementation of a code of ethics: The early efforts of one entrepreneur

Attention is being focused on the tone at the top in businesses in the United States with the publication of the Report of the Commission on Fraudulent Financial Reporting. There has been growing discontent with the quality of ethcial behavior in the business society and at the present moment many American companies are developing — or revising — codes of ethics and establishing procedures for their implementation. Yet, there is some question about the success of such efforts.This article describes the efforts of an early American entrepreneur to develop a code of ethics and to implement it throughout his organization during the early years of relatively rapid growth. The code was introduced in 1913 and was supported through a variety of means in which the leader himself participated. That early code continues to be reissued as the company updates its overall code of ethics. The persistent and seemingly genuinc commitment to ethical behavior throughout the company was evident in all aspects of the leader's behavior. Mary Ellen Oliverio (PhD, Columbia; CPA, New York State) is Professor of Accounting, Graduate School of Business, Pace University, New York, New York, 10038. She is the author of several textbooks and has had articles published in a number of professional journals, including the CPA Journal, Internal Auditor, and Internal Auditing. She is currently conducting a study on the role of the internal auditor in the performance of the external audit.     

The Struggles of the Interculturalists: Professional Ethical Identity and Early Stages of Codes of Ethics Development

Ethicalisation processes that partake in the construction of a firm or a professional group’s ethical identity are often described as a relatively linear combination of several components, such as policies (starting with the development of a code of ethics), corporate practices, and leadership. Our study of a professional community dealing with the topics related to cultural diversity indicates a more reciprocal relationship between ethical identity and ethicalisation processes. We argue that a tangible form of ethical identity can pre-date the ethicalisation process of a professional group, and additionally, can impact this process at the start. We highlight that, despite the absence of official ethical statements in the community, a form of ethical professional identity is already present among the interculturalists of the international organisation Society for Intercultural Education Training and Research. Using critical discourse analysis, we identify the proclaimed humanist ethos in the discourses that interculturalists co-produce and diffuse during conferences, on on-line discussion forums, and in the mission of their professional organisations. This study contributes to the literature on ethical identity development by showing how a pre-existing form of ethical identity can influence the early stage of the development of a code of ethics. In addition, we indicate that, similar to organisational identity construction, ethical identity construction uses self-other identity talks, thus, defining an ethical other (or less ethical other) in its development.     

Ethical Perspectives: Are Future Marketers any Different?

The notion of ethics in business continues to receive considerable attention. Many universities and professional organizations have attempted to address the issue of ethics by adding ethics courses to the curriculum and by creating codes of ethics for individuals working in that field. A study of students in Australia has shown that students majoring in marketing are more prone to less-than-ethical behavior than are other students. In an attempt to better understand the attitudes of future marketers in the US, we examine the attitudes of marketing majors interms of an ethical practices code and with respect toa set of ethical value statements. The ethical perspectives of marketing majors are compared to thoseof other business majors. In addition, the effect of taking a course in ethics is examined.     

Internal Audits as a Source of Ethical Behavior,Efficiency, and Effectiveness in Work Units

This study of internal auditors and auditees, who engage in both financial and operational internal audits in Israel, extends theory and research on internal audits in organizational units. It develops and tests a model that examines the role of top management and internal auditors in facilitating learning from internal audits and driving perceived performance improvement. We argue that support from the top management for the internal audit as well as the auditor’s capacity (skills, resources, and behaviors) facilitate learning from audits and help audited units to improve ethicality, efficiency, and effectiveness in organizations. The results of time-lagged survey data provide general support for the hypothesized indirect relationships between auditor capacity, auditor–auditee relational exchanges, learning from audits, and three different perceived performance measures: ethical behavior, efficiency, and effectiveness. We discuss the implications for research on internal audits, proactive learning, ethics, and performance improvement of organizational units in the public sector.     

Ethics in Tourism-Reality or Hallucination

Many professional organizations have established codes of ethics which members are expected to adhere to. These ethical codes serve an important function by containing the rules that govern the conduct of the members of the profession. Should the tourism industry be governed by a code of ethics? Is it important enough and large enough to spend a lot of time and energy developing a code of ethics since tourism is based on service rather than a physical good, which does not lend itself to standardization or control? This paper will examine these issues.     

Ethical behavior perceptions in Russia: Do ethics-related programs and individual characteristics matter?

This paper aims to analyze how individual differences and ethics-related programs predict Russian business students and working adults' perception of personal business ethics. This research evaluates the business ethics perceptions based on surveys of 1,207 managers, employees, and business students in Russia. This study finds the significant correlations between individual differences (gender, age, education level, and management experience), ethics-related programs (business ethics courses taught in universities, ethics and diversity professional development training), and personal business ethics' perceptions of Russian business students and working adults. We also find that individual differences moderate the relationship between ethics-related programs and how the personal business ethics of Russian business students and working adults are perceived. These findings advance current literature by revealing that age moderates the relationship between ethics-related programs (formal ethic courses, ethics, and diversity trainings) and personal ethical behavior perceptions of working adults and business students in Russia. Our study found that gender had a significant positive moderating effect on relationship of organizational code of ethics, formal ethic courses, and diversity professional development with personal ethical behavior perceptions. The relation between personal ethical behavior perceptions and the presence of an organizational code of ethics was negative and marginally moderated by age and managerial experience. This study contributes to business ethics research by deepening the understanding of the impact of individual differences on the relationship between ethics-related programs and personal business ethics' perceptions.     

Social and environmental accounting: A practical demonstration of ethical concern?

The accounting profession has regarded itself as ethical ever since the first modern professional accounting body was founded in the second half of the 19th Century. However, the code by which members have bound themselves have been professional ethics codes, which are more concerned with the relationship between professional and professional, or professional and client, than that of the professional and society as a whole. Recently, a number of educational programmes have been developed which attempt to go beyond the limited view of professional ethics, and into the field of ethics and professionalism. These programmes are based on an application of the work of Kohlberg and that of Rest. In the opinion of the author these aspects of ethics and professionalism are important developments, which need to be followed up by the development of social accounting, which would be a practical demonstration of ethical concerns by members of the accounting profession. This aspect of business ethics is outlined in the chapter.Professor M. R. Mathews is Professor of Accountancy and Associate Dean in the Faculty of Business Studies, Massey University, New Zealand. Professor Mathews has academic qualifications in accountancy, economics and education and is a Fellow of the Centre for Social and Environmental Accounting Research at the University of Dundee, Scotland.     

Student Honor Codes as a Tool for Teaching Professional Ethics

Today's business students have grown up in a society where distinctions between right and wrong have become blurred and where unethical behavior is observed and even expected in high-profile leaders. Especially troubling is the impression educators have that many students no longer view cheating as morally wrong (Pavela and McCabe, 1993). By contrast, the general public is demanding higher ethics of businesspeople. In this environment, educators are challenged to instill ethical norms in business students, especially when recent research indicates that students intending to enter business fields are more likely than any other group of students to engage in cheating and other forms of academic dishonesty (McCabe and Trevino, 1995). One of the major future roles of accounting students depends on their honesty, however. For audits to have economic value, the auditors must be perceived by the public as acting with independence, integrity, and objectivity. Public accountants have adopted a Code of Professional Conduct in order to protect the integrity of the profession. In an effort to teach accounting students the importance of ethical professional conduct, the author has developed a class project wherein groups of students write proposals for a student honor code at Niagara University.     

The real estate code of ethics: Viable or vaporous?

Several recent articles in the field of ethics and business have raised questions concerning the viability of professional ethical codes. Are such codes serious, effective tools for promoting and enforcing an ethical standard of behavior? Or do the codes more closely resemble clever, elaborate public-relation ploys? The purpose of this paper is to analyze the content, role and efficacy of one such ethical code, namely, The Code of Ethics of the National Association of Realtors. The paper examines the ethical principles embodied, implicitly or explicitly, in this Code; it tests these principles for coherence, comprehensiveness, clarity and enforce-ability. Furthermore, it seeks to determine whether this Code articulates standards of ethical conduct that are higher than those already required by law and whether the Code successfully translates a general ethical vision down to concrete, everyday real estate practice.     

Professional codes: Why,how, and with what impact?

A tension between the professions' pursuit of autonomy and the public's demand for accountability has led to the development of codes of ethics as both a foundation and guide for professional conduct in the face of morally ambiguous situations. The profession as an institution serves as a normative reference group for individual practitioners and through a code of ethics clarifies, for both its members and outsiders, the norms that ought to govern professional behavior. Three types of codes can be identified — aspirational, educational and regulatory. All codes serve multiple interests and, as a consequence, perform many functions, eight of which are discussed. The process of developing a code of ethics is assessed because of the role it plays in gaining consensus on professional values and ethical norms. After discussing some of the weaknesses in current approaches to professional self-regulation, several new private and public initiatives are proposed.Mark S. Frankel is Head of the Office of Scientific Freedom and Responsibility of the American Association for the Advancement of Science, where he is Staff Director of the Association's Professional Ethics Program. Prior to joining AAAS, he was Director of the Center for the Study of Ethics in the Professions at the Illinois Institute of Technology in Chicago. His recent research and writings focus on the role of professional societies in promoting ethical practices by their members. He has conducted several workshops and seminars on ethics for corporate managers, scientists, and engineers.     

The Role of Professional Codes in Regarding Ethical Conduct

This paper investigates the regulation of ethical behavior of professionals. Ethical perceptions of South African professionals operating in the business community (specifically accountants, lawyers and engineers) concerning their need for and awareness of professional codes, and the frequency and acceptability of peer contravention of such codes were sought. The existence of conflict between corporate codes and professional codes was also investigated. Results, based on 217 replies, indicated that the professionals believe that codes are necessary and are relatively aware of the contents of such codes. Despite these ethical tendencies, respondents (particularly lawyers) believe that their peers contravene their professional codes relatively often. No significant differences in ethical tendencies between professionals consulting to and those working in business were found. Many respondents were regulated by more than one code of ethics, but few experienced conflict between such codes. In the events of conflict occurring professionals chose to adhere to their professional code above others.     

The Ethics of Giving Notice

What ethical issues are raised when employees are going to be given notice to leave? Are some approaches more ethical than others? This paper analysing the ethics of the situation and offering ethical guidelines was prepared for the Swedish Association of Graduates in Business Administration and Economics in its work to formulate a professional code of conduct. The author holds a PhD in business administration and is a member of The Swedish Council for Management and Work Life Issues, P.O. Box 5042, S-10241 Stockholm, Sweden.     

Codes of Ethics as Signals for Ethical Behavior

This study investigated effects of codes of ethics on perceptions of ethical behavior. Respondents from companies with codes of ethics (n = 465) rated role set members (top management, supervisors, peers, subordinates, self) as more ethical and felt more encouraged and supported for ethical behavior than respondents from companies without codes (n = 301). Key aspects of the organizational climate, such as supportiveness for ethical behavior, freedom to act ethically, and satisfaction with the outcome of ethical problems were impacted by the presence of an ethics code. The mere presence of a code of ethics appears to have a positive impact on perceptions of ethical behavior in organizations, even when respondents cannot recall specific content of the code.     

Unapplied Ethics: On the Need For Classical Philosophy In Professional Ethics Education

The central claim of this essay is that thoseof us who teach applied ethics courses shouldconsider infusing those courses withdiscussions of central issues in classicalphilosophy, issues which lie beneath thesurface of contemporary ethical problems in theprofessions. I will argue that the current,widely-used approach of discussing traditionalethical theories as an introduction to andfoundation for such courses may not adequatelyserve what should be the overarching goal ofpre-professional ethics education which is toteach a kind of ethical thinking which is notto be identified exclusively with ethical``decision-making'. Such thinking, it will beargued, is both practical and theoretical innature and therefore has a greater breadth thanthe more delimited ethical decision-makingoften taught in applied ethics courses. In whatfollows, I will therefore advocate thatteachers include a substantive ``unapplied'component in professional ethics educationcourses. While I believe that my argument foran unapplied approach to professional ethicseducation is relevant to many professionalfields, I will focus on business ethicseducation.     

Should A Public Relations Code of Ethics Be Enforced?

Whether or not a public relations code of ethics should be enforced, among others, has become one of the most widely controversial topics, especially after the Hill and Knowlton case in 1992. I take the position that ethical codes should be enforced and address this issue from eight aspects: (a) Is a code of ethics an absolute prerequisite of professionalism? (b) Should problems of rhetoric per se in a code of ethics become a rationale against code enforcement? (c) Is a code of ethics of any significance? (d) Is the ethical code is enforceable, (e) Would the licensure system interfere with the freedom of expression of the practitioners? (f) Do PR practitioners choose to be ethical (if they do) because they have to be or because they want to be? (g) Would the public interest be virtually assured as a result of a public relations? and (h) Can education in ethics overcome the ethical problems in public relations?     

Individual and Organizational Antecedents of Professional Ethics of Public Relations Practitioners in Korea

This study examines the effects of individual ethical values and organizational factors on the professional ethics of PR practitioners in Korea by considering a person–situation interactionist model. Individual ethical values are used as individual factors, and organizational factors consist of an organization’s reward and punishment for ethical/unethical behavior, the behavior of peers, and the ethical integrity of the chief ethics officer. The professional ethics of PR practitioners (the dependent variable) are classified into the following three dimensions: professional ethics for the public, the client, and the PR industry. The results indicate that agency practitioners were more likely to be committed to their profession than to their organization, whereas in-house practitioners were more likely to be committed to their organization than to their profession. That is, in-house practitioners showed weak professional commitment, indicating that they perceived themselves as employees, not as PR professionals. Organizational factors such as reward, punishment, and peers’ ethical behavior had considerable influence on the professional ethics of in-house practitioners, whereas they had little influence on agency practitioners. Organizational factors as well as individual ethical values were more likely to influence the professional ethics of in-house practitioners than that of agency practitioners. Thus, to foster in-house practitioners’ professional ethics and commitment, professional associations in the PR industry should make efforts to provide in-house practitioners with more information on the PR industry and more opportunities for interacting and maintaining communication with their colleagues in the industry.