This study investigates the effects of personal values on auditors' ethical decision making. Previous accounting research has investigated the value profiles of practicing CPAs and accounting students, and the effects of values on accounting students' ethical decisions. However, the current study is the first to empirically address the role of values in the ethical decision processes of professional auditors. We surveyed a random sample of AICPA members to assess their value preferences and reactions to an ethical dilemma involving client pressure for aggressive financial reporting. Contrary to our hypothesis, personal value preferences did not influence auditors' perceptions of the moral intensity of the ethical dilemma. As hypothesized, perceptions of moral intensity influenced both ethical judgments and behavioral intentions.
This study examines the effect of CPA firm type on regulators' decisions with respect to the closure of banks. Using a sample of 116 closed and 116 nonclosed banks in the state of Texas during 1990–1991, we estimate regression models which include (1) financial characteristics of the sample banks, (2) other characteristics of the sample banks, (3) the type of auditor's opinion received by the bank (with respect to the bank's ability to continue as a going concern), and (4) the CPA firm type (Big 6 vs. non-Big 6). Our results indicate that banks receiving modified opinions from Big 6 firms were more likely to be continued (not closed) by regulators than those receiving modified opinions from non-Big 6 firms. In contrast, banks receiving nonmodified opinions from non-Big 6 firms were more likely to be closed than those receiving nonmodified opinions from Big 6 firms. These findings indicate that, ceteris paribus, banks audited by Big 6 firms are more likely to be continued, consistent with regulators' perceptions that economic reporting incentives may result in Big 6 firms being more likely to modify their opinions to reflect going-concern uncertainties.
While internal auditors in financial institutions have only nominal
direct legal responsibility, there is implied indirect responsibility.
As a defence to such potential, an audit department could substantiate
its “due dilligence” efforts by identifying basic elements
of internal controls and performing audits on a regular basis in areas
with high risk exposures. Presents a list of suggested audit frequencies
and necessary internal controls for some of the most vulnerable areas in
the banking industry. These suggestions should be helpful to audit
departments in planning and scheduling their activities, as well as
helping the institutions in cutting external audit fees that may
otherwise be required in a weak internal control environment.
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