Auditor’s Role: The Importance to Overcome Ethical Dilemmas

1032 Words5 Pages
Throughout the years, the news covered stories of corporate scandals involving accounting unethical practices. These unethical corporate acts had a tremendous negative impact on these company’s stockholders, investors, employees and the whole U.S. economy. Most of these scandals would have been prevented, if the independent audits of these companies were conducted in an ethical manner. With this in mind, two corporate scandals will be the subjects of further review to understand that an auditor might encounter ethical dilemmas, if independence and objectivity are not part of the audit process.

An auditor should keep objectivity at all times. Maire Loughran, a Certified Public Accountant and University Professor, explains “objectivity means the ability to look at facts the client presents, and reviews them with no preconceived notions or prejudices” (52). In other words an auditor has to exercise his ability to review information in a no subjective manner, and perform auditing work free of conflicts of interest. Many instances have occurred when objectivity was not present while performing audits, for instance the case of Bernard Madoff’s auditor, David G. Friehling, from the firm of Friehling & Horowitz, illustrates it well. On 2009, William K. Rashbaum and Diana B. Henriques, both reporters at The New York Times, inform in the online version of their newspaper:

The civil complaint by the S.E.C., in addition to citing the deceptive audits, accused Mr. Friehling of collecting “ill-gotten gains” in the form of substantial audit fees — about $186,000 a year — from the Madoff enterprise and millions of dollars…he and his family maintained with Mr. Madoff accounts….

Mr. Friehling “essentially sold his license…for more than 17 years...

... middle of paper ...

...d unethical behavior, to the unethical side. An auditor needs to follow, abide and comply with the standards, rules and regulations of their profession, as these will help the auditor to recognize when independence and objectivity would be compromised.

Works Cited

Gray, Iain and Stuart Manson. The Audit Process: Principles, Practice and Cases. London: Thomson Learning, 2008. Print.

Holt, Michael F. The Sarbanes-Oxley Act: overview and implementation procedures. Oxford: CIMA Publishing, 2006. Print.

Loughran, Maire. Auditing For Dummies. Hoboken: Wiley Publishing, 2010. Print.

Madura, Jeff. Financial Markets and Institutions. Mason: South-Western Cengage Learning, 2009. Print.

Rashbaum, William K., Diana B. Henriques. “Accountant for Madoff Is Arrested and Charged With Securities Fraud.” The New York Times. The New York Times, 18 Mar. 2009. Web. 3 Dec. 2011.

    More about Auditor’s Role: The Importance to Overcome Ethical Dilemmas

      Open Document