An Analysis on Ethical Judgments of Malaysian Auditors
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Date
2010-01
Authors
Zakaria, Maheran
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Abstract
Many major financial scandals in the auditing profession throughout the world
resulted from unethical judgments. This has been evidenced by the involvement of
auditors in the scandals. For example, in the US, one of the big accounting firms,
namely Arthur Anderson collaborated with the company's management in
perpetrating fraud in the Enron' s Scandal. In the UK, Ernst & Young was charged for
giving an unqualified opinion for accounts between 1994 and 2000. In Malaysia, we
have seen major scandals in some large organizations, such as Transmile Group
Berhad, Megan Media Holdings Berhad, Southern Bank Berhad, Technology
Resources Industries and Cold Storage Malaysia Berhad. Despite major financial
irregularities, their auditors issued clean reports. As such, the public is skeptical
toward auditors and accuses them of forming unethical judgments. This concern on
ethical judgments has spurred the interest in studies on auditors' ethical judgments.
Although this topic has been of interest to many scholars and practitioners abroad,
local studies continue to remain scarce. In relation to this, the objective of this study is
to analyze ethical judgments of Malaysian auditors.
The foundation of this study was based on ethical judgment model proposed
by Hunt and Vitell's Theory of Ethics (1993, 1986). The data were gathered from
completed questionnaires that were mailed to selected audit firms as listed in the MIA
list and analyzed using Structural Equation Modeling of AMOS 16.0 and SPSS 16.00.
As hypothesized, the findings confirmed the following statements; auditors who work
in firms with higher organizational ethical climate are perceptive of ethical problems.
Knowledge of ethics is positively related to perceived ethical problems. Also, culture
has a positive relationship with perceived ethical problems. Furthermore, the greater
the perceived ethical problems, the greater is the deontological evaluations. Also well
supported is that both moral philosophies, namely deontological and teleological
evaluations influence ethical judgments. In addition, it supported that the strength of
relationship between deontological evaluations and ethical judgments is greater as
opposed to the relationship between teleological evaluations and ethical judgments.
However, the study did not support the relationship between perceived ethical
problems and teleological evaluations.
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Keywords
Ethical Judgments , Malaysian Auditors