Question

Examine Ethical Issues Related to the Audit Function and Managerial Accounting

Answer 1

Audit standards require auditors to conduct audits being independent in their mental attitude from the clients. The ethical issues related to the audit function are as follows:

--Maintain Independence: Auditors must maintain independence from the entity which they are auditing

--Materials usage: Auditors will have access to a lot of materials of the company including fax machines, computer time, and other business materials. Thus, they should not misappropriate the usage of these materials and should not be using these for personal gain

-- Disclosure of Information: Auditors must fully disclose their findings to both their own employing body as well as the company they are auditing. Thus ensures that companies are receiving appropriate treatment

--Avoid Familiarity: When the auditor has been with a company for a long period of time, then the objectivity may come into question. It is mandatory for firm to rotate lead auditors after a period of five years

The management accountants work inside a firm who are handling all internal accounting data. They generally create management reports, allocate production costs, and extend their support for managerial decisions. The ethical issues related to the management accountants are as follows:

--Conflicting Interests: Accountants often work for the best interest of the company, not individual executives or managers. A conflict of interest occurs when a management accountant can improve the personal position by violating the principle

--Competence, Confidentiality, Integrity and Credibility: This allows an accountant’s ability to use professional expertise and development of the accounting knowledge and skills. Confidentiality requires accountants must disclose information only at their supervisor’s discretion. Integrity prohibits managerial accountants from doing any unethical conduct. Credibility provides the accountant’s ability to communicate accounting information to all business stakeholders in a fair and objective manner

--Disclosure of information: Managerial ethics states that all financial information is reported to directors, business owners, or managers