Question

As an auditor of a company, you discover evidence that executives in the firm conspired to murder a business competitor. You are considering whether to report the crime to either the board of directors or the police. Discuss the legal and ethical considerations of this choice.

Answer 1

Auditors are responsible to the society; their responsibility can be divided into 3 categories:

• Moral
• Professional
• LegalMoral
• responsibilities: Auditor responsibilities to conform to broad social norms of behavior
• Professional responsibilities: the rules and principles for the proper conduct of an auditor in her work; necessary to obtain the respect and confidence of the public, achieve order within the profession, and provide a means of self-policing the profession; also known as professional ethics.
• Legal responsibilities: The risks auditors accept in a court of law while practicing public accountingoThese risk s include risks that arise from failing to use due care in the conduct of the audit.
• General ethicsTwo aspects of ethics operate in the professional environment:
• 1)General ethics (the spirit or principles)
• 2)Professional ethics (the rules)
• Ethicalbehavior in auditing is no more than special application of the general notion of ethical conduct devised by philosophers for men
• Ethical conduct in auditing draws its justification and basic nature from the general theory of ethicsOverviewEthics: that branch of philosophy which is the systematic study of reflective choice, of the standards of right and wrong by which it is to be guided, and the goods toward which it may ultimately be directed.
• Three elements of ethics:
• 1)It involves questions requiring reflective choice (decision problems)
• 2)Involves guides of rights and wrong (moral principles)
• 3)It is concerned with the consequences of decisions Ethical problem: a problem exists when you must make a choice among alternative actions and the right choice is not absolutely clearEthical dilemma: A problem that arises when a reason to act in a certain way is offset by a reason to not act that wayCritical Thinking:
• the process of justifying one’s conclusion or decision by providing good or acceptable reasons. Ethical behavior consists of the following:
• 1)It is that which produces the greatest good
• 2)It is that which conforms to moral rules and principles
• Conclusion
• ​​​​​​An auditor keeping in mind his ethical and legal responsibilities, shall report the crime to Board of Directors. Reporting to the police shall be the duty of the Board.
• However, considering moral responsibility, the auditors shall also report the crime to the Police.