Question

discuss and identify the importance and the source of professional ethics

explain auditor independance and identify when it may be impaired

Answer 1

discuss and identify the importance and the source of professional ethics.

Professional Ethics means a code of conduct or standards of behaviour which are to be practised by individuals in their professional life. Just like personal ethics, professional ethics is important to run a business successfully. Business or profession without ethics is bound to fail sooner or later. And ethically poor business can make earn money, despite having poor ethical practices and dishonesty, but the profitability may not sustain for a longer time, because it will a message of distrust among the customers regarding the company and products. Hence in longer run, it may prove to be loss making business and ultimately lead to closure of the corporation. Ethics should not only be followed towards the customers, but also towards it other stakeholders like employees, suppliers, government, journalists etc. Any unethical approach towards its employees, will lead to lack of commitment and productivity of the employees, similarly it will create a feeling of distrust in other stakeholders like suppliers, supplieres, investors etc. This may lead to ultimate failure of the organisation in long run.

Sources of Professional Ethics:

Religion: It is one of the oldest and strongest foundation to guide the various sects through ethics and standards. It teaches the followers moral and ethical practices to be practised in their personal as well as professional life. Many of the religions have guidelines to draw a line between ethical business trading practices and unethical business practices.

Culture: Cultural values are built up over period of time, they are passed on from one generation to the other. Regional Culture has a strong influence on the business practices of the people in the area. It has been observed that some culture are extremely good in ethical business practices, while there are certain cultures, which are having very poor cultural impact on the ethics of business and professions of its people. It is the culture which passes on the cultural values and ethical standards of business from generations after generations.

Law of the land: Legal framework of a country, discourages unethical practices in the citizen's individual's social life as well as it guides the businesses operating in the state towards ethical practices. Unethical practices are punishable by law of the land, hence businesses are discouraged to follow unethical practices in the company's operations.

Auditor Independance:

An auditor wants to carry out his work freely without any obstruction and in an objective manner. Independance of the author is characterised by integrity and objective appraoch towards the audit process:

However it can be impaired under the following conditions:

• If the auditor accepts gift or other unusual consideration from the client.
• The auditor shouldnt be working or servicing as an officer, director, manager or any equivalent capacity to the management of the organisation.
• If the member serve as a trustee of the foundation or the estate, would be deemed as impairment of the objectivity.
• If member is director of the controlling firm of the organisation.