Module: 09TH MAY, 2009Ethical theories in AuditingOutlineIntroduction Deontology ethicsTeleological ethicsVirtue ethicsEthical relativismDecisions for Olga on bribesProcedures and practices of competent auditReasons for BWE not accepting an audit engagement with solace limitedAudit strategy that can be employed on small firmsConclusionsIntroductionEthical theories are important in auditing to give the auditor a basis for their argument in the financial reports of an organization. Auditors have o apply ethics in particular decisions that forms their opinion. The essay describes three theories that can be used by an auditor to form an opinion regarding issues in the financial reports.
The theories can be used but must be used in combination because none gives a satisfactory solution to the best opinion by the auditor. Auditors are found to combine individual principles in order to provide reasonably comprehensive opinion on financial reports. The following are the ethical theories discussed in this essay. Deontology ethicsDeontological ethics is a theory that demands some one to focus on the rightness or wrongness of the intention of the action. It is a theory that binds the person to the duties that must be carried out.
In deontological ethics, some actions are wrong no matter what consequences follow them. The concepts of values in deontological theory are fundamental and the idea of an action being right or wrong is basic. The situation of good or bad depends on whether the action that brought it about was right or wrong. In deontological theory, the ends do not justify the means. According to deontology theory, when evaluating the moral worth of an action or the goodness of an action the consequences do not matter.
The theory says that what matters is the disinterested will of a person to follow the dictates of reason, principle and duty, whatever the cost or consequences may turn out to be. Teleological ethicsIt is a theory that requires a person to focus on the consequences of the rightness or wrongness of the action. Teleological theories have the concepts of obligation already defined. Ethical issue in teleological theory explains the rightness of actions in terms of the goodness of the state of affairs that occurs because of that action. If an action genuinely brings about greater good in the world, then it is a right action.
The rightness of the action is independent of the nature of the action or the intentions of the person carrying out the action. In teleological theory, the end justifies the means. In this theory what make an action right or wrong are the consequences only and no reason to look at the intent of the person in performing the action. Virtue ethicsThe virtue ethics theory takes virtue as the primary character in the action rather than viewing the rightness or wrongness of the action.
In this theory virtues are derivatives and are appreciated for the consequences with which they bring after the performance of an action. People must be guided by virtue when performing their duties and virtue must be basis of their opinion on an action. However, the opinion made by a person will depend on what the person considers as virtue. The question here is that, does the action lead to human happiness or to the development of distinctively human capacities. People don’t have to do what is morally obligatory or what turns to achieve the optimality utility.
People should base their opinions on what really nurtures and nourishes fully actualized human beings. The theory takes people as social beings who finds their individual fulfillment in community and defines virtues as characteristics that contribute to healthy community life.