The ethical decision-making process within the Maltese auditing profession

Abstract

PURPOSE : This study assesses whether the situational factors social consensus and magnitude of consequences impact the ethical decision-making process of different groups of auditors and students. Additionally, it seeks to ascertain whether organisational factors are influential and significant. DESIGN : A mixed methodology was used in this study. A questionnaire was distributed to audit personnel and students which enabled the analysis of the impact of situational and organisational variables on the ethical decision-making process. This was complemented by a number of semistructured interviews held with ten Maltese audit partners. FINDINGS : The study shows that auditors’ ethical decision-making process is affected by social consensus and magnitude of consequences while that of students is only affected by social consensus. Moreover, findings reveal that although audit firms have numerous mechanisms to rebuke unethical behaviour, social influence pressure exerted by superiors and peers, negatively impacts the intention to act ethically amongst all auditors. Additionally, Big Four auditors are negatively affected by unethical tone at the top and lack of timely penalties. CONCLUSIONS : The study concludes that in order to enhance the behaviour of auditors, the profession, audit firms and educators should focus on establishing a social consensus on the most pertinent ethical issues encountered and enhancing the awareness of consequences generated by unethical actions. Additionally, stakeholders should ensure that audit firms’ organisational culture promotes ethical behaviour and professionalism. VALUE : In view of the impact of situational context and organizational factors on the auditor’s ethical evaluation and intention to act, this study provides audit firms and educators with ways on how to improve ethical behaviour, thus ensuring that the trustworthiness and credibility of the audit profession are maintained and enhanced.