Conor O'Leary

An Empirical Analysis of the Positive Impact of Ethics Teaching on Accounting Students

Recent releases from the International Federation of Accountants (IFAC) highlight the importance of ethics education. Academic institutions employ varying methods and place varying levels of emphasis on ethics teaching during a business/accounting degree. This paper attempts to evaluate whether teaching ethics to final year accounting students is beneficial. At the commencement of a semester, one class of 155 students was given five ethical scenarios on which to make an ethical decision. All students were then subject to three different methods of ethical instruction. Several weeks later, the class was again given the original five ethical scenarios and asked to re-complete. In all five instances, the mean responses were more ethical after the instruction methodologies. The subjects also verified that the combined effect of the methodologies had impacted positively on hypothetical ethical decision-making. Hence, it appears that ethics education is beneficial, and the challenge is to find the optimal method(s).

An analysis of Australian final year accountancy students' ethical attitudes

Ethical behaviour is a critical component of theaccountancy/auditing profession. This study examines ethicalattitudes of final year accountancy students in Australia.Students were surveyed as to whether they would accept a bribe todefraud a public institution (Taxation Office) or shareholders,cheat in an exam, and/or become whistleblowers in differingcircumstances. A high proportion of students appeared willing toaccept the bribe (25% Taxation Office and 20% shareholders). Thispercentage plummeted when the risk of being caught was introduced(9% Taxation Office and 6% shareholders). The difference betweenmale and female responses was significant. Males appeared fourtimes more likely than females to act unethically. 28% ofstudents appeared willing to cheat in an exam. Interestingly,the difference between male and female responses was lesssignificant. Again the risk of being caught drastically reducedthese figures (6%). Just greater than 50% of students appearedwilling to become whistleblowers for the frauds against theTaxation Office and shareholders, however, only 8% wouldwhistleblow on cheating in an examination. Finally theimplications for educators, attempting to provide effectiveethical education for trainee accountants/auditors, are considered.

The Relative Effects of Elements of Internal Control on Auditors’ Evaluations of Internal Control

Internal control evaluation is a critical component of the overall audit process, mandated by auditing standards worldwide. These standards divide internal control structures into a number of elements, summarised as the control environment, information systems, and control procedures. Significant research exists as to auditors’ evaluations of internal controls. However, little work appears to consider the elements’ inter-actions and relative significance. This study attempts to gauge the relative importance external auditors assign to the three elements. 94 practicing auditors evaluated internal control structures in two fictitious companies, one with strong internal control elements throughout, the other with one of the three set at a lower reliability level. The results indicate auditors consider control environment the most important element of internal control. The effect of weakening this element was that auditors assessed all three elements and overall evaluation as less reliable. Varying the other two elements did not have such significant effects. The findings carry ramifications for the auditing profession, particularly in drafting auditing standards on risk assessment.

The consistency of individual auditors in performing evaluations

This study examines the consistency of external auditors in evaluating internal control structures using two different audit methodologies, their current firm procedures and a standardised, structured matrix approach. Previous consistency studies have evaluated consistency over time. This study acknowledges that in the current audit climate auditors change firms more frequently than previously, therefore gaining exposure to different methodologies. Also, more public interest exists in the performance of auditors and their firms. Hence, evaluating consistency across methods rather than over time would appear beneficial. Irrespective of the method used, an auditor should arrive at the same evaluation. A total of 94 practising auditors from five different firms performed the evaluations. Overall a satisfactory level of consistency was achieved. This helps to support the concept of a self‐regulating profession maintaining a satisfactory level of performance among its members as regards to one professional trait, consistency.

Positive Influences of Governance, Legal, Educational and Market Factors on Audit Environments

As companies trade beyond their national borders, corporate boards need to evaluate the effectiveness of audit regulatory environments in foreign countries. A model with which to assess the strength of financial audit and reporting standards of individual countries would be beneficial. This study develops and tests such a model. Many factors are identified which impact upon financial assurance environments. These include corporate governance, legal, educational and market factors. A thirteen variable model was devised to predict the strength of a country’s financial assurance environment. An actual score for this was obtained from a World Economic Forum report. Using the geographical area of sub-Saharan Africa, as this contains a range of economies from mature to developing, the model was tested on 28 countries. Eight of the thirteen variables were significant, proving that governance, legal, educational and market factors all impact positively on a country’s audit regulatory environment. Variations in individual countries’ scores are discussed. The implications are that a model can be developed and used by corporate boards to compare countries’ audit environments before deciding where to trade.