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Journal of Business Ethics
Published in: Journal of Business Ethics 4/2022

25-07-2020 | Original Paper

Debating Ethics or Risks? An Exploratory Study of Audit Partners’ Peer Consultations About Ethics

Authors: Mouna Hazgui, Marion Brivot

Published in: Journal of Business Ethics | Issue 4/2022

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Abstract

This qualitative field study is based on interviews with 20 experienced audit partners in France and documents the dialogical dimension of ethical deliberation in auditing. We ask: do audit partners consult each other when faced with an ethical dilemma at work? Who among their peers do they prefer to consult and why? Our analysis provides evidence that audit partners do not deliberate alone, contrary to what psychological experimental research on audit ethics usually postulates. When faced with an uncertain situation in terms of professional ethics, they seek reassurance by consulting colleagues. Not just any colleagues, however. Whom they consult depends on whether they wish to avoid or take measured ethical risks. Overall, we find that audit partners approach ethics as a personal and collective risk that must be managed in specific ways. This study enriches what we know about auditor ethics by helping to shed light on what is usually inaccessible to researchers: the questions that audit partners ask their peers when faced with uncomfortable ethical issues in client engagements before making a decision they find acceptable.
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Appendix
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Footnotes
1
Legalism reflects a system in which the control of the auditing and accounting profession is based on principles dictated by the state (Bédard et al. 2002, p. 142).
 
2
Anecdotally, more than 15 years after Enron, Samsonova-Taddei and Siddiqui (2016, p. 192) continue to argue that auditors tend to have a rule-based approach to ethics, which allows them to pursue opportunistic goals with impunity, using the line of defense that they acted in accordance with the relevant technical standards.
 
3
Baïada-Hirèche and Garmilis (2016) point out, however, that auditors do not all perceive risks in the same way, depending on the institutional context that governs their profession.
 
4
The authors are thankful to both anonymous reviewers for their suggestion to focus on the dialectic between ethics and risks.
 
6
CNCC (1998, March), CNCC Bulletin.
 
7
CNCC (1999), CNCC Guide.
 
8
CNCC (2002), Professional standards and ethics.
 
9
Following the last European audit reform, a new code of ethics was published in 2017.
 
10
French auditors may receive a disciplinary sanction for a breach of the code of professional conduct committed during an audit or non-audit engagement (accounting services, for instance) or for an offense committed outside of work (e.g., drinking and driving). Sanctioning auditors for misconduct inside and outside the professional sphere is specific to the French context; it derives from the belief that “an auditor who does not behave ethically at the private level will tend to do the same at the professional level” (Hottegindre and Belze 2013, p. 20, our translation).
 
11
At the time of the interviews, the H3C was working with the professional association (CNCC) and the French audit firms to revise some of the criticized rules in the professional ethical code published in 2005. Indeed, on October 17, 2007, the European Commission officially asked France to amend articles 22–25 of the code concerning audit services provided by international firms. The EC considered that these articles were not reflective of the European Directive regarding auditor independence and that they were disproportionate. In this context, it should be noted that some of our discussions with the interviewees about their ethical dilemmas developed into discussions about the H3C’s regulatory work and its tumultuous relationships with the audit profession. These unexpected discussions about the regulation of auditing were later used for the purpose of another research project.
 
12
The authors thank both anonymous reviewers for this suggestion.
 
13
All excerpts from the interviews are translations from the original French.
 
14
Reputational risk means that “even apparently small events or losses, such as a minor regulatory fine, can have larger repercussions” (Power 2004, p. 61).
 
15
“Audit Policy: Lessons from the Crisis.” Released on October 13, 2010.
 
16
The Guardian. “Carillion fiasco shows why auditors must be accountable to parliament” by Richard Brooks. Online at https://​www.​theguardian.​com/​commentisfree/​2018/​may/​20/​carillion-auditors-recklessness-hubris-greed, accessed April 16th, 2020.
 
17
Financial Times. “KPMG South Africa executives dismissed over Gupta scandal” by Joseph Cotterill and Madison Marriage. Online at https://​www.​ft.​com/​content/​ce8ddb84-9a01-11e7-a652-cde3f882dd7b, accessed April 16th, 2020.
 
20
See, e.g., the new European directive requiring auditors to report their key audit matters, which appear to “serve as moral license to waive an adjustment” (Karsten and Klaus 2019).
 
21
Risk appetite is defined as the amount of risk an entity or a person is willing to bear (Power 2009, p. 850).
 
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Metadata
Title
Debating Ethics or Risks? An Exploratory Study of Audit Partners’ Peer Consultations About Ethics
Authors
Mouna Hazgui
Marion Brivot
Publication date
25-07-2020
Publisher
Springer Netherlands
Published in
Journal of Business Ethics / Issue 4/2022
Print ISSN: 0167-4544
Electronic ISSN: 1573-0697
DOI
https://doi.org/10.1007/s10551-020-04576-4

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