Staff Auditors' Observations of Questionable Peer Behavior

By Taylor, Eileen Z.; Curtis, Mary B. et al. | The CPA Journal, June 2012 | Go to article overview

Staff Auditors' Observations of Questionable Peer Behavior


Taylor, Eileen Z., Curtis, Mary B., Chui, Lawrence, The CPA Journal


The View from the Other Side

Violations of audit standards threaten audit quality and increase litigation risk, while violations of workplace behavior lead to demoralization and employee turnover, a significant threat to CPA firms focused on attracting and retaining qualified and talented professionals. Identification of these activities can help managers understand which types of activities employees consider unethical. Knowledge of these activities can help management address employee concerns and work toward developing a positive organizational culture.

The study described below reported and classified public auditors' observations of unethical behavior within their offices, Of the 238 survey respondents, 66 reported observing 80 instances of unethical behavior. The majority of these behaviors were related to audits, but many were related to the workplace.

Observations

A second-year staff auditor - a new CPA - looks around to see who is watching before placing a page of uncleared review notes in a client's shredder. Back at the office, a senior auditor receives an e-mail from a colleague containing a sexually offensive joke. Another staff person, working toward a promotion to manager, is staying late again; however, she won't record those extra hours because she has to come in under budget or risk a poor evaluation.

These examples are actual behaviors observed by audit staff in their workplaces. As members of a profession that has a primary responsibility to protect the public, auditors have an obligation to behave with the utmost integrity. But as employees working in a for-profit business, they are also subject to company pressures, organizational politics, and individual moral values. Violations of professional standards or company policies reduce effectiveness and efficiency and threaten a company's overall success. In addition, violations of professional standards reduce audit quality and increase litigation risk. Violations of company policy might lead to employee demoralization and increased turnover in the organization; this, in turn, drives up recruiting, training, and salary costs. Creating and maintaining an ethical workplace is critical, especially at a time when executives at large firms state that attracting and retaining talented professionals is what keeps them up at night (Ira Solomon, "Conversations with the Big 4 Accounting Firms' Chief Executives," Current Issues in Auditing, vol. 2, pp. C13-C27, 2008). In a recent ethics and compliance report, accounting firm partners and executives stressed the importance of integrating ethics in training and practice in order to attract and retain the best employees Speaking of Ethics: Ethics and Compliance Report 2010, KPMG).

The sections below present practicing staff auditors' observations on behavior that they considered unethical - also called workplace deviance - within their own offices. For the past three years, this article's authors used an open-ended survey to ask 238 in-charge auditors to provide information about any unethical or questionable acts they witnessed within their firm. Of the participants, 66 (27.7%) reported 80 instances of unethical behavior, which fall into two broad categories: those related to audits and those related to the general workplace environment. While inappropriate audit behaviors were the most common issues identified (57.5%), workplace environment issues were also a major concern.

Furthermore, participants rarely reported their observations to firm management, despite the availability of an anonymous hotline. This lack of reporting is a concern, especially given the recent revisions to the NYSSCPA Code of Professional Conduct, which elevate integrity and due professional care of CPAs (Joanne S. Barry, "A Revised Code of Conduct for the New Law," The CPA Journal, September 2010). Unless managers make a concerted effort to identify these behaviors by encouraging auditors to report mem early on, they might miss the opportunity to address employees' concerns.

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