Lecture 3 - Advanced Auditing

What is ethics?

The philosophical study of morality, evaluating right action, motives, and consequences.

Why do societies need ethics?

To regulate coexistence, cooperation, and manage scarcity and interdependence (Hume, Rawls).

Difference between values and norms?

Values are general positive ideals; norms are concrete rules derived from values.

What is consequentialism?

Actions judged by their outcomes; maximize overall good.

What is deontological ethics?

Actions judged by duties, rights, or rules, regardless of outcomes.

What is virtue ethics?

Actions judged by the character and virtues of the actor.

Why do professions need ethical codes?

To fulfill their social function, ensure trust, and guide ethical conduct.

What is Limperg’s Theory of Inspired Confidence?

Society grants trust to accountants based on expectations of competence and ethical conduct.

What are “qualified expectations”?

Reasonable trust the public places in accountants’ integrity and expertise.

List the five fundamental principles.

Integrity, Objectivity, Professional competence & due care, Confidentiality, Professional behavior.

List the five fundamental principles.

Integrity, Objectivity, Professional competence & due care, Confidentiality, Professional behavior.

What is integrity?

Being honest, straightforward, and truthful.

What is objectivity?

Avoiding bias, conflicts of interest, and undue influence.

What does due care require?

Maintaining professional knowledge and performing diligently.

What does confidentiality require?

Not disclosing client information without authority/legal duty.

What is professional behavior?

Complying with laws and avoiding actions that discredit the profession.

What is the VGBA?

Dutch Regulation on Professional Conduct and Ethics for Accountants.

What are the objectives of the VGBA?

Promote proper conduct, act in public interest, support regulatory reviews, support disciplinary measures.

What is the international equivalent of the VGBA?

The IFAC Code of Ethics.

What must auditors do under the ethics conceptual framework?

Identify, evaluate, and address threats to fundamental principles.

Name the five IFAC threat categories.

Self-interest, self-review, advocacy, familiarity, intimidation.

Give an example of a safeguard.

Independent review, removing team member, enhancing firm policies.

What factors influence human motivation?

Internal mood, internal cognitive processes, external behavior.

What are common “filters” affecting decision-making?

Deleting information, distorting information, generalizing.

Why is thinking + acting essential in ethics?

Ethical reasoning without action does not protect the public interest.

What is moral concern in a professional context?

Acting based on moral principles beyond personal gain.