Inherent Conflicts Of Interest In The Accounting Profession

Abstract

In this paper, we critically examine three situations in the accounting/auditing profession in which conflicts of interest arise. Specifically, we describe conflicts of interest that occur (1) because audit fees are paid by the very companies being audited, (2) due to the tension built into accountants codes of professional ethics between the responsibility to maintain client confidentiality and the need to serve the public trust, and (3) because of most auditors perspective of who is their primary client. Based on our analysis, we conclude that these three inherent conflicts of interest, in the absence of some unforeseen revolutionary changes, are likely to persist within the auditing profession. We also conclude that attempts to mitigate some of these conflicts of interest through the Sarbanes-Oxley legislation have only been moderately successful. We therefore propose that audit professionals must learn to identify and manage the conflicts of interest that will likely remain a part of the profession for the indefinite future.

Managing Conflict of Interests in Professional Accounting Firms: A Research Synthesis

“…This implies that welldrafted ethical codes of conduct have the power to influence ethical behaviour and the way professionals would handle conflict of interests. Clements et al (2012) critically examined the conflict of interests in the accounting profession and strongly asserted that firms should improve their codes of conduct for their provisions regarding prioritisation of interests.…”

“…Similarly, Cain et al (2005), Guiral et al (2010), Moore et al (2006) found that the conflict of interests leads to unintentional bias rather than intentional dishonesty and that more than regulatory efforts are required to monitor such conflicting interests with a focus on addressing the unintentional biases. Clements, Neill and Stovall (2012) argued that regulations such as Sarbanes-Oxley have only remained moderately successful in countering the effects of conflicts. Based on their critical examination of conflicts of interest in the accounting profession, they strongly asserted that in the absence of revolutionary changes, conflicts of interest are likely to remain in the accounting profession for an indefinite future.…”

“…Almost every year, the professional accounting firms face heavy fines on account of the deteriorated audit quality due to conflict of interests (Agnew 2015;Crump 2015;Withers 2018). Extant research reveals that this problem is largely pervasive due to ineffective management of conflict of interests (Bazerman and Gino 2012;Clements et al 2012). Although the devastating effects of conflict of interests in professional accounting environment are welldocumented (see, for example, Boyd 2004;Daugherty et al 2012;Favere-Marchesi and Emby 2005;Pierce and Sweeney 2004), research pertaining to managing conflict of interests is scattered across various topics.…”

Cognitive approach to understand the impact of conflict of interests on accounting professionals’ decision-making behaviour

“…The last two decades have witnessed numerous corporate scandals that brought the integrity of accounting professionals and that of the accounting firms into question (Tepalagul and Lin, 2014;Church et al, 2015). Conflict of interests faced by accounting professionals has been playing a central role in such scandals (Bakre, 2007;Clements, Neill and Stovall, 2012;Crump, 2013). According to Thagard (2007), conflict of interests arises when professionals have to make decisions that are biased by their personal interests and they are, therefore, prone to neglecting the interest of others.…”

5. “Teposliro” and “Semuci” among Public Accountants: Do We know, and do We Care?

“…Auditors are often faced with a dilemma situation which allows not acting independently in their activity (Bazerman, Morgan, and Loewenstein 1997;Finn, Chonko, and Hunt 1988;Kaplan 2004). Clement, Neill, and Stovall (2012) state that the auditor is inherently have a confl ict of interest. Kaplan (2004) refers to the relationship between auditor and client is a major source of confl ict or the Mother of All Confl icts.…”