Investigating factors that influence Malaysian auditors’ ethical sensitivity

Razana Johari (), Md. Mahmudul Alam () and Jamaliah Said
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Razana Johari: UiTM - Universiti Teknologi MARA [Shah Alam]
Jamaliah Said: UiTM - Universiti Teknologi MARA [Shah Alam]

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Abstract: Purpose The primary role of auditors is to offer fiduciary services to society and users of financial reporting. With this role, users placed their trust and depend on the ability and judgement made by the auditors during their auditing works. However, recent financial scandals involving high profile companies frustrated the public's expectations, particularly in Malaysia. It is claimed that auditors are not having ethical sensitivity while executing their task in mitigating fraudulent financial reporting. Therefore, this study aims to examine the influences of ethical orientation, locus of control and the firm's ethical culture on the auditors' ethical sensitivity in Malaysia. Design/methodology/approach This study collected primary data based on a questionnaire survey among audit firms in the Klang Valley area and registered with Malaysian Institutes of Accountants. Findings The results showed ethical sensitivity has a significant negative relationship with relativism and in some cases has a significant positive relationship with idealism. Moreover, it found a significant positive relationship between ethical sensitivity and ethical culture. Originality/value This paper provides benefit to the audit firms, professional bodies, policymakers and academia in understanding the factors that might increase the sensitivity of auditors in dealing with ethical issues that could lead to fraudulent financial reporting in the company.

Keywords: Ethical sensitivity; ethical culture; ethical orientation; locus of control; audit; fiduciary services; Malaysia (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-acc, nep-ban and nep-sea
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Published in International Journal of Ethics and Systems, 2021, 37 (3), pp.406-421. ⟨10.1108/IJOES-01-2021-0006⟩

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Journal Article: Investigating factors that influence Malaysian auditors’ ethical sensitivity (2021)
Working Paper: Investigating Factors that Influence Malaysian Auditors’ Ethical Sensitivity (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03538166

DOI: 10.1108/IJOES-01-2021-0006

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