Audit professionalism, audit independence and audit effectiveness of CPAs in Thailand.

AuthorUssahawanitchakit, Phapruke
PositionReport - Survey
  1. INTRODUCTION

    Recently, auditors have become significant players in improving the qualities of reported earnings and financial statements. They help stakeholders and others explore, assess, and investigate the advantages and benefits of firms' financial information in all activities by auditing any business transaction through the implementation of accounting and auditing standards, and other related regulations, rules, and laws. They need to present critical factors of profession conduct and the cornerstone of the audit profession and an essential ingredient of users' confidence in financial statements. Then, auditors' professional behaviors, practices and activities through audit professionalism and audit independence have outstandingly influenced their audit effectiveness; and have potentially impacted their audit quality, efficiency, effectiveness, performance, success, sustainability, and survival in the competitive environments. Accordingly, audit professionalism and audit independence are likely to have an important positive influence on audit effectiveness.

    Interestingly, audit effectiveness is an outcome of auditors' professional practices, duties, activities, and responsibilities by committing with audit standards, objectives, goals, and policies. Audit professionalism and audit independence are consequences of explaining audit effectiveness. Audit professionalism is a preference by auditors to exercise individual professional judgment in undertaking auditing tasks (Askary, 2006) and it entails the maintenance, sustainability and survival of professional self-regulations and self-forces. Also, audit independence refers to an objective and trustworthy arbiter of the fair presentation of financial results (Falk et al., 1999). To fulfill and increase the benefits, advantages and contributions, audit experience and ethical orientation are proposed to become moderators of the relationships. Audit experience is an auditor' unique knowledge, competencies and capabilities that occur from job practices in auditing profession and it enhances the auditor's abilities to process information, make metal comparisons of alternative solutions, and initiate subsequent actions (Chung and Monroe, 2000). Likewise, ethical orientation is the approach that an individual takes to making ethical judgment through ethical perceptions and sensitivity with the ability to recognize the ethical nature of a situation in a profession (Clikeman et al., 2001)

    With the interest of CPAs' behaviors and activities, this study aims to test the influences of audit professionalism and audit independence on audit effectiveness of CPAs in Thailand via

    moderating effects of audit experience and ethical orientation. The key research questions are: (1) how audit professionalism has a positive association with audit independence, (2) how audit professionalism has a positive impact on audit effectiveness, (3) how audit independence has a positive influence on audit effectiveness, (4) how audit experience positively moderates the audit professionalism-audit effectiveness relationships and the audit independence-audit effectiveness relationships, (5) how ethical orientation positively moderates the audit professionalism-audit effectiveness relationships and the audit independence-audit effectiveness relationships, and (6) whether both audit experience and ethical orientation are moderators of the research relationships.

    This study is outlined as follows. Relevant literature of audit professionalism, audit independence, audit effectiveness, audit experience, and ethical orientation are reviewed, addressed and criticized, and significant research hypothesis development is also presented. Next, the research methods used to test the hypotheses are discussed including sample selection and data collection procedure, variables and methods. Also, the results of the study derived from 219 certified public accountants (CPA) in Thailand are indicated and their reasonable discussions with existing literature supports are shown. Lastly, the study concludes by discussing implications for theory, institution, and profession, identifying limitations of the study, and providing suggestions and directions for future research.

  2. AUDIT PROFESSIONALISM, AUDIT INDEPENDENCE AND AUDIT EFFECTIVENESS

    This study attempts to examine the effects of audit professionalism and audit independence on audit effectiveness of CPAs in Thailand through moderators of audit experience and ethical orientation. Both audit professionalism and audit independence are independent variables; audit effectiveness is a dependent variable; and audit experience and ethical orientation are moderating variables. To outstandingly investigate these relationships, the conceptual, linkage, and research model present the relationships among audit professionalism, audit independence, audit effectiveness, audit experience, and ethical orientation, as shown in Figure 1.

    [FIGURE 1 OMITTED]

    2.1 Audit Professionalism

    Audit professionalism refers to a preference by auditors to exercise individual professional judgment in undertaking auditing tasks (Askary, 2006). It entails the maintenance, sustainability and survival of professional self-regulations and self-forces. It is positively associated with audit effectiveness. Auditors with greater professionalism tend to do best audit practices, activities and responsibilities in order to enhance audit efficiency, gain audit effectiveness, receive audit performance, and audit success. Also, audit professionalism is defined as an occupation that demanded extraordinary skills, motivations and efforts. It is a definable body of knowledge, specialized and advanced education, a formal organization, a code of ethics, standards for practices, a procedure for disciplining members, and public acceptances. Auditors with more professionalism definitely present their knowledge, judgments, competencies, and capabilities through reporting valuable audit activities and practices for achieving stakeholders' acceptance, creditability and reliability. Then, audit professionalism potentially encourages auditors to gain better audit outcomes via efficiency and effectiveness in their audit practices.

    To outstandingly provide auditors' best audit practices and activities, audit professionalism is a main driver of determining audit effectiveness, performance and success. It involves altruistic service to the public, requiring long and specialized training for its entrants, embracing a code of ethics, forming associations and holding meeting, publishing learned journals aimed at upgrading the auditors' practices, and using examinations as barriers to entry (Burns and Haga, 1977). It is committed with the concept of true and fair audit practices (Jayalakshmy et al., 2005). Auditors are likely to be concerned with their autonomy, professional values and ethical standards. They definitely present their independence in providing audit behaviors, practices and activities. Thus, audit professionalism has an important positive influence on audit independence, effectiveness, performance, success, survival, and sustainability. Therefore, the hypotheses are posited as below:

    Hypothesis 1: The greater the audit professionalism is, the more likely that auditors will perform better audit independence.

    Hypothesis 2: The greater the audit professionalism is, the more likely that auditors will perform better audit effectiveness.

    2.2 Audit Independence

    Audit independence is another antecedent of audit effectiveness. It is defined as an objective and trustworthy arbiter of the fair presentation of financial results (Falk et al., 1999). It is a critical factor of profession conduct and the cornerstone of the audit profession and an essential ingredient of users' confidence in financial statements. It includes independence in fact, which is an unbiased mental attitude of an auditor, and independence in appearance, which is the perception by a reasonable observer that an auditor has no relationship with an audit client which would suggest a conflict of interest (Beattie, et al., 1999). Hence, auditors need to operate independently on the basis of sound auditing standards and strong ethical principles, and...

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