From the Islamic view point, the ethics of accountants and auditors depend primarily on the principles of Islamic faith and Shari’ah. As ethics are integral part of Shari’ah, therefore, Islam strongly emphasizes on that and considers them as one of the objectives of legislation. In short, Islamic Shari’ah provides some foundations of auditors and accountants’ ethics.
AUDIT Professionalism:
Auditing is one of the branches of accounting. It is associated with examination of accounting data. It is a professional service which people put high reliability on. Hence, audit needs to be performed in the most ethical manner since the auditors provide reasonable assurance to the company’s stakeholders. Therefore, based on the ethical principles highlighted in the Qur’an and Sunnah, the following ethical principles for accountant and auditors are derived:
Trustworthiness : Accountants and auditors should be trustworthy and honest in conducting their professional duties. However, they are said to be trustworthy by conducting their responsibilities with high degree of integrity and honesty. One way to show their integrity is by protecting client’s interest, which is related to the confidentiality of the information of the clients. For example; they cannot use such confidential information for their personal gain and third party. Besides that, the auditors have to present and provide factual and truthful report so that others can rely on the information while making judgment and decision.
Legitimacy: Besides being truthful and honest, auditors also have to comply with certain legal requirements and procedures including the Shari’ah rules and principles. They have to act and conduct according to the guidelines of Shari’ah principle. Moreover, they also have to comply with standards provided by professional bodies such as MASB.
Objectivity: In conducting an audit work, auditors have to be objective. They have to perform their professional duties in fair, impartial and unbiased ways. They also have to be free from any conflict of interest in order to ensure their independence. Since independence is a fundamental characteristic and key point of auditing profession, auditors should be independent both mind and appearance. If the auditor is a member of the board of directors of the audited company, then, he should not perform or conduct any audit work for that company. This is because he could be involved in providing bias information, as now he is no longer an independent party.
Professional competence and diligence: Since auditing is a professional service, it should be conducted in professional ways. Therefore, auditors should show their credibility in realizing these duties. To ensure work are done in proper manner, they should be professionally competent and well- equipped in carrying out the task assigned. Hence, professional competence can be achieved or obtained through ways like formal education, training, experience and professional education. Besides that, they have to be due diligent in discharging their responsibilities as they are not only responsible to the stakeholders but ultimately also to Allah the Al-Mighty.
Faith-driven conduct: Auditors should behave and conduct his duties in line with the faith values derived from Shari’ah principles.
Lately, critics have charged that the current audit has failed to meet user expectations. It is important for the profession to reflect to the nature and ethics of auditing in hope that by practicing ethically this will restore the confidence of the public. In order to uphold the integrity of auditors, a separate body should govern ethical principles governing the auditor’s professional responsibilities. Therefore, the best solution is to form the Shari'ah Supervisory Board to govern the ethics of auditors. The ethical principles that should be included are:
- Integrity.
- Trustworthiness.
- Confidentiality.
- Professional behavior.
- Honesty.
- Righteousness.
- Fairness.
- Objectivity.
- Professional competence.
- Due care.
- Independency etc.
The question of complying with professional ethics depends on the principle of religious legitimacy. Responsibility towards God should be put as the priority in one’s consideration. Commitment towards Allah (swt) generates good ethical appearance, diligent and proper work with high quality, which complies with Shari’ah rules and principles.
The emphasis on Shari’ah adherence provides good audit work through the sincerity while performing professional duties. Seeking Allah’s satisfaction becomes a due to good job fulfillment by way of being conscious to the accountability before Allah (swt) and the Day of Judgment. Annual audit is mandatory for every company, regardless of size, that is registered under the Malaysia Companies Act, 1965.
An auditing plays an important role in this process by providing objective and independent reports on the reliability of information.
Traditionally, the essence of auditing is to provide financial control and risk management. Auditor is deemed to work on the interest of shareholders, by which he/she need to carry out a systematic process with the objective of accumulating and evaluating evidences regarding the management assertions contained in the financial statements.
However, there’s an increase in audit need since the corporate sector expanded in parallel to the changes in business activity. Thus, audit provides not only control on financial aspects but furnishes top management with analysis, appraisals, recommendations and advices regarding the company‘s performance and profitability as well. Thus, complying to general accounting and auditing standards in Malaysia as well as rulings issued by Shari’ah Supervisory Board while expressing a reasonable assurance to the financial statements become the most important objective of an audit.
This is to ensure that the activities carried out are not in breach of the Shari’ah requirements. Ultimately, an audit on financial statements enhances the reliability of management assertions and enables auditor to communicate his true and fair opinion on the financial statement to the interested users or parties. To maintain the perception that auditors are credibly reliable in their profession, they should observe ethical values in their duty apart from providing the highest level of trustworthiness, integrity and truthfulness
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