Auditors’ Ethical Reasoning in Developing Countries: The Case of Egypt

Abstract

Purpose – The aim of this research is to investigate Egyptian auditors ethical reasoning, to understand whether auditors’ ethical reasoning is influenced by audit firm size or/and auditor position.

Design/methodology/approach – This paper draws on 178 questionnaires that include six different ethical scenarios. This paper also uses AEDI (Accounting Ethical Dilemma Instrument) that is developed by Thorne (2000) to measure the ethical reasoning of Egyptian auditors.

Findings – The findings are three-fold. First, this study finds that the general level of deliberative ethical reasoning of auditors working in CAO (The Central Auditing Organization) and small firms are categorized in the post-conventional level, while auditors working in Big and Medium firms categorized in conventional level. Second, the result suggests that there is a negative relationship between ethical reasoning and audit firm size in Egypt. Finally, the results show that ethical reasoning levels decrease when the position of auditors increase except for auditors working in CAO.

Originality/value – This study adds to the scarce literature in developing countries that measure auditors’ ethical reasoning. The findings suggest that auditors’ ethical reasoning depend on auditor firm size and the position the auditor holds within the firm. These findings will aid policy makers and regulators, especially in developing countries to avoid any potential risks regarding professional misconduct and in evaluating the adequacy of the current code of ethics.

Keywords: Ethical reasoning; AEDI, Defining Issues Test, Egypt Paper type Research paper