To place epistemic trust in someone is to take their word for something. Much of the existing literature on epistemic trust concerns epistemic authorities. But as important as authority is to epistemic trust, it pales in comparison to the epistemic importance of conflicts of interests. In economics, we say that buyers shouldn’t take the word of sellers. Caveat emptor: let the buyer beware. I argue for a similar principle in epistemology. Caveat auditor: let the hearer beware. (...) Others often have incentives to testify in ways that are odds with our epistemic goals. Given this, our epistemic trust in others should be calibrated to reflect the epistemically virtuous and perverse incentives of ourselves and others. This basic principle explains the need for epistemic caution in a wide range of applied topics from politics to product reviews to fake news. (shrink)

The recent accounting scandals have raised concerns regarding the closeness of auditor–client relationships. Critics argue that as the relationship lengthens a bond develops and auditors' professional skepticism may be replaced with trust. However, Statement on Auditing Standards No. 99 states that auditors "should conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past experience with the entity and regardless of the auditor's belief about (...) management's honesty and integrity" (AICPA 2002, Statement on Auditing Standards No. 99, paragraph 13, p. 10). The purpose of this study is to investigate whether auditors develop trust in a client's management and whether this trust affects auditors' decisions. Specifically, this study examines whether auditors' satisfaction with a client's management during a prior audit engagement affects auditors' self-reported trust in that client's management and whether that trust affects their fraud risk assessment. The decision to trust a client's management should be an ethical decision because excessive trust may impair auditors' skepticism, which auditors are required to maintain by their professional responsibilities. We therefore also investigate whether auditors' trust is affected by their moral reasoning. An experimental case was completed by 89 professional auditors, all with experience assessing the risk of fraud. The results suggest auditors' satisfaction with the client affects their trust in the client (higher satisfaction associated with higher trust and lower satisfaction associated with lower trust). Further, after an overall unsatisfying experience, auditors' trust affects their fraud risk assessments. However, after an overall satisfying experience, their trust does not affect their fraud risk assessments. The results indicate auditors are able to maintain their professional skepticism after satisfying past experiences with the client regardless of their beliefs about the honesty and trustworthiness of the client's management. Lastly, auditors' moral reasoning was not related to their trust in the client's management. (shrink)

We examine the implications of social trust for auditor reporting conservatism. Using a sample of listed companies in China, we find that clients located in high-trust regions are less likely to receive a non-clean audit opinion. This negative impact of social trust on auditor reporting conservatism increases when the client’s parent firm operates in a region of higher social trust, suggesting that social trust is contagious from a parent firm to its subsidiaries in (...) a consolidated entity. We provide evidence that the trust contagion is more pronounced for clients with a higher percentage of parent-appointed directors on their boards and clients whose parent firm has fewer subsidiaries. These findings indicate that monitoring and, to a lesser extent, personnel rotation may serve as potential channels of trust contagion. We also find that the impact of trust is more pronounced when the client is located closer to its audit firm, when the client’s parent firm is a state-owned enterprise or holds a higher percentage of the client’s shares, and when the client is associated with greater discretionary accruals. We provide further evidence that it is client rather than auditor trustworthiness that influences auditor reporting conservatism, auditors charge trustworthy clients lower fees, and clients from high-trust regions are less likely to manipulate earnings. Overall, our evidence suggests that social trust alleviates auditor concern about client moral hazard. (shrink)

The recent accounting scandals have raised concerns regarding the closeness of auditor–client relationships. Critics argue that as the relationship lengthens a bond develops and auditors’ professional skepticism may be replaced with trust. However, Statement on Auditing Standards No. 99 states that auditors “should conduct the engagement with a mindset that recognizes the possibility that a material misstatement due to fraud could be present, regardless of any past experience with the entity and regardless of the auditor’s belief about (...) management’s honesty and integrity” (AICPA 2002, Statement on Auditing Standards No. 99, paragraph 13, p. 10). The purpose of this study is to investigate whether auditors develop trust in a client’s management and whether this trust affects auditors’ decisions. Specifically, this study examines whether auditors’ satisfaction with a client’s management during a prior audit engagement affects auditors’ self-reported trust in that client’s management and whether that trust affects their fraud risk assessment. The decision to trust a client’s management should be an ethical decision because excessive trust may impair auditors’ skepticism, which auditors are required to maintain by their professional responsibilities. We therefore also investigate whether auditors’ trust is affected by their moral reasoning. An experimental case was completed by 89 professional auditors, all with experience assessing the risk of fraud. The results suggest auditors’ satisfaction with the client affects their trust in the client (higher satisfaction associated with higher trust and lower satisfaction associated with lower trust). Further, after an overall unsatisfying experience, auditors’ trust affects their fraud risk assessments. However, after an overall satisfying experience, their trust does not affect their fraud risk assessments. The results indicate auditors are able to maintain their professional skepticism after satisfying past experiences with the client regardless of their beliefs about the honesty and trustworthiness of the client’s management. Lastly, auditors’ moral reasoning was not related to their trust in the client’s management. (shrink)

Studies demonstrating the benefits of ethical behavior at an individual level are scarce. The business ethics literature centers its analysis on unethical behaviors and their consequences, rather than ethical behaviors and their benefits. There is now considerable debate on the role of auditors in society and the function of accounting firms in the free market capitalist system. Specifically, the eminently ethical nature of the auditor’s work has been highlighted. Therefore, the aim of our paper is to show the impact (...) of auditors’ sustained ethical behavior: the trust it generates. This trust results in considerable benefits for the firm due to a reduction in the costs of the partner’s supervision of the auditor. The methodology chosen to validate these claims is a survey of partner of the audit firm in auditing companies. The results of this research confirm the hypotheses raised in the theoretical model. (shrink)

A constructive, highly professional relationship between tax authorities and taxpayers is essential for tax compliance. The aim of the present paper was to explore systematically the determinants of this relationship and related tax compliance behaviors based on the extended slippery slope framework. We used in-depth qualitative interviews with 33 self-employed taxpayers and 30 tax auditors. Interviewees described the relationship along the extended slippery slope framework concepts of power and trust. However, also novel sub-categories of power (e.g., setting deadlines) and (...) trust (e.g., personal assistance) were mentioned. Furthermore, also little-studied categories of tax behavior emerged, such as accepting tax behavior, e.g., being available to the tax authorities, or stalling tax behavior, e.g., the intentional creation of complexity. The results comprehensively summarize the determinants of the tax relationship and tax compliance behaviors. Additionally, results highlight future research topics and provide insights for policy strategies. (shrink)

This paper analyzes the rhetoric surrounding the profession’s presentations of auditor independence. We trace the evolution of thecharacter of the auditor from Professional Man in the early years of the twentieth century to the more public and abstract figures of Judicial Man and Economic Man. The changing character of the auditor in the profession’s narratives of legitimation reflects changes in the role of auditing, in the economic environment, and in the values of American society. Economic man is (...) a self-interested and shallow character who offered the auditing profession little protection against involvement in corporate scandals. In the wake of recent accounting scandals, the profession is calling for a return to the character of Professional Man to restore trust in audits and the financial markets.We also analyze the philosophical bases of the metaphors surrounding auditor independence. These metaphors, particularly the metaphor of independence as separation, create problems in conceptualizing independence concepts. How can you discuss appropriate relationships when your basic concept is one of separation, or no relationship? On the other hand, relational concepts of independence are also flawed if they are not based on a firm moral foundation. We suggest how the profession can act to rebuildits moral foundation through recognition of collective responsibility. (shrink)

The devastating impact of the climate crisis has led many countries to promulgate regulations that hold businesses accountable for their environmental externalities. However, while these formal constraints compel businesses to fulfill their legal obligations, scholars argue that acting in a socially and environmentally responsible way requires more than mere compliance with the law. Accordingly, we provide novel evidence of how the concept of social justice, implicit in society as an informal construct, underpins firms’ ethical behavior, compelling them to accept their (...) social responsibilities by reducing their environmental violations, implementing procedures to prevent further infractions, and repairing the breach in social trust that their transgressions have caused by engaging in restorative acts. Based on unique environmental violation and remedial action data from 2007 to 2022 in China, we establish that social trust significantly lowers a firm’s propensity to commit further ecological abuses. We also determine that firms in high-trust regions are more likely to undertake remedial actions in the aftermath of an environmental breach. Moreover, cross-sectional analyses reveal that the relationship between social trust and environmental violations is more pronounced for firms that face greater reputational pressure from higher media reporting, analyst coverage, auditing by Big Four auditors, and institutional site visits. This study augments the literature on environmentalism and argues that social trust also shapes corporate ethical behavior in addition to regulatory pressures. (shrink)

Internal audit provides an independent and objective opinion to the Board on risk management, control and governance, by measuring and evaluating their effectiveness in achieving an organisation’s agreed objectives. It also provides an independent and objective consultancy service to help line management improve the organisation’s processes. Internal auditors should respect in their work some ethical rules, especially these included in the Code of Ethics formed by the IIA. This code is intended to clarify the standard of conduct expected from all (...) members of the internal audit unit. The main four principles that should be observed are as follows: integrity, objectivity, competency and confidentiality Being ethical in internal audit is necessary in order to win the trust of the environment in which auditors work. However, declaring one’s readiness to respect the Code of Ethics is not enough. Much more important is to implement and comply with given rules in carrying out audit duties. (shrink)

Traditionally, certified public accountants (CPAs) have served a unique role in the world of commerce and the profession of accounting. They perform an attest function and thereby serve as the chief providers of relevant, high quality accounting information to the decision making public. CPAs are licensed practitioners, who as expert independent accountants express opinions about an entity'sfinancial statements. Their license provides them with the exclusive right to perform this attest function. This monoploy relies on the concept of independence that is (...) the normative standard of accountancy. It is this perceived independence of auditors which provides credibility, reliability and trust in the financial accounting information upon which stakeholders depend to make informed decisions. Now, however, we see the environment in which CPAs operate undergoing rapid change. Both the globalization of business operations and technological advances have radically changed how and where accountants work and the speed at which things happen. The very nature of accounting information services is evolving; moving from a concentration on audits to an increasing reliance on consulting and assurance services. New ethical issues have been raised by this confluence of changes in the accounting environment. Noteworthy is that the application of the principle of independence by CPAs has been called into question by no other than the SEC. Are those stakeholders who depend upon the independence of CPAs at risk? The influence of insiders has significantly increased as accounting firms perform multiple tasks for the same clients. This paper discusses the different groups who can potentially impair the independence of auditors and the steps that are being taken to enhance the "independence" of the auditors. (shrink)

Reports of research fraud have raised concerns about research integrity similar to concerns raised about financial accounting fraud. We propose a departure from self-regulation in that researchers adopt the financial accounting approach in establishing trust through an external validation process, in addition to the reporting entities and the regulatory agencies. The general conceptual framework for reviewing financial reports, utilizes external auditors who are certified and objective in using established standards to provide an opinion on the financial reports. These standards (...) have become both broader in scope and increasingly specific as to what information is reported and the methodologies to be employed. We believe that the financial reporting overhaul encompassed in the US Sarbanes–Oxley Act of 2002, which aims at preventing accounting fraud, can be applied to scientific research in 4 ways. First, Sarbanes–Oxley requires corporations to have a complete set of internal accounting controls. Research organizations should use appropriate sampling techniques and audit research projects for conformity with the initial research protocols. Second, corporations are required to have the chief financial officer certify the accuracy of their financial statements. In a similar way, each research organization should have their vice-president of research (or equivalent) certify the research integrity of their research activities. In contrast, the primary responsibility of the existing Research Integrity Officers is to handle allegations of research misconduct, an after-the-fact activity. Third, generally accepted auditing standards specify the appropriate procedures for external review of a corporation’s financial statements. For similar reasons, the research review process would also require corresponding external auditing standards. Finally, these new requirements would be implemented in stages, with the largest 14 research organizations that receive 25% of the total National Institutes of Health funding, adopting these research oversight enhancements first. (shrink)

Although the foundation of financial accounting and auditing has traditionally been based upon a rule-based framework, the concept of a principle-based approach has been periodically advocated since being incorporated into the AICPA Code of Conduct in 1989. Recent high profile events indicate that the accountants and auditors involved have followed rule-based ethical perspectives and have failed to protect investors and stakeholders – resulting in a wave of scandals and charges of unethical conduct. In this paper we describe how the rule-based (...) traditions of auditing became a convenient vehicle that perpetuated the unethical conduct of firms such as Enron and Arthur Andersen. We present a model of ten ethical perspectives and briefly describe how these ten ethical perspectives impact rule-based and principle-based ethical conduct for accountants and auditors. We conclude by identifying six specific suggestions that the accounting and auditing profession should consider to restore public trust and to improve the ethical conduct of accountants and auditors. (shrink)

While prior ecolabel research suggests that consumers’ trust of ecolabel sponsors is associated with their purchase of ecolabeled products, we know little about how third-party certification might relate to consumer purchases when trust varies. Drawing on cognitive theory and a stratified random sample of more than 1200 consumers, we assess how third-party certification relates to consumers’ use of ecolabels across different program sponsors. We find that consumers’ trust of government and environmental NGOs to provide credible environmental information (...) encourages consumers’ use of ecolabels sponsored by these entities, and consumers do not differentiate between certified versus uncertified ecolabels in the presence of trust. By contrast, consumers’ distrust of private business to provide credible environmental information discourages their use of business association-sponsored ecolabels. However, these ecolabels may be able to overcome consumer distrust if their sponsors certify the ecolabels using third-party auditors. These findings are important to sponsors who wish develop ecolabels that are more credible to consumers, and thus encourage more widespread ecolabel use. (shrink)

In recent years, global corporations and national governments have been enacting a growing number of codes of conduct and public regulations to combat dangerous and degrading work conditions in global supply chains. At the receiving end of this activity, local producers must contend with multiple regulatory regimes, but it is unclear how these regimes interact and what results, if any, they produce. This article examines this dynamic in the sugar sector in Brazil. It finds that although private and public agents (...) rarely communicate, let alone coordinate with one another, they nevertheless reinforce each other’s actions. Public regulators use their legal powers to outlaw extreme forms of outsourcing. Private auditors use the trust they command as company insiders to instigate a process of workplace transformation that facilitates compliance. Together, their parallel actions block the low road and guide targeted firms to a higher road in which improved labor standards are not only possible but even desirable. (shrink)

Committing financial fraud is a serious breach of business ethics. However, there are few large scale studies of financial fraud, which involve ethical considerations. In this study, we investigate the pervasive financial scandals, which by the end of 2012 involved more than a third of the US-listed Chinese companies. Based on a sample of 262 US-listed Chinese companies, we analyze factors that differentiate between firms that commit financial fraud and those that do not. We find that firms more predisposed to (...) unethical behavior, due to their low regional social trust in the home country and low respect for regulations and laws as proxied by political connections, are more likely to commit accounting and financial fraud. They take advantage of low hurdles for listing via reverse mergers and avoid third-party monitoring through poor governance and auditors. Finally, we find evidence, after these scandals, of non-fraudulent firms differentiating themselves from the fraudulent firms by sending costly signals such as insiders purchasing shares, increasing dividends, and going private. (shrink)

This contribution offers the author’s personal experience with a project that took place 25 years ago in Latin America. This was about Second Order Auditing in Colombia during the second part of the 1990s. This project was carried out at the Country’s National Auditing Office, and was an application of the Viable System Model and the Viplan Methodology to a National Context. It was an innovative project at the CGR, focused on Second Order Auditing, to improve communications within the fabric (...) of the Colombian government. Its emphasis was building responsible trust between public enterprises, ministries and political agencies. Its emphasis was building communications between ministries and public entities, with the aim of increasing their effectiveness. At its core were methodological and epistemological developments. Key questions it attempted to answer were how to model the complexity of the enterprises and how to transform the auditors’ views of their relations with people in public entities, from one focused on requesting information, to one focused on communications. Structural changes were proposed for the National Audit Office and state enterprises, and hundreds of auditors were trained, through epistemological methodological workshops, in second order auditing and the reports of their auditing were debated extensively in government and beyond. This paper finishes with a short discussion of these transformations in the light of organisational cybernetics and in particular of the Viable System Model. (shrink)

This instructional case explores ethical and leadership issues within the context of public accounting. The case examines one senior manager in a public accounting firm who failed to receive an anticipated promotion to partner and the resulting discussions and actions that follow. The primary objectives of the case are to increase students’ awareness of select ethical issues commonly faced by auditors as they attempt to serve the public trust, their clients, and their firms, and to consider their own value (...) system in relation to the issues identified in this case. The secondary learning objectives are to increase students’ knowledge of the AICPA Code of Professional Conduct / IESBA Code of Ethics, encourage consideration of the impact of ethical and unethical behaviors by auditors on others within the profession, and illustrate how leadership within an organization influences the behaviors of others. (shrink)

Jennifer Trusted's new book argues that metaphysical beliefs are essential for scientific inquiry. The theories, presuppositions and beliefs that neither science nor everyday experience can justify are the realm of metaphysics, literally `beyond physics'. These basic beliefs form a framework for our activities and can be discovered in science, common sense and religion. By examining the history of science from the eleventh century to the present, this book shows how religious and mystical beliefs, as well as philosophical speculation have had (...) a considerable role in motivating scientists and inspiring scientific inquiry. _Physics and Metaphysics_ presupposes no technical knowledge of either philosophy or science. It is an ideal introduction to science and the important forces that have shaped its history and ideas. (shrink)

First published in 1987. Routledge is an imprint of Taylor & Francis, an informa company.

This book was written for those who have a general interest in how the concepts of personal freedom and determinism affect their daily lives and their dealings with other people.

ABSTRACT This paper addresses a current confusion in debates on the morality of experimentation on human pre‐embryos: the confusion that arises from ambiguity in the sense of ‘human being’. We may quite legitimately decide to apply the term ‘human being’to all entities with human DNA but in that case we should not then imply that all human beings are as much objects of moral concern as the fetus or a post‐parturate human being. It is argued that whatever classifying terms we (...) use, potential entities need to be distinguished from actual entities and that the very notion of potentiality rests on this distinction. The paper does not offer an argument in favour of experimentation, rather it appeals for clear thought. Moral attitudes to experimentation on pre‐embryos are varied and attempts to analyse issues through implicit appeal to emotionally ambiguous terms do not help the moral debate. (shrink)

A short account of the philosophy of knowledge for students reading philosophy for the first time. It also serves as a general introduction to those interested in the subject.

The purpose of this book is to show how the science of biology has been influenced by ethical, religious, social, cultural and philosophical beliefs as to the nature of life and our human place in the natural world. It follows that there are accounts of theories and investigations from those of Aristotle to research in molecular biology today. These have been selected to illustrate the theme and there is no intention to present a comprehensive history of biology. It is suggested (...) that ethical beliefs in particular have a greater influence in biology than in other sciences, such as physics and chemistry, and this is because biology includes the study of ourselves and involves us in consideration of the value and purpose of life. Attitudes to non-human life are also coloured by ethical beliefs and though some philosophers, for example Descartes, thought that only human beings were capable of thought and feeling the general view has always been that animals were sentient. Our treatment of animals and our attitudes toward them have also been conditioned by religious views as to the position of humans in relation to the natural world. (shrink)

This book examines the place of mathematics in Berkeley's philosophy and Berkeley's place in the history of mathematics. Beginning with an account of the traditional "abstractionist" philosophy of mathematics which Berkeley opposed, it examines his case against abstract ideas as well as his differing accounts of arithmetic and geometry. Berkeley's critique of the calculus is also examined in detail, beginning with a historical treatment of the origins of the calculus, proceeding to analyze Berkeley's objections in his 1734 work "The Analyst", (...) and studying some of the many responses to Berkeley. (shrink)

First published in 1987. Routledge is an imprint of Taylor & Francis, an informa company.

This presents several texts dealing with the philosophic view of The Gods and their providential relationship with manifestation. It includes, - Sallust, On The Gods and the World; The Pythagoric Sentences of Demophilus; Taurus, On the Eternity of the World; The Thema Mundi of Julius Firmicus Maternus; The Emperor Julian's Oration to the Mother of the Gods; and To the Sovereign Sun; Synesius' On Providence; and two essays by Taylor, On the Mythology of the Greeks; and On the Theology of (...) the Greeks. An indispensable and accessible introduction to Greek theology. (shrink)

This paper draws on the economics of ethical compliance model to examine the association between ethical reasoning, perceived risk of detection, perceived levels of penalties and Chinese auditors'' ethical behavior in an audit conflict situation. Using 53 Chinese auditors from Shenzen as subjects, and a survey questionnaire, this study found that there is a significant negative association between ethical reasoning and the likelihood of unethical behavior and that this negative association is weaker for auditors who perceive higher risks of detection.

This paper argues that independent auditors have lost sight of their obligation to be truly impartial, and have increasingly adopted an attitude of client advocacy. We argue that auditors have a professional obligation to go beyond merely passing judgment on whether client accounting methods are acceptable under GAAP, and to judge whether the principles adopted are the most appropriate under the circumstances. We then review recent evidence which suggests that auditors have abandoned this objective in favor of advocating client-preferred principles. (...) The results of a survey of public accountants employed by small CPA firms indicates that, in a scenario in which an auditor did not feel that the client's accounting treatment was the most appropriate under the circumstances but it was recognized as an acceptable alternative under GAAP, advocacy of the client-preferred approach is considered appropriate and is very likely to occur in practice. In less subtle cases (e.g., when the auditor did not feel that the client's treatment provided the best reflection of the economic substance of the underlying transactions), survey participants as a group were ambivalent regarding the appropriateness of client advocacy, and felt that subordination of judgment was likely to occur in practice. The results also indicate that engagement risk, or the risk that the firm will be harmed by aggressive behavior, affects judgments of both the appropriateness and likelihood of subordination of judgment. These findings suggest that auditors have adopted an ideology of client advocacy, within the constraints of engagement risk. (shrink)

Recently, society and the accounting profession have become increasingly concerned with ethics. Accounting researchers have responded by attempting to investigate and analyze the ethical behavior of accountants. While the current state of ethical behavior among practitioners is important, the ability of accountants to detect ethical problems that may not be obvious should also be studied and understood. This study addresses three questions: (1) are auditors alert to ethical issues; (2) if so, how important do they perceive them to be; and (...) (3) what factors affect their sensitivity threshold and their perceptions of the importance of the issues?Most of the prior research in accounting ethics presents subjects with scenarios that contain an obvious ethical issue, and subjects realize that they are participating in an ethics study. In the present study, the ethical problems are integrated into general accounting situations in order to discover the sensitivity of accounting professionals to them. This study defines ethical sensitivity as the ability to interpret a given situation and to realize that a moral problem exists. (shrink)