INTERNAL AUDITOR AND ETHICAL DILEMMA: The Importance of Experience, Professional Commitment and Auditor Ethics Orientation and Organizational Ethical Values

Amount: INTERNAL AUDITOR AND ETHICAL DILEMMA: The Importance of Experience, Professional Commitment and Auditor Ethics Orientation and Organizational Ethical Values

Authors: SASONGKO BUDISUSETYO

Memberships: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya

Publisher: Airlangga University

Abstract

Internal auditors have an important role in an organization related to accounting, management and control functions. The dual role carried out by the internal auditor, namely as a professional and as a member of the organization in which he is located, often brings the internal auditor into an ethical dilemma.

This study tries to see how the ethical decision-making process is carried out by the internal auditor. The Person-Situation Interactionist model developed by Trevino (1998) was adapted to see the relationship between unique individual variables and situational variables related to the ethical decision-making process. Individual variables from internal auditors include ethical orientation, professional commitment and work experience, while the situational variables are organizational ethical values. The ethical orientation adopted by internal auditors and influencing ethical decision making is measured by the Ethical Position Questionnaire vane, developed by Forsyth (1986) by describing two dimensions of ethical orientation, namely idealism and non-relativism. Organizational ethical value is measured using Corporate Ethical Value developed by Hunt et.al (1989).

The hypothesis of this study states that the ethical decision making of internal auditors will be influenced by ethical orientation, professional commitment, work experience and organizational ethical values. In this study, structural equation modeling (SEM) was used to describe the relationship between each construct in the study.

The results of SEM and path analysis indicate that (1) the ethical decision-making process is influenced directly or indirectly by individual factors and situational factors. (2) Three constructs, namely organizational ethical values, ethical orientation and professional commitment have a significant positive relationship with the internal auditor's decisions and directly and indirectly affect the internal auditor's ethical decision making (3) This study did not find a positive relationship between work experience with professional commitment as well as with the internal auditor's ethical decision-making process. In this study, the proposed model also has a goodness-of-fit index that is not good enough, so it cannot be used as a model, this may be due to the complexity of an ethical decision-making process and may not be fully covered in the theory discussed.

Keywords: Internal auditor, ethics, ethical decision making, corporate ethical values, ethical orientation, professional commitment

sources: http://repository.unair.ac.id/34230/