Definition of corruption and audit role
Definition of corruption and audit role
The definition of corruption and the role of audit, the concept of corruption has various definitions; Meanwhile, the definitions that are usually used by accountants are based on the behavior-based definition of Johnston (1996).
which states that corruption is the abuse of government power or resources for personal gain. Accordingly, the International Organization of Supreme Audit Institutions (INTOSAI, 2013) defines corruption in the public sector as the abuse of public authority or trust for personal gain.
In a more detailed analysis of factors, Klitgard (1996) sees corruption as a product of monopoly power and authority minus accountability.
According to the element of accountability in the aforementioned equation, it can be seen that accounting and auditing play an important role in determining the level of corruption.
Modern management programs, such as modern public management, use authority instead of hierarchical and bureaucratic structures to create responsive and flexible organizations (Power, 1997);
But the increase in power increases the opportunities for corruption. 111
Therefore, the use of managerial authority is controlled through the requirement of management to show transparency and accountability using financial statements.
By definition, financial statements are management’s assertions about economic facts.
and therefore it is not reliable and requires an audit by an independent third party to assure the environment. (Power, 1997);
Therefore, auditing plays an active role in limiting corruption.
Dai and Stoppenhurst (1998) consider audit as one of the basic pillars of the health and integrity of any country.
which supports the transparency and national health system.
A recent study shows that companies with audited financial statements pay less bribes than unaudited companies (Farooq and Sundström 2016).
Removing corruption from the concept of fraud in literature and audit texts
The discussion about the professional responsibility of auditing in relation to the detection of fraud is not a new issue, as Brief (1977) states.
that this debate was going on in America at the end of the 19th century, and at that time there was no consensus among accountants about the role of auditors in fighting corruption.
After more than a century, auditors are still reluctant to report corruption disclosures.
In an article titled “Professional role of accounting in the fight against corruption”, the International Federation of Accounting (IFAC) states.
that the main responsibility and duty of accountants, including independent auditors, cannot be supervision against corruption and the mission of law enforcement.
And although it seems that accountants should consider reporting corruption to external legal authorities.