Journal of Accounting and Management Information Systems (JAMIS)

Ethical evaluation of auditors’ deficiencies in recent fraud cases based on Laczniac model

Supp/2006 ,   p587..598


Keywords:   ethical evaluation; deficiencies of auditor; Laczniac model

This study is a case study which aims to investigate some recent fraud cases such as Sunbeam, Cendant, Waste Management, Enron, Carme, Fine Host, Perry Drug, Vari-L, and WorldCom in order to realize ethical evaluation of (external) auditors’ deficiencies in auditing process of these companies. All the information regarding companies herein was obtained from the US Securities Exchange Commission (SEC)’s web site.
Auditing process term used in this study means the deficiency detection and reporting process, and includes three main steps: (1) awareness of the transaction including deficiency (2) recognition of deficiency transaction and its probability of being knowingly (3) to give or to modify the audit opinion to disclose the nature of deficiency if management does not correct the deficiency.
In the study, first of all, Laczniac Model is explained and adapted to auditing profession. Then, the deficiencies (failure points) of auditor(s) during the auditing process are defined. Accordingly, the deficiencies of auditor(s) are evaluated from perspective of ethics by using Laczniac Model.
Lastly, the findings reached are discussed, and some suggestions on ethical principles that all auditing firms should especially possess are emphasized.