Abstract
The present study aimed to identify the most effective causes of conflict of interest by examination of accounting literature and expert consensus. Understanding these factors, using cognitive psychology theories, can lead to a model for reducing conflict of interests. The dignity of the audit profession depends on fair and proper professional judgment by auditors, and achieving this requires identification and controlling of the key factors affecting judgment and decision-making. When auditors intentionally or unintentionally accredit financial statements in line with the opinion of their employers, public interests and the auditing profession are at serious risk. Several factors that can categorize into seven categories of structure, community, culture, environment, personality, audit firm characteristic, and ethics and behavior are rooted in a conflict of interests. However, no comprehensive research examining all the above factors and identifying the most effective ones has been done so far. By reviewing the research literature, major and minor factors were identified in domestic and foreign sources. Ten expert auditors were selected by the snowball method and interviewed. The considered major and minor factors were selected from among the introduced factors, and a questionnaire was sent to the experts using the Fuzzy Delphi (Screening) method. The results of the above statistical analysis identified eighteen of the most prominent sub-criteria of the factors affecting conflict of interests and identified structural factors the highest rank in this classification, which was agreed by the experts.
Highlights
The moral scandal of corporate such as Enron in 2001 and WorldCom in 2002 raised expectations from auditors for strict and comprehensive observation of all ethical guidance and put the issues related to ethical decision-making in financial reporting at the center of attention (Tepalagul and Lin, 2014; Church et al, 2015)
Among the four dimensions, dimensions of long-term relationships, job opportunity, and non-audit services, compared to other dimensions, have a significance value lower than the threshold limit (6.61) and will be deleted; and the dimension of termination or conclusion of audit contract, given that its significance value is greater than the threshold limit, will be selected
Among the eight existing dimensions, the dimensions of internal control, external control, religious beliefs, economic conditions, and knowledge, compared to other dimensions, have a significance value lower than the threshold limit (4.80) and will be deleted; and the dimensions of laworientation, experience, and professional skepticism, given their significance value is greater than the threshold limit, will be selected
Summary
The moral scandal of corporate such as Enron in 2001 and WorldCom in 2002 raised expectations from auditors for strict and comprehensive observation of all ethical guidance and put the issues related to ethical decision-making in financial reporting at the center of attention (Tepalagul and Lin, 2014; Church et al, 2015). At the time of conducting this study, the largest litigation to handle fraud in British history was held in London on March 25, 2019 From a practical point of view, the results of this study can lead to the identification of key factors affecting conflict of interests and they can be used as important variables for the application of cognitive psychological theories in proposing models for controlling and reducing conflict of interests. In order to control and reduce conflict of interests, it seems necessary to identify the key factors affecting judgment and decision-making; and, use cognitive psychology theories and manage them, to increase the quality of professional judgment of auditors and provide the possibility of achieving wise decision-making (Valian et al, 2019). The results of the present study will lead to the identification of appropriate variables to complement the process of future explorations in the area of controlling and reducing the conflict of interests of auditors
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