The importance of independent audit and ethics in prevention of risk in businesses

Abstract

Purpose- Regarding risks that express the possibility of loss of financial, physical, human and intellectual resources of businesses, not only due to their effects on the existence of the relevant businesses; At the same time, due to its devastating effects extending to international economies, it has become necessary to make institutional and legal regulations at national and international levels. Since the focus of the regulations is on "independent auditing and ethical rules", examining this issue constitutes the purpose of the study. Methodology- The method of the study is to consider the audit institutions and concepts developed for the prevention of risk in the historical development process, to reveal the importance of independent auditing and ethical principles in terms of stakeholders and the social environment, and to evaluate the subject in a whole, based on the literature. Findings- In preventing risks; It has been determined that audit activities are carried out under three headings: public audit, internal audit and independent audit. In independent auditing, which provides assurance regarding the reliability of financial data and statements, ethical principles are a prerequisite for ensuring the public interest. When we look at the historical roots of the concept of independent auditing and ethical principles; The emergence of financial reporting and auditing scandals behind the sudden bankruptcies of international companies such as Enron, World Com, Xerox, Lucent in the USA and Parmalat in the EU has shaken the trust in capital markets, company management, financial reports, independent audit companies and auditors. The need to re-establish public confidence in the markets and to introduce regulations regarding the transparency, honesty and financial information disclosure responsibility of public companies necessitated institutional structuring and regulations. In this context, the Treadway commission, established in 1985 in the USA, prepared the Sarbanes-Oxley Act (SOX) in 2002, and based on this law, the Public Company Accounting Oversight Board (PCAOB) was established to monitor the accounting sector in order to protect the interests of public company investors. International Supreme Audit Institutions have published the Code of Ethics Standard (ISSAI 30). In parallel, the Public Oversight Institution (KGK) and Capital Markets Board (SPK) in Turkey published the "Corporate Governance Principles". Conclusion- In order to prevent risks, independent auditing based on ethical principles, on the one hand, ensures the protection of stakeholders and public interest; On the other hand, it will contribute to the successful continuation of the activities of the related enterprises. The trust and transparency to be provided in the investment environment will be the guarantee of the development of national and international economies in general and the increase of social welfare and the dynamic of development. Keywords: : Risk, audit, ethics JEL Codes: M12, G10