The Relationships among the Sub-categories

The interviews and data analyses of stage3 and 4 (in the Figure 4-1) revealed that there were relationships between the sub-categories (knowledge, professional judgment, and ethical values). The findings emphasize that no audit ought to be completed without such aspects of auditor knowledge, the ability to exercise professional judgment, and ethical considerations.

4.4.4.1 Knowledge and Professional Judgment

• Knowledge to professional judgment: Most of interviewees stated that knowledge considerably supports the exercise of professional judgment. Knowledge is a basic foundation for auditors in making judgment.

Knowledge is a foundation of judgment. Auditor apply their knowledge on auditing, business activities and existing markets to exercise judgment (Interviewee 1).

Chapter 4 – Data Interpretation from Grounded Theory

The combination of the knowledge types helps auditors understand about the practical situations, then making professional judgment. Knowledge supports and improves audit judgment (Interviewee 22).

Knowledge strongly influences to auditors’ judgment making process. It is a basis for judgment. If an auditor does not have good knowledge, the quality of his/her judgment should be questionable (Interviewee 18).

Knowledge has a strong impact to an auditor’s judgment (Interviewee 19).

Knowledge is a compulsory foundation of an auditor if s/he want to be a good auditor, especially, knowledge is necessary in making professional judgment (Interviewee 23).

• Professional judgment to knowledge: On the contrary, some of interviewees mentioned about the influences of judgment to the improvement of knowledge. They stated that judgment may help auditor enhance their knowledge in some cases. Some of interviewees were not sure about this inverse influence since they thought that it may take a long time to see the process of knowledge enhancing.

I think, in some cases, judgment can create new knowledge to auditor. If we have a new regulation, it means that we do not have much knowledge or experience about the regulation. Auditors usually apply their judgment to find an appropriate application of such new regulation. Then, the application can become knowledge. However, this infrequently happens. This impact is not strong as the support of knowledge to judgment (Interviewee 8).

Sometimes, judgment helps improve knowledge when it helps auditors know the aspects that they need to acquire more knowledge, e.g., looking into more information of an unobvious issues (Interviewee 22).

In additions, there was an opinion that knowledge improvement is a continuous process since the society and business environment is quickly changing. Knowledge need to be updated and improved regularly to adapt with new changes. Good judgment is an ability helps auditor improving their knowledge, especially to knowledge is in-completed or out of dated.

Chapter 4 – Data Interpretation from Grounded Theory

Judgment is useful in enhancing and expanding knowledge. Besides, judgment can help auditors re-confirm the knowledge passively received from schools or training (Interviewee 4).

4.4.4.2 Professional Judgment and Ethics

• Ethics to professional judgment: In practice, in making some specific judgment, we need consider ethical requirements carefully since ethics is a foundation in making those judgments. For example, judgment related to evaluation of bad debt items, the disclosure of subsequent events, and so forth.

For instance, to say that ethics is foundation for judgment in some situations, an interviewee gave an example from his experience. The example described a judgment made on the presentation of a bad deb amount as following:

There was a business which has bad debt amount recorded in their financial statements. The company had difficulties in collecting their account receivables with debtors. Then, the company’s board management asked for help from “a bad debt collector”. The debt collector was an entity that hired aggressive persons who can collect bad debt by daring and threatening. In that way, the company collected their bad debt. Therefore, the company did not make high provision for their bad debt account, but they recorded expenses that were paid to the debt collector. During the audit, auditors made judgment based on ethical regulations then verified the account.

According to code of conduct, auditors concluded that the company need to make provision for the bad debt account and expense could not be recorded as management fees. (Interviewee 1).

Although, the influences of ethics to judgment does not occur frequently, this example showed that ethics is basis for judgment in some situations.

• Professional judgment to ethics: Most of interviewee did not mentioned about the influence of professional judgment to ethics.

4.4.4.3 Knowledge and Ethics

• Knowledge to Ethics: The data analyses showed that there were two dissimilar perspectives on the impact of knowledge to ethical ability. Many auditors believed that good knowledge could help auditor improve their ethical values.

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Good knowledge may help auditors understand deeply about ethical requirements or the code of conduct in auditing. This means, except for intentional and purposeful actions, good knowledge probably improves ethical values (Interviewee 11).

The term: “A very good knowledge person” does not mean that s/he complies with, or conform to all legal or ethical regulations. However, knowledge has positive influence to ethical aspects of auditors. Since good knowledge helps auditors clearly understand ethical requirements as well as the possible rewards or punishments. A good understanding of ethical problems helps auditors avoid violating because of misunderstanding or misinterpretation (Interviewee 8).

An auditor who has good knowledge may have better ethical values.

However, this statement is not always correct (Interviewee 4).

On the other hand, a few auditors stated that knowledge and ethics are different thing. If a person who has a good knowledge, s/he usually may have a good understanding on ethical issues. However, it doesn’t mean that s/he always behave ethically because ethics is a personal characteristic.

Ethics is a personal and private attribute. If a person is ethical, s/he always has tendency to behave ethically. However, if they are not, they don’t care much about ethics. Even though, if they have good knowledge, they may use their knowledge to avoid or get out of responsibility. This behavior principle happens similarly to auditors (Interviewee 19).

In addition, a good knowledge person may evade ethical requirements by using his/her expertise and trickery in short-term.

Practically, ethics and knowledge may be not relevant. In a negative aspect, an expertise but unethical auditor may try to evade legal or ethical regulations by trickery. However, it is very rare and the violation may be only hidden in short-term (Interviewee 23).

• Ethics to Knowledge:

Chapter 4 – Data Interpretation from Grounded Theory

Ethical values may help auditors improve knowledge since a highly ethical person tends to study and improve their abilities to qualify job requirements. However, this influence is not strong and it is not frequent.

I think, ethics can help auditor enhance knowledge. For instance, auditor’s actions for “subsequent events” ¹³. Depending on each situation, such events may or may not be disclosed in an organization's financial statements. In practice, ethical auditors will carefully examine the events and decide whether the subsequent events should be disclosed or not. The process of examination usually help auditors understand more about the events, thereby improving their knowledge and practical expertise (Interviewee 20).

A skeptical and ethical auditor will try their best in looking for new things to improve knowledge. Ethics is a useful motivation for him/her to improve their knowledge. However, this is indirectly influence. Usually, people improve their knowledge since they want to, or they have to do. Rarely, people try to improve themselves since they are ethical (Interviewee 6).

4.4.5 The Different Influences of the Sub-categories to Decision Making Process