Navigating Ethics: Insights into External Auditor Compliance from

Financial Managers and Internal Auditors in Jordanian Companies

ABDELRAZAQ FARAH FREIHAT

School of Accounting,

Faculty of Business,

Al-Balqa Applied University,

to collect the necessary data from 200 participants. The findings show that the external auditor complies with

the code of professional ethics at a high to moderate level per the Relative Important Index from the viewpoint

of both financial managers and internal auditors. Moreover, the outcomes also show there are no significant

variances between their beliefs regarding the adherence of external auditors to the code of ethics. The study

consequences indicate that the enacted regulations that organize the work of the auditors can effectively

enhance the compliance of Jordanian auditors with the code of professional ethics. Nevertheless, it emphasized

the need for more shared efforts for more compliance with professional ethics in the auditing profession. The

study suggests Many recommendations to enhance auditors’ compliance such as continuous oversight of

auditor compliance from the Jordanian Association of Certified Public Accountants, ethical awareness, research

and development in the area of ethics, and training programs to explain ethical complexities. This study

Received: April 22, 2023. Revised: February 17, 2024. Accepted: March 9, 2024. Published: April 5, 2024.

1 Introduction

In the past few years, there has been an accelerated

rise in the failures of huge worldwide companies

such as Enron and WorldCom in 2002. These

scandals shed light on different causes such as the

failure of management in reporting and financial

disclosure. In addition, these collapses highlight the

second largest bank in early 1990 was dissolved

because of deception fraudulent activities,

counterfeit documents, and theft, [1]. Additionally,

recently many public shareholding companies listed

on the Amman Stock Exchange were going into the

path of mandatory liquidation. Such as Unified

auditing legislators, the scholars, and the

professionals themselves. Therefore, this study

intended to investigate the compliance of auditors

with ethical norms in an emerging country,

specifically Jordan.

auditors should maintain are established by the

International Ethical Standard Board (IESBA).

These standards include independence, objectivity,

integrity, professional competence, confidentiality,

with the code of professional ethics controls the

auditors' attitude to achieve and meet their duties

and liabilities towards their corporation clients,

investors, and other stakeholders, [3]. On the other

side, various previous research indicates that

nonadherence with independence, integrity, and

other codes of ethics leads to many corporate

collapses, [4]. For example, the Enron and

WorldCom scandals inversely impacted the image

Jordan. By finding vulnerabilities and gaps within

existing systems, research endeavors contribute to

the enhancement of measures designed to mitigate

the occurrence of fraudulent activities. Therefore, it

sheds light on important aspects of the auditing

profession, such as its resilience and commitment to

ethical principles, thereby filling a notable

knowledge gap.

of conformity of external auditors with the Code of

regulators who wish to improve auditing quality,

such as the Jordanian Securities and Exchange

Commission, the Amman Stock Exchange, the

Studies, and Hypothesis

Development

various principles of ethical conduct while

performing the auditing process to enhance the trust

of the investors and other stakeholders.

All members of the association should maintain

independence, uphold objectivity, integrity,

confidentiality and preserve professional conduct.

These guidelines enhance auditors' performance. To

oversight compliance with the guidelines, the

JACPA established an inspection team. These

disciplinary measures were following Article 12 of

the 2006 Law on the Practice of the Legal

Accounting Profession. These procedures show how

important the role of the JACPA is in enforcing the

accounting literature have confirmed that there is a

significant relationship between auditors’ adherence

to applying the rules of professional conduct and

both the quality of the auditing process and the

credibility of the financial statements. This enhances

public trust in audits and financial reporting. [6],

conducted a qualitative study that addressed the

importance of adhering to the code of ethics and the

repercussions associated with a deficiency in

accountants' independence within Indonesia's public

[15], utilizes the survey of auditors in public

accounting firms to explore the effect of auditors’

adherence to a code of ethics on audit quality. The

study showed that there is a significant correlation

between the levels of auditor compliance with ethics

and audit quality. The same findings were supported

by [16], in Nigeria, where they studied the impact of

professional ethics on the quality of auditing

processes. The study showed that there is a

significant association between compliance with

influence audit quality. The study highlights that

auditors' quality is influenced by multiple factors.

The components that comprise auditor ethics

expectation gap among auditors. The results show

that adhering to values like honesty, independence,

competence, and professionalism can reduce the

audit expectation gap.

Compliance

Different previous studies have discussed the extent

of compliance with professional standards and the

accuracy. From this perspective, [23], examined

Ethiopian external auditors' conformity with

professional accounting ethics. Data was acquired

by a questionnaire from 68 auditors and 29 tax

auditors. Results show that professional misconduct

and accounting standards non-compliance are

substantial issues in chosen cities. The researchers

suggest that the accounting profession establish a

monitoring system, impose punishments, suspend

auditors who break professional norms, and provide

professional accountants follow the code of ethics

concepts and systems. The study indicates that

potential sanctions, ethical principles, company

internal legislation, and religious and social

traditions urge auditors to observe the code of

ethics.

auditor independence in Egyptian enterprises. The

lack of a law requiring Egyptian companies to

change auditors was the biggest factor. Also,

is the foundation of the accounting and auditing

profession, preventing company collapses, reducing

dishonest management, and boosting stakeholder

auditors. According to the Jordanian Securities and

Depository Center, there are 53 industrial

companies, [26]. Then, a questionnaire was drafted

and disseminated to a sample of financial managers

and internal auditors employed by publicly traded

industrial companies. A research sample of 170

questionnaires was successfully collected from the

study population of 200 participants. Within the

examined cohort, a total of 120 individuals were

identified as internal auditors, while 50 individuals

This study relies on two data sources: secondary

sources, which include a comprehensive

investigation of prior research and relevant

theoretical frameworks pertinent to the research

topic, and primary sources, which include the design

of questionnaire-based research instruments. This

questionnaire was meticulously crafted to answer

insight into their research needs and hypothesis

testing. The study also examines the Company

Guide published by the Amman Stock Exchange to

get knowledge about companies' financial managers

and internal auditors, where the questionnaires were

sent to them to provide a comprehensive assessment

of their prospects.

𝐓𝐡𝐞 𝐇𝐲𝐩𝐨𝐭𝐡𝐞𝐭𝐢𝐜𝐚𝐥 𝐌𝐞𝐚𝐧 = Upper Limit of Likert scale(5)+ Lower Limit of Likers Scale(1)

2 = 3 … . (1)

The Relative Importance Index (RII) =∑W

4 Findings

This section will examine the reliability of the

research instrument as well as provide a detailed

analysis of the demographic characteristics of the

respondents and the information they provided. This

section will finish by examining the theories that

have been subjected to empirical verification.

Cronbach's alpha coefficient for all items in the

study was determined to be 0.83, indicating a high

level of internal consistency. This number surpasses

the recommended threshold of 0.60, affirming the

reliability of the study tool and its suitability for

conducting statistical analysis.

Table 2. Internal consistency Cronbach's alpha

coefficients

Table 3. Participants According to Occupation

aspect of "demonstration of both apparent and

intellectual independence" received the highest

grade, with a RII of 0.870, a significant level of

adherence (H), and a mean score of 4.35, placing it

at the pinnacle of the ranking. The dimension under

"Audit Committee Role: Isolation and Appointment

of Independent Auditors" was rated the lowest by

internal auditors, as indicated by a (RII) of 0.688

independence" within the principle of independence,

which is considered the highest priority. The

solidification of this element's position as widely

recognized in assuring auditor independence is

supported by its high (RII) of 0.806, high adherence

level (H), and an average score of 4.03. In contrast,

the element of "remaining independent of