Auditors' ethical reasoning in developing countries: the case of Egypt

Purpose: The purpose of this study is to investigate Egyptian auditors' ethical reasoning, to understand whether auditors' ethical reasoning is influenced by audit firm size and/or auditor's position. Design/methodology/approach: This paper draws on 178 questionnaires that include six different ethical scenarios. This paper also uses the accounting ethical dilemma instrument that is developed by Thorne (2000) to measure the ethical reasoning of Egyptian auditors. Findings: The findings are threefold. First, this study finds that the general level of deliberative ethical reasoning of auditors working in the Central Auditing Organization (CAO) and small firms are categorized in the post-conventional level, while auditors working in big and medium firms are categorized in conventional level. Second, the result suggests that there is a negative relationship between ethical reasoning and audit firm size in Egypt. Finally, the results show that ethical reasoning levels decrease when the position of auditors increase except for auditors working in CAO. Originality/value: This study adds to the scarce literature in developing countries that measure auditors' ethical reasoning. The findings suggest that auditors' ethical reasoning depends on auditor's firm size and the position the auditor holds within the firm. These findings will aid policymakers and regulators, especially in developing countries, to avoid any potential risk regarding professional misconduct and in evaluating the adequacy of the current code of ethics.