The Identification and Categorization of Auditors' Virtues Author(s): Theresa Libby and Linda Thorne Source: Business Ethics Quarterly, Vol. 14, No. 3, Accounting Ethics (Jul., 2004), pp. 479-498 Published by: Philosophy Documentation Center Stable URL: http://www.jstor.org/stable/3857741 . Accessed: 08/02/2015 09:11
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THEIDENTIFICATION CATEGORIZATION AND OF AUDITORS' VIRTUES

Theresa LibbyandLinda Thorne

paper, we develop a typology of auditors' virtues throughin-depth interviewswith nine exemplarsof the audit community.We comparethis typology with prescribed auditors'virtues as represented in the applicable Code of ProfessionalConduct.Our comparisonshows that the Cocleplaces a primary emphasis on manw datoryvirtues includingthe virtues of "independent,""objective," and 'dprincipled." Whilethe nonwmandatory virtues,whichinvolve"going beyond the minimum" "putting publicinterest foremost," and the were identified by our exemplarsas essential to the auditor'srole, they received little or no emphasis in the Rulesof ProfessionalConw duct. We find this particularlyalarming,given that the exemplars interviewedfor this study viewed these virtues are essential to the auditors'role. If the audit profession wishes to uphold public confidence byencouraging possessionof nonSmandatory the auditors' virtues, ourresearchsuggests that nonwmandatory auditors' virtuesshould be explicitlydescribedand includedin rulesof professional conduct.
The reliance of the public, generally,and the business community,in particular, on sound and fair financial reporting and competent advice on business affairs-and the economic importanceof that reportingand advice impose special obligations on the profession. They also establish, firmly, its social usefulness. Rules of Professional Conduct, OntarioInstituteof Chartered Accountants

A6stract: In this

Uundamental to the role of auditoris to meet public expectationsin ensuring thatthe financial statementsfairly representthe financialposition of a company (Gaa2001). Long beforeAndersen'sshreddingof Enron-related documents became the subjectof Congressionalinquiry,auditorswere underpressurefrom the courts, regulators,and the press to maintainpublic trustin financial reporting (see for example Forbes March 2002; Brown 2000; Levitt 1998). Given recent disclosures of accounting"shenanigans," public confidence in the audit profession may be at an all time low (Schilit 2002). Regulatory,professional, and legal remedies are underwayto rectify apparentshortcomingsin institutional structuresthat may have contributedto this crisis (e.g., Sarbanes-Oxley

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(C) 2004. Business Ethics Quarterly, Volume 14, Issue 3. ISSN 1052-1SOX.

pp. 479498

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Act 2002); however, the importanceof auditors'virtues to this state of affairs has yet to be considered. Virtues are normativequalities that reflect an individual's tendency to act ethically, and by so doing manifest the ideals of the community to which the individual belongs (MacIntyre 1984). An underlying premise of this paper is that the judgments and actions of auditorsare, to some degree, a reflection of the virtues as enactedby the auditcommunity(Mintz 1995). Accordingly,auditors' virtuesaredefinedas those integralto the formulation auditors' of judgments and actions consistent with the ideals of the audit community(Thorne 1998). In this paper, we employ a qualitativeresearchmethodology to identify the virtues of auditorsas describedby exemplarsin the audit community.By using exemplarsof the auditcommunity,we attemptto capturethe auditcommunity's agreement about the "ideal" qualities that virtuous auditors' possess (Shaub 1994). We then organize and analyze the identified auditors'virtues using the typology of the virtues derivedby Pincoffs (1986) as a guide.l Finally, we compare the prescribedaudit virtues of the accountingprofession as representedin the applicable Code of Professional Conduct(the Code) to our typology of the audit virtues. Throughthis analysis, we identify the correspondenceand relative emphasis placed on the audit virtues specifically prescribedin the Code as comparedto our qualitativelyderived typology of audit virtues.2It is our contentionthatthe virtuesidentifiedby the exemplarsas fundamental the auditor's to role should be explicitly reflected in the Code as a signal of their significance to both membersof the profession and the public at large. Ourfindingssuggest the importance affordedauditors'virtuesexplicitly identified in codes of professional conduct. Our comparisonof the relevantcode of conduct and our qualitatively derived typology of auditors' virtues revealed a primaryemphasis on mandatory virtues in the Code, defined as virtues auditors must possess at a minimum,while other categories of virtues identified in the typology received little mention in the Code. The lesser emphasis accordedto non-mandatory virtues, defined as those virtuesreflecting auditors'willingness to go beyond the minimum,is particularlyalarminggiven that these virtues are essential to the auditor'srole. Reference to the non-mandatory virtues is made via reference to the importanceof "personalcharacter," although specific personal characteristics(many of which would qualify as virtues accordingto our definition) are not explicitly listed. The lack of emphasis on non-mandatory virtues in the Code may be responsible, at least in part, for the crisis in confidence the professionis currentlyexperiencing.To rectify this situation,although preliminary,our results suggest the importanceof explicit delineation of the range of auditors'virtuesidentified as essential by the exemplarsinterviewedin this study in codes of professional conduct of the audit profession. By using well-accepted qualitativeresearchmethodologies (cf. Denzin and Lincoln 1998), we demonstratea rigorous approachto describing virtues as shared by a particularcommunity.From a theoretical perspective, we extend

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Pincoffs's (1986) typology by applyingit to the auditcommunity.By categorizing virtues accordingto a theoreticallybased typology, we facilitate discussion of auditors' virtues between philosophers, accounting ethics researchers,and practicing auditors. Methodology The following four steps were followed in developing our typology of auditors' virtues: 1) identificationof exemplarsthat epitomize virtuous auditors;2) conductingopen-endedinterviewswith these exemplars;3) analyzingthe interview transcripts identifythe wordsused by the exemplarsto describeauditors' to virtues; and 4) categorizing the list of auditors' virtues guided by Pincoffs's (1986) typology. Each is describedin turn. Identification of Audit Exemplars Nine exemplarsof the audit communitywere identified to us based on their reputationsas "ethicalauditors" other membersof the audit community.All by were professional accountantswith five to thirty-five years of auditingexperience who had also held positions of trust and respect in the professional accounting community.Most of our participantshad obtained the position of partner.This group included individuals whose job was to act as the ethical soundingboardwithin the organizationsin which they worked,individualswho had been chairs of regulatorycommittees overseeing key audit functions, and individualswho had received medals for high achievementin the Canadiannational accounting accreditationexamination.Also included in the group were individualswho were accountingstandard-setters, representativesof provincial and national accounting institutes, and one regulator.3 of our participants, All even if not currentlyauditing,continuedto have regularcontactwith auditorsin their currentpositions. Interviews A series of open-endedquestions was developed to guide discussion (see the Appendix). To facilitate discussion, the questions were framed from the perspectives of both the auditorwho acts in a virtuousmannerand the auditorwho is not virtuous. The same two-person research team attended all of the interviews, which lastedbetweenfortyandeighty minutes.The interviewswere taped, transcribed,and then content-analyzedto capturethe particularwords the participants used to describe auditors'virtues. The completeness and accuracyof the transcriptswere ascertainedthrougha review of the transcribedinterviews by both of the researchersand each respective participant. Denzin and Lincoln (1998) suggest data collection should continue until the researchersfeel little new informationis revealed. At that point, they recommendconductingtwo additional interviewsto ensurecompleteness.In the current

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study, little new informationwas revealed by the seventh interview.Therefore, nine interviews were conductedin total.

Virtues of and Analysisof Transcripts Identification Auditors'
We independentlycontent-analyzedthe interview transcriptsto develop two separate catalogues of auditors' virtues. The two catalogues were then comparedfor agreementandcompleteness.All disagreementswere resolvedthrough discussion and reference to the interview transcriptsresulting in a preliminary catalogue of auditors'virtues. To ensure the validity of the preliminarycatalogue of auditors'virtues, an expertpanel of five accounting-ethicsresearchers,well versed in the virtueethcatalogue.The expertpanel ics theoreticalperspective,examinedthis preliminary of was asked to judge whetherthe listing was complete andrepresentative auditors' virtues.Virtuesthatdid not receive agreementfrom four out of Elveexperts given were eliminated,as were those items the panel consideredto be redundant This resulted in expert panel agreementof over ninetyother items in the list. five percent.

Virtues of Categorization Auditors' frombothmethof Webelieve categorization auditors'virtuesto be important odological and theoreticalperspectives. From the methodological perspective, the use of a typology as a basis for categorizationof auditors'virtues allows us to reduce and organizeour data in a way "thatpermitsconclusion drawingand/ or action taking.... The researchertypically needs to see a reduced set of data as a basis for thinking about its meanings"(Denzin and Lincoln 1998, 180). In addition, categorizationinformed by Pincoffs's theoreticaltypology is consistent with Van Maanen (1979), who argues that first-orderconcepts emerging from a qualitativestudy (i.e., the facts of the studyreflected in the raw data)can never "speakfor themselves," but requiresecond-orderconcepts derived from patternsin the data. theory that help the researcherexplain and understand completed in two stages. First, The categorizationof auditors' virtues was two researcherseach independentlyperformeda preliminarycategorizationof the identified auditors'virtues according to Pincoffs's (1986) typology. When necessary,Pincoffs's text was consultedto clarify the meaningof the categories of virtues.All discrepanciesbetween these two independentclassifications were resolved throughdiscussion between the two researchers. Second, to ensure the validity of our preliminarycategorizationof auditors' virtues, we provided membersof the expert panel with the preliminarycategorizationanda copy of Pincoffs's generic categorizationof the virtues.The expert panel was asked to identify categorizationsthat they agreed and/or disagreed classified to the with and to reclassify any virtues thathad been inappropriately category,if possible.4Based on the input from the expertpanel, the appropriate preliminarycategorizationwas amendedto reflect consensus, where consensus

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was consideredto exist if therewas categoryagreementfrom at least four out of five experts. Items that did not receive agreementfrom four out of five experts were eliminatedas were any consideredredundant. This resultedin expertpanel agreementof over 95 percent. Pincoffs's typology separatesout two main dimensions of virtue, the noninstrumental virtues and the instrumental virtues. According to Pincoffs, non-instrumental virtues affect actions only indirectlythroughthe development of an individual'sintentionto act in accordancewith the virtues whereasinstrumental virtues have a direct positive effect on the actions the individualtakes. Priorresearchin accountingethics also suggests the importanceof instrumental and non-instrumental virtues to the formulationof auditors'professionaljudgment (Tsui and Gul 1996; Windsor and Ashkanasy 1995). For auditors, non-instrumental virtues influence auditors'formulation of professionaljudgment according to an ideal standardwhereas instrumentalvirtues influence auditors' actual exercise of professional judgment (Thorne 1998). Pincoffs's (1986) generic categorizationof the virtues is presentedin Figure 1 (next page). In our analysis of the interview transcripts,we identified both auditors'virtues as denotedby Pincoffs (1986) and auditors'virtues distinctivelydenotedin terminologyspecific to the auditcommunity. Althoughmanyof the virtuesidentified by Pincoffs were also identified by our exemplars, we found that the meaningof some virtuesidentiEled the exemplarswas differentfromPincoffs's by meaning.For example, a personwho is describedas open is denotedby Pincoffs as a person who is accepting of new ideas. One participantdescribeda virtuous auditoras open, but qualified what was specifically meantby the word "open," in this way:
"Open" . . . not being inflexible. It's not being so stuck on a position that is you are unwilling to change in light of informationthatwould suggest you ought to change.

But this commentwas qualified as follows:
. . . but not in the sense that he'll wave in the wind because the wind is going in anotherdirection.

Similar to Pincoffs's definition, "open"means not being inflexible and accepting new ideas, but an importantconnotative qualificationwas made to clarify that a virtuousauditormust not be so open as to go againsthis or her principles. In the next section of the paper,we presentthe expert panel-validatedtypology of auditors'virtues resulting from the analysis discussed above.

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Figure 1: Pincoffs's (1986) Typology of the Virtues
VIR5UES

T
MORAL MANDATORY NON-MANDATORY Honesty Benevolence Sincerity Altruism Truthfulness Selflessness Loyalty Sensitivity Consistency .Horglvlngness Reliability Helpfulness Dependability Understandingness Trustworthiness Super-honesty Non-recklessness Super-conscientiousness Non-negligence Super-reliability Non-vengefulness Non-belligerence Non-fanaticism
. _ . .

MEDIATING Tolerance Reasonableness Tactfulness

MEL IO RATING TEMPERAMENTAL Gentleness Humorousness Amiability Cheerfulness Warmth Appreciativeness Openness Even-tempered Non-complaining Non-vindictive

FORMA Civility Politene Decency Modest Hospita Unprete

AESTHETIC
NOBLE Dignity Virility Magnanimity Serenity Nobility CHARMING Gracefulness Wittiness Vivaciousness Imaginativeness Whimsicality Liveliness

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,

Figure 2: Typology of AuditorsSVirtues
AUDITORS'VIRTUES
| NON-INSTRUMENTAL | MANDATORY Honest Sincere Truthful Reliable Dependable . rustworthy Integrity Independent Objective Principled Healthy skepticism Concerned with the public interest MORAL NON-MANDATORY Benevolent Altruistic Selfless
Sensitive

Puts public interest ahead of self-interest Puts professional interest ahead of self-interest Farsighted Enlightened

MELIORATING MEDIATING TEMPEEtAMENTAL Tolerant Amiable Reasonable Cheerfi Tactful Warm Even-handed Appreciative Open Even-tempered Thoughtful

FORMA Civility Politene Decency Unprete

AESTHETIC
NOBLE Dignity Magnanimity Professional Pride Honorable Mature Generous

CHARMING

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A Typology Auditors' of Virtues
The qualitativelyderivedtypology of auditors'virtues is presentedin Figure 2 and describedin detail below.

Non-instrumental Virtues
For auditors,non-instrumental virtues are those virtues that lead auditorsto formulatetheir intended actions consistent with the ethical ideals of the audit community (Thorne 1998). There are three different sub-categoriesof non-instrumental virtues:moral,meliorating,andaesthetic.Auditors'virtuesconsistent with each sub-categorywill be briefly describedin turn. Auditors' moral virtues The frequency and the focus of the exemplars'discussion of the moral virtues revealedthe importanceof moralvirtuesfor auditors.Moralvirtuesdescribe traits concerned with an individual's intention to act in accordancewith his or her ethical judgment (Thorne 1998). There are two sub-categoriesof moralvirtues: mandatoryand non-mandatory. According to Pincoffs (1986), mandatory virtues are requiredvirtues; they are the minimum.In contrast,non-mandatory virtues go beyond the minimum;as such, non-mandatory virtues are exemplary, supererogatory, maximal or ideal. Based on the analysis of our interviewdata,mandatory moralvirtues are the auditors'virtuesrequired,at minimum,to ensureauditors'formulation profesof sional judgment in accordancewith GenerallyAccepted Accounting Principles (GAAP).We use the analogyof "TheAuditoras Business Person"to suggest that mandatory moral virtues are those virtues that one would expect in a reputable businessperson,for whom the possession of the mandatory virtuesis considered to be a minimumstandard doing business. Our list describes an auditorposto sessing the mandatorymoral virtues (see Table 1) as honest, sincere, truthful, reliable, dependable,and trustworthy (from Pincoffs's list) as well as someone who has integrity,is independent, objective,principled,maintainsa healthyskepticism, andhas a concernwith the public interest(from our dataanalysis). Table 1: Mandatory Moral Virtues of Auditors "The auditor as business person"
Qualities necessary to auditors' formulation of "sound" professional judgment that complies with generally accepted practices Honesty (P) Sincerity (P) Truthfulness (P) Reliability (P) Dependability (P) Trustworthiness (P) Integrity Independence Objectivity Principled Healthy skepticism Concern with the public interest

(P) = Virtues also included in PincoJjrs's list

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Examples of statements made by our participantsthat helped us to better understand types of virtues that might fall into this category from the audithe tors' perspectiveinclude the following:
The people you are dealing with are not the people you are workingfor, so havingan independent mindset, havingthe abilityto separateyourselffrom the personal. . . your personalfeelings or your interactions,or your empathy or whateverit is with the person is critically important. ';Integrity'7 the ability to follow a set of principlesas opposedto reacting is to a mere circumstanceor expediency. Integrityto me is doing the right thing. "Objective" being able to see both sides of the issue fromboththe client's is perspectiveandyourinitial perspectiveandtakingeverythinginto account. But still, it is not necessarily free of client influence because you need to understand client's side of the issue as well. the Clients, in my belief, look at two attributesof an auditor,and one would be the ability to provide technical service in a timely fashion.... [T]he other is we do want somebody who is absolutelyseven without a doubt, trustworthy.

Althoughit is importantthat auditorspossess the mandatory virtues at minimumsmandatory auditors'virtues may not be enough to ensure the formulation of "ideal' professionaljudgment.We use an exampletakenfrom the Enroncase to illustrate this point. Given that Generally Accepted Accounting Principles (GAAP) pertainingto the reportingof Special Purpose Entities were complex and subjectto interpretationS firms like Enroncould move debt off theirbalance sheets into Special Purpose Entities without disclosing the existence of these entities to investors. In addition, auditors who fail to require such disclosure might consider this decision to be consistent with the possession of mandatory auditors' virtues since the decision is not in directcontraventionof specific professional standards.This problem is not limited to the Enron case. In the words of one of the exemplarsinterviewedfor this study:
[I]t is more a factor of the inconsistency and complexity of the transactions that clients are entering into. The irlcreasein things of a litigious nature.... Clients more and more are trying to stretch the rules and get people-auditors to compromise,or the client's financial people are trying to walk the fine lines stretchthe rules readthem in differentways than they used to ten or twenty years ago.

Therefore,the exemplarsinterviewedfor this study arguedthat the non-mandatory moral virtues are also essential to the auditor'srole. Pincoffs (1986) describes non-mandatory virtuesas virtues that go beyond the minimum.For auditors,ourparticipants perceivedthatnon-mandatory moral virtues are those personal characteristicsthat result in auditorsmakingprofessionaljudgmentsin whichthe publicinterestis paramount. example,although For GAAP does not requirean accountingentryto recordthe issue of stock options,

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the auditormay believe that the public interest and the interests of the users of financial statementsare better served by making an accountingentry to record them. The auditorexhibiting non-mandatory moral virtues would make this argument to the audit community and work to change the generally accepted practice. The auditor,in this case, expends time and effort to serve the public interest and the interestof the auditprofession, perhapsat the expense of his or her own self-interest. As specifically appliedto the Enroncase, an auditorexhibiting the non-mandatorymoral virtues would have requiredthe client to disclose the existence of Special PurposeEntities if the auditorfelt that such disclosure was in the public interest.The auditorexhibiting non-mandatory moral virtues would requirethis disclosure in the spirit of fair disclosure to the public. In addition, the auditor would qualify the auditors' opinion and/or resign from the audit if the client refused to do so. We use "The ConsummateProfessional" as a descriptive analogy of nonmandatorymoral virtues to capture the notion that these virtues describe the auditorwho not only takes the public interestinto account,but places the public interest ahead of his or her own interests. Table 2 shows that non-mandatory moral virtues include several of the virtues identified by Pincoffs (1986) (i.e., benevolent, altruistic,selfless, sensitive) as well as several virtues arising from ourdataanalysis.These auditors'virtuesincludeputtingthe publicinterestahead of self-interest, putting professional interest ahead of self-interest, being farsighted, and being enlightened. Table 2: Non-Mandatory Moral Virtues of Auditors "The Consummate Professional"
Non-mandatoryvirtues are those that result in the formulation of professional judgment in which the public's interest is paramount. Benevolent (P) Altruistic (P) Selfless (P) Sensitive (P) Puts public interest ahead of self-interest Puts professional interest ahead of self-interesl

(P) - Vgrtues also included in

Commentsmade by our participantsindicating the importanceof auditors' non-mandatory virtues include the following:
In a conflict situation,the virtuousauditorwould not hesitate to go against his or her own client if it would serve the public interest. [A]t the end of the day, they have to put the public interestin front of their own self-interestbecausethey are the ones thatwill maybelose theirclient, maybe lose their fee, whatever.So they have got to be willing to sacrifice personal gain, if you want to call it that, for the public good.

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VIRTUES OF CATEGORIZATIONAUDITORS'
[M]anytimes (auditorschange) because therewas a disagreementwith the client on an accountingissue. And so they get Elred.... [T]he auditordoes the job and for a reward,he gets fired!

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with manThe frequencyof mentionand familiarityof all of our participants virtuesover non-mandatory datoryvirtues suggests the dominanceof mandatory virtues in the audit community. Auditors' melioratingvirtues Accordingto Pincoffs (1986), the melioratingvirtuesmakecommonlife more tolerable. There are three sub-categoriesof the melioratingvirtues: mediating, and temperamental, formal. Each will be describedin turnbelow. to We use the analogy of the auditoras "ThePeacemaker" capturethe notion one's tendencyto resolve an issue in a way that that mediatingvirtues describe may considermanypartieswith differentneeds andobjectives.Auditors'mediatand ing virtuesinclude tolerance,reasonableness, tactfulnessfrom Pincoffs's list based upon our analysisof the datacollected (see Table3). and even-handedness Table 3: Auditors' Mediating Virtues "The Peacemaker"
Mediating virtues are those qualities that facilitate the formulation of professional judgment that satisfies the client-auditor relationship. Tolerant (P) Reasonable (P) Tactful (P) Even-handed

(P) = Virtues also included in Pincoffs'slist

Commentsmade by participantsregardingexamples of auditors'mediating virtues include:
I've got one personin mind.... [H]e was a memberof a task force. He was a public accountant and the situation did sort of involve conflict.... [R]egulatorswanted certainthings.... And basically, I think what he did was he put the cards on the table and said, "Youknow, here's the issue, here's the pressure and at the end of the day this is what I think."And basically he was up front about where people were coming from, what the thathis decision was based on. issues are.And he gave you the information

We use the analogy of "The Congenial Companion"to describe temperavirtues are those traitsthat make a mental auditors'virtues. The temperamental virtues based person pleasant to deal with. Our list of auditors'temperamental on analysis of the data collected includes amiable, cheerful, warm, appreciafromPincoffs's list. For auditors,our expertpanel tive, open, andeven-tempered virtuethat would be valued.Auditors' addedthoughtfulnessas a temperamental thoughtfulnesswas describedby one participantin our study as follows:
This person would probablybe viewed as conservative, not outgoing, not prone to snapjudgments,thoughtful,diligent . . . very level-headed.

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BUSINESS ETHICS QUARTERLY Table 4: Auditors' Temperamental Virtues "The Congenial Companion"
Temperamental virtues are the qualities of an auditor that makes her easy to work with. (P) =Virtues also included in Pincogs 's list Amiable (P) Cheerful (P) Warm (P) Appreciative (P) Open (P) Even-tempered (P) Thoughtful

Results of our research did not reveal manifestations of the formal virtues, although our expert panel agreed that civility, politeness, decency, and unpretentiousness (coming from Pincoffs's list) were important to the auditor's role. Overall,the melioratingvirtueswere not identified as frequentlyas the moral virtuesby those interviewedfor this study.In many cases, the melioratingauditors' virtues were not mentioned at all during the course of the interview. Therefore,this category of auditors'virtues appearsto be of lesser importance overall than the moral virtues category. Aesthetic virtues Pincoffs (1986) describes the aesthetic virtues as "qualitiesthat are farthest away from being instrumentallyvalued.... Aesthetic virtues are appreciated for what they are.... [T]hey are exemplarsof what humanbeings can be; their absence is regrettedbecause it impoverishes life" (p. 86). There are two subcategories of aesthetic virtues: noble and charming.Each will be described in turn below. Noble virtues are possessed by a person who makes of himself or herself "a model of what humanbeings might aspireto.... [T]he sort of person who lives and dies in a high and admirableway" (p. 86), similar to the traditionalcharacterization of "The Knight."Auditors' noble virtues are the qualities possessed by the sort of auditorwho makes himself or herself a model of what other auditors might aspire to. For auditors,the noble virtues include professional pride, honor, maturity,and generosity (see Table 5). Table 5: Auditors' Noble Virtues "The Knight"
Noble virtues are the qualities possessed by the sort of auditor who makes himself or herself a model of what other auditors might aspire to. (P) = Virtues included in Pincoffs's list Dignity (P) Magnanimity (P) Professional pride Honor Maturity Generosity

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in An auditorpossessing the noble virtues was describedby our participants the following terms:
He had the reputationfor being a very sort of up-front,honest honorable personwho would not compromisehis principles. So you knew where you stood when you talked to him. A lot of respect. You had this view that he was older for some reason.... [W]ith age comes maturityor something. He was mature. . . smart. . . very good judgment,knownfor his judgment. I?mthinkingof the one person who is sort of the personificationof a true gentleman.Very ... I was going to say very polite but I don't know.... [V]ery polite, a good listener. In my own personal experience, you know, very open. If I pick up the phone and call he wouldn't hesitate to talk to me.... [S]o very open in that sense. A good listener, thinks before he speaks, very articulate.

Charmingvirtues attractby theirbeauty,and include gracefulness,wittiness, vivaciousness, imaginativeness,and liveliness. Results of our researchdid not reveal auditors virtues consistent with Pincoffs's category of charmingvirtue. The relative importanceof aesthetic virtues to the audit communityappears to be low based on the low frequencyof mention of aesthetic virtues as well as the lack of depth of discussion of this virtue category.Many participantsin the study did not identify any aesthetic virtues as importantto the auditor'srole.

Virtues Auditors' Instrumental virtues are qualities of auditors Pincoffs (1986) instrumental To paraphrase that, in a relatively direct fashion, make it more probable that they will take action consistent with the ethical ideals of the audit community.We use "The virtues to capturethe noDoerS'as a descriptive analogy of agent-instrumental natureat an individuallevel. tion thatthese virtuesdescribeone's action-oriented Ourlist describes the Doer as persistent,courageous,alert, careful,resourceful, determined,diligent, disciplined in action, steadfast, thorough in action, and and someonewho will notbow to pressure who standson convictions(see Table68. Table 6: Auditors' Agent Instrumental Virtues "The Doer"
Qualities of an auditorthat ensure that professional judgment is carried out. Persistent (P) Courageous (P) Alert (P) Careful (P) Resourceful (PJ Determined (P) Diligent Disciplined in action Steadfast Thorough in action Will not bow to pressure- stands on convictions

(P) = Virtues also included in Pincofs 's list

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Examplesdrawnfrom the interviewtranscriptsof referencesto agent instrumental auditors'virtues include the following:
He had personal, strong personal beliefs, and he acted on them. He was taking what he thoughtwas the right answerregardlessof the consequences that we would probablybe fired. Being a professional auditor,in my view, is that you representfinancial reporting and you report the "right"answers and you tell the client the answers regardless of whether it's the news the client wants to hear and whetheror not you, as an individual,might then terminateyour economic relationshipwith the client. [W]herean auditorsees a problemin terms of his standardsduringan audit, sees an event or some representation materialthathe doesn't feel is of right and he knows that management,the people he is working with, are not going to agree with the way it should be presented. . . if he holds his groundthen, that I consider to be ethical behavior.

Instrumental virtues were given a secondary emphasis comparedto moral virtues in our interviews. SpeciElcally,agent instrumentalvirtues were described by all subjects, althoughnot as frequentlyas moral virtues. We use "The Successful Audit Team"as a descriptiveanalogy of the Group Instrumental Virtuesto capturethe notionthatthe enactment these virtuesleads of to a high qualityaudit.Groupinstrumental virtuesare those qualitiesthatensure joint undertakings successful, given thata groupunderstands are whatis required. Table7 shows two groupinstrumental virtues,co-operativeand consultative. Table 7: Group Instrumental Virtues "The Successful Audit Team"
Qualities of an auditors' team (at all levels of the hierarchy) that result in the successful completion of the audit as described by auditors. (P)= virtues also included in Pincoffs's list Co-operative (P) Consultative

When describing the virtuous auditor from a group instrumentalperspective, participantsin the study gave the following examples:
[A] virtuous auditorwould take the time to explain to all those involved on the [audit]team what the resolution was of the ethical dilemmaand the issue, and why. And explain that so everybodycould learn from the situation. And so that nobody left feeling uncomfortablewith the resolution of the issue at the end of the day The virtuous auditor is concerned with both coaching and learning. It's really part of helping to develop the professionaljudgment in the people that work for you.

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Auditors' Virtues Codesof Professional and Conduct
We use the typology presented in Figure 2 to analyze prescribedauditors' virtues by consideringauditors'virtues specifically identified in the applicable Code of Professional Conduct. In Canada,Codes of Professional Conduct are established by each of the provincialinstitutes of charteredaccountants.As all of our participantswere membersof the Instituteof Chartered Accountantsof Ontario(ICAO), we used the ICAO Code of Professional Conductto illustrate the prescribedvirtues of the audit profession in this paper.5 The Code identifies both principles and rules of professional conduct.A review of these principles and rules indicates mandatoryauditors'virtues are the most frequently identified types of virtues in the Code. Specifically included are the mandatory virtues of 1) honesty, 2) integrity,3) independence,4) objectivity, and 5) concernfor the public interest.6For example, the Code prescribes the following:
. . . the duty that the charteredaccountanthas to bring, and be seen to bring, the qualities of objectivity and integrity to his or her professional services.... [H]e or she will not subordinate or her professionaljudghis mentto the will of others,andthathe or she expresseshis or herconclusions honestly and impartially. The public must be assured of the charteredaccountant'sfreedom from any conflict of interest.... Only thus can public confidence in the objectivity and integrityof the charteredaccountantbe sustained,and it is upon this public confidence that the reputationand usefulness of the profession rest (ICAO, Rules of Professional Conduct,2000).

In contrast,the Code does not specifically prescribevirtues in other categories as identified in our typology of auditors'virtues, with the exception of two Agent Instrumentalvirtues, "careful"and "will not bow to pressure,"which were identified twice. In particular, non-mandatory auditors'virtues are not explicitly delineatedbut instead, the following statementis made:
The rules of professional conduct thus define a minimumlevel of acceptable conduct:ethical conduct in its highest sense, however,is a productof personal character an acknowledgementby the individual that the standardto be observedgoes beyond that of simply conformingto the letter of a list of prohibitions(ICAO Code of Conduct2000).

Thus, the Code recognizes the importanceof personalqualities of character (i.e., the virtues),but therewas no specific delineationin eitherthe principlesor the rules of the Code of the non-mandatory virtues as there was for the mandatory virtues. Our analysis suggests that the emphasis on mandatoryvirtues, as perceived by the exemplars,reflects the virtues specifically included and identified in the Code of Conduct.As a result, it appearsthat the Code significantly influences the relative importanceaccorded particularcategories of auditors' virtues by the auditcommunity.We find it alarmingthat non-mandatory virtues are not explicitly delineated in the minimum level of acceptable conduct as

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prescribedby the Code of Conduct,althoughthe exemplarsviewed non-mandatory virtues as essential to the auditors'role. Explicit delineationand inclusion of non-mandatory virtues in the Code, similar to that found for mandatoryvirtues, may be requiredto promotenon-mandatory virtues in auditors. Discussion In this paper,we develop a typology of auditors'virtues as perceivedby the audit community.We comparethe typology of auditors'virtues with auditors' virtues prescribedby the audit profession in the relevant Code of Professional Conduct. Our analysis reveals a strong correspondencebetween the emphasis placed by the Code on specific categoriesof auditors'virtues and the emphasis placedon these categoriesin ourinterviews.Forexample,mandatory virtueswere the most frequentlymentionedand importantcategory of auditors'virtues described by the exemplarsinterviewedfor this study. Secondaryin frequencyof mentionwere non-mandatory auditors'virtuesfollowed by the agent instrumental auditors' virtues.Othervirtuecategorieswere mentionedmuchless frequently. In terms of prescribedauditors'virtues, we found a similar primaryemphasis on mandatoryvirtues in the Code, to the exclusion of most other categories of auditors' virtues. In particular,non-mandatoryvirtues, which reflect the auditor'swillingness to go beyond the minimum,are not explicitly identiEled in the Code. A cardinalprincipleof the auditprofession is maintainingpublic confidence. If the audit profession wishes to maintain public confidence by encouraging the possession of non-mandatoryauditors' virtues, our research suggests thatnon-mandatory auditors'virtuesshouldbe explicitly describedand included in professional codes of conduct. The Enrondebacle appearsto substantiate this conclusion. At the time of the writing of this paper,it is unclearwhetherEnron'sElnancial statementsactually violated any accounting standard,or whetherAndersen violated any auditing standard.The results of our researchimply that Enron's auditorsmay have interpretedtheir role as ensuring that both they and their clients complied with explicit rules. However,the public may perceive the critical issue to be whether or not Enron'sfinancial statementswere fundamentally misleading-regardless of the existence or non-existence of explicit standards,practices, or rules. This line of reasoning suggests that, to rectify this situation, professional codes of conductshould specify and explicitly delineateauditors'non-mandatory virtues. One way to deal with this problem, accordingto Harvey Pitt, formerchairman of the SEC, would be for the SEC to impose a requirement auditorsto for consider "substanceover form"in the interpretation the rules. Along similar of lines, one of our participantsstated,
I'm thinkingparticularly wheresomeonepointsto the Handbook says, of and "Showme whereI can't do that."So it's tryingto find a way to justify where management wantsto go andratherthanlooking at the Handbookandlooking at the spiritof the Handbook if thatparticular pattern and fact isn't there,

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VIRTUES OF CATEGORIZATIONAUDITORS' tell doesn7t me I can't do it, so therefore simply saying,"Well,the Handbook I can do it" . . . and then you startstretchingthe limits.

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"Substanceover form" suggests that the rules, as codified in generally accepted accounting principles (GAAP), are used not only to prohibitbehavior, but also to guide behavior.Auditorsare requiredto look beyond the rules to the substance of the transactionand ensure that the "spirit"of the transactionis presented.Mr. Pitt suggests that, for the accountingprofession to maintainits value to society, it must ensure that "puttingthe public interest foremost"has prominenceas an auditors'virtue. In Mr. Pitt's words:
The public cannot be served if professionals who serve as gatekeepers merely follow the letter of the law, but not necessarily its spirit. We need to move away from wooden, rigid literalismand encourageall upon whom the present system depends to adopt a bias in favor of the needs of the investing public. (Remarksto the SEC Speaks Conference,February22, 2002)

When consideredin the context of our study,Mr.Pitt's commentsimply that the non-mandatory auditors'virtues,which include"putting publicinterestahead being "farprofessionalinterestaheadof self-interest," of self-interest," "putting sighted," and being "enlightened" should be more actively encouraged in membersof the auditcommunity.One way for the auditprofessionto signal the auditors'virtuesto membersof the profession importanceof the non-mandatory conductof auditors. wouldbe to explicitlyincludethemin the rulesof professional As with any study of this type, there are several limitations to consider in interview apevaluating the results. For example, the use of a semi-structured proach provides a rich data set, but by its naturelimits the sample size (Hirst and Koonce 1996). As a consequence,we recognize thatthe resultsof this study may not generalize to the entire populationof auditors.Futureresearchcould ascertainthe extent to which auditors'virtues identified and categorizedin our study are descriptiveof those generally recognized by auditorsin Canada.Furthermore,given that our subjectswere Canadian,we may introducea culturalor social bias with regardto the identified auditors'virtues.Futureresearchshould endeavorto examine auditors'virtues within different national and regulatory contexts. Finally, our researchis limited in its focus on auditorsin defining the auditors' virtues. Futureresearch could analyze, and possibly compare, auditors' virtues as perceived by other interestedpartiesincluding auditors'clients, users of financial statements,and non-auditemployees of accountingfirms. to these limitations,this studycontributes our understanding Notwithstanding of auditors'virtues as presentlyenactedby the auditcommunity.Larson(1977) suggests that society grantsprofessionsspecial power and prestigebecause they have special competencein esoteric bodies of knowledgelinked to centralneeds andvalues of the social system andbecauseprofessionsaredevotedto the service of the public, above and beyond materialincentives. Integralto ensuringthe retentionof this special power and status,the auditprofessionmust both prescribe andenact a set of auditors'virtuesthat guardthe public good.

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Notes
We would like to express our appreciation to our expert panel and the many participants in the study. Thanks also are extended to participantsin the 2001 CAAA Annual Conference and the 2002 EuropeanAccounting Association Annual Conference. Funding for this project from the Centre for Accounting Ethics, University of Waterloo is also gratefully acknowledged. l This is a somewhat different methodology than applied by Pincoffs (1986) who compiled a list of virtues with the help of Robert Audi, another philosopher. They developed their list by drawing on their joint understanding of what it means to be virtuous, but without reference to the definition of virtues of any particularprofessional community. 2 Rules of professional conduct are prescribed in the sense that members of the profession are required to comply with them in order maintain their professional status and right to practice. 3 We felt it important to include a regulator who had also been an auditor as a representative of the constituency of users of audited information. 4 This was the same expert panel that aided us in validating the original list of auditors' virtues generated from analysis of the interview transcripts. 5 Although not completely comprehensive, we chose to focus on the Code of Conduct of the Ontario Institute of CharteredAccountants given Ontario is the largest province in Canada with respect to membership in the Canadian Institute of CharteredAccountants. 6 The ICAO Code of Conduct was reviewed by both researchers who each independently developed a list of auditors' virtues noted in the principles and rules. The lists were then compared for agreement. Where lists differed, disagreement was resolved through reference to the Code.

References
Brown, D. A. 2000. "Building Markets Starts with Building Credibility."Remarks made by David Brown, QC, Chair of the Ontario Securities Commission in a dialogue with the Ontario Securities Commission (October 31). Denzin, N., and Y. Lincoln. 1998. Collecting and Interpreting Qualitative Materials. Thousand Oaks, Calif.: Sage Publications. Gaa, J. 2001. "Doing a Good Job? The End of the Accounting Profession." Working paper, University of Alberta. Hirst, D. E., and L. Koonce. 1996. "Auditors'Analytical Procedures:A Field Investigation." ContemporaryAccounting Research 13(2), 457-86. Institute of Chartered Accountants of Ontario. 2000. ICAO Rules of Professional Conduct: Toronto. Larson, M. S. 1977. The Rise of Professionalism: A Sociological Analysis. Berkeley, Calif.: University of California Press. Levitt, A. 1998. The Numbers Game. Remarks made by the Chair of the Securities and Exchange Commission to the NYU Center for Law and Business, New York, N.Y. (September 28). MacIntyre,A. 1984. After Virtue.Notre Dame, Ind.: University of Notre Dame Press. Mintz, S. M. 1995. "VirtueEthics and Accounting Education."Issues in Accounting Education 10 (2): 247-67.

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Pincoffs, E. 1986. Quandaries and Virtues. Lawrence, Kans.: University Press of Kansas. Pitt, H. L. 2002. Remarks made to the SEC Speaks Conference, Feb 22. Shaub, M. K. 1994. "Limits to the Effectiveness of Accounting Ethics Education." Business and Professional Ethics Journal (Spring/Summer): 129-45. Schilit, H., 2002. Financial Shenanigans: How to DetectAccounting Gimmicksand Fraud in Financial Report, Second Edition; McGraw-Hill. Thorne, L. 1998. "The Role of Virtue in Auditors' Ethical Decision-Making: An Integration of Cognitive-Developmental and Virtue-Ethics Perspectives." In Research onAccounting Ethics (4), ed. L. Ponemon. Greenwich, Conn.: JAI Press: 29 1-308. Tsui, J., and F. Gul. 1996. "Accountants'Behavior in an Audit Conflict Situation: A Research Note on the Role of Locus of Control and Ethical Reasoning."Accounting, Organizations and Society 21: 41-51. Windsor, C., and N. Ashkanasy. 1995. "The Effect of Client Management Bargaining Power, Moral Reasoning Development, and Belief in a Just World on Accountant Independence."Accounting, Organizations and Society 20: 701-20. Van Maanen, J. 1979. Qualitative Methodology. Beverly Hills, Calif.: Sage.

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BUSINESS ETHICS QUARTERLY APPENDIX Semi-Structured Interview Questions

Virtuous 1) We would like you to describe an incident or incidents where you have experienced or observed an auditorrespondingin a virtuous way to an ethical conflict. 2) How does this person exemplify a "virtuous"or "good" auditor?What words would you use to describe this person? 3) Are there other importantqualities of a virtuous auditor? 4) How would you complete a sentence beginning with "A list of the personal qualities of the model auditorwould include"? 5) How does your descriptionof the dispositions of a virtuousauditordiffer from the dispositions of other professions (e.g., lawyers, doctors, and nurses)? Not Virtuous 1) We would like you to describe an incident or incidents where you have experienced or observed an auditor NOT responding in a virtuous way to an ethical conflict. 2) How does this person exemplify an auditor who is NOT "virtuous"or good? What words would you use to describe this person? 3) Whatotherdispositions would you use to describe an auditorwho is NOT virtuous? 4) How would you complete a sentence beginning with "A list of the personal qualities of an auditorwho is NOT virtuouswould include"? 5) How does your descriptionof the dispositions of an auditorWHOIS NOT VIRTUOUSdiffer from the dispositions of otherprofessionals who are not virtuous (e.g., lawyers, doctors, nurses)? General Consequence Some people argue that the auditorof today is less ethical or virtuous than the auditorof twenty years ago. Wouldyou agree or disagree?Can you describe how the characteristicsof auditorshave changed over the past twenty years? How do you think the profession should respond? Note: The order of presentationof the virtuous and non-virtuousquestion categories was reversed for half of those interviewed.

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