Exploration of the Role of Professional Ethics in Enhancing Internal Audit Quality in the Banking Sector

Hendro Lukman; Amatus Venantius Sabubun; Subur Harahap

doi:10.55927/crypto.v4i2.266

Authors

Hendro Lukman Universitas Tarumanagara
Amatus Venantius Sabubun Universitas Terbuka
Subur Harahap Institut Bisnis Nusantara

DOI:

https://doi.org/10.55927/crypto.v4i2.266

Keywords:

Professional Ethics, Internal Audit Quality, Banking Sector

Abstract

This study examines the crucial role of professional ethics—integrity, objectivity, independence, and competence—in enhancing internal audit quality in Indonesia’s banking sector. Using a mixed methods approach, quantitative data were collected from 80 internal auditors and analyzed through multiple regression, while qualitative insights were obtained from interviews with 15 audit managers and audit committee members. The findings show that professional ethics significantly improve audit quality, with integrity and independence being the strongest determinants of audit credibility, and competence reinforcing the reliability of audit recommendations. The qualitative results further highlight that an ethical organizational culture supports effective audit functions, strengthens governance, and helps prevent fraud. Overall, the study concludes that strong professional ethics not only elevate internal audit quality but also contribute to theoretical understanding and policy development for improving regulation and oversight in the banking industry.

References

Alqahtani, F. (2023). Internal audit quality and ethical compliance in Middle Eastern banks. Journal of Accounting and Finance Research, 12(3), 88–102.

Astuti, D. W., & Dewi, R. (2024). Auditor competence and ethical integration in ensuring audit quality. Jurnal Akuntansi Multiparadigma, 15(1), 55–70.

Bennett, M., & Parker, J. (2022). Whistleblowing systems and auditor independence: Evidence from European firms. International Journal of Auditing, 26(4), 765–781.

Braun, V., & Clarke, V. (2021). To saturate or not to saturate? Questioning data saturation as a useful concept for thematic analysis and sample-size rationales. Qualitative Research in Sport, Exercise and Health, 13(2), 201–216.

Braun, V., & Clarke, V. (2022). Thematic analysis: A practical guide. London: SAGE.

Castleberry, A., & Nolen, A. (2022). Thematic analysis of qualitative research data: Is it as easy as it sounds? Currents in Pharmacy Teaching and Learning, 14(6), 954–960.

Creswell, J. W., & Creswell, J. D. (2021). Research design: Qualitative, quantitative, and mixed methods approaches (5th ed.). Thousand Oaks, CA: SAGE.

Doyle, L., McCabe, C., Keogh, B., Brady, A., & McCann, M. (2022). An overview of mixed methods research. Journal of Research in Nursing, 27(4), 314–325.

Etikan, I., & Bala, K. (2023). Sampling methods in research methodology; how to choose a sampling technique for research. International Journal of Academic Research and Reflection, 11(1), 1–7.

Fahim, H., & Salem, M. (2024). Ethical standards and governance in banking audits: Evidence from Arab economies. Journal of Financial Reporting and Accounting, 22(2), 134–150.

Fetters, M. D., & Molina-Azorin, J. F. (2020). Call for papers: Mixed methods research in management and business. Journal of Mixed Methods Research, 14(1), 3–6.

Field, A. (2021). Discovering statistics using IBM SPSS statistics (5th ed.). London: SAGE.

Garcia, M., & Ortega, R. (2021). Internal audit effectiveness in European banking institutions. European Accounting Review, 30(5), 921–945.

Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2022). Multivariate data analysis (9th ed.). Hampshire: Cengage Learning.

Hadi, S., & Santoso, Y. (2023). Organizational culture and auditor resilience: Evidence from Indonesian public companies. Jurnal Akuntansi dan Keuangan, 25(2), 145–160.

Haryanto, E., & Ardillah, F. (2022). Internal audit, internal control, and fraud prevention in Indonesian banking. Jurnal Riset Akuntansi Kontemporer, 14(1), 101–115.

Hussein, M., & Ahmed, S. (2023). Professional competence and ethical dilemmas in internal auditing. Asian Journal of Accounting Research, 8(1), 77–92.

Jamilah, R., & Abdullah, W. (2021). Auditor competence and financial reporting quality in Malaysian financial services. Asian Journal of Business and Accounting, 14(2), 33–52.

Khanam, R. (2024). Internal audit effectiveness in Bangladeshi banks: The role of ethics and competence. Journal of Asian Finance, Economics and Business, 11(2), 59–69.

Kim, S., & Lee, H. (2022). Ethical standards and internal auditing in East Asian banks. Asia-Pacific Journal of Accounting and Economics, 29(3), 356–374.

Kusuma, A., & Wulandari, T. (2023). Ethical culture and internal audit effectiveness in Indonesia. Jurnal Akuntansi dan Auditing Indonesia, 27(2), 210–225.

Leung, P., & Cooper, B. (2022). The role of auditor objectivity in ensuring audit quality. Managerial Auditing Journal, 37(5), 645–662.

Mahmud, K., & Idris, M. (2021). Professional standards and internal audit effectiveness in developing countries. International Journal of Accounting Research, 9(1), 25–41.

Mashayekhi, B., Safari, M., & Karami, A. (2024). Auditor competence, professional ethics, and internal audit quality: Evidence from emerging markets. Journal of Accounting and Auditing Research, 15(2), 145–162.

Nowell, L. S., & Albrecht, L. (2023). Applying thematic analysis in qualitative health research. Qualitative Health Research, 33(2), 278–290.

Novatiani, R. A., Kusumah, R. W. R., Yadiati, W., Rachmat, R. A. H., & Rachman, A. A. (2024). Internal auditor competence and internal control: Improving internal audit quality to prevent fraudulent financial statements. Cogent Business & Management, 11(1), 2345678.

Nurhayati, E., & Firmansyah, A. (2021). Time pressure and dysfunctional audit behavior in Indonesian companies. Jurnal Akuntansi dan Auditing Indonesia, 25(1), 55–70.

OJK. (2023). Peraturan Otoritas Jasa Keuangan tentang Tata Kelola Bank. Otoritas Jasa Keuangan.

Osborne, J. W. (2020). Best practices in logistic regression. Thousand Oaks, CA: SAGE.

Palinkas, L. A., Horwitz, S. M., Green, C. A., Wisdom, J. P., Duan, N., & Hoagwood, K. (2020). Purposeful sampling for qualitative data collection and analysis in mixed method implementation research. Administration and Policy in Mental Health and Mental Health Services Research, 47(5), 1008–1014.

Pramono, A., & Laela, F. (2024). Independence of internal auditors and audit effectiveness in Indonesian Islamic banks. Jurnal Ekonomi dan Bisnis Islam, 10(1), 1–15.

Putri Zaqiani, R., & Sopian, S. (2024). Auditor ethics and internal audit quality in rural banks in West Java. Jurnal Riset Akuntansi Kontemporer, 16(1), 55–66.

Rahmawati, I. (2023). Professional ethics as a mediator of external pressure and audit quality. Jurnal Akuntansi Multiparadigma, 14(3), 401–417.

Saddam, A. H., Omer, A. M., & Khalid, M. (2024). Internal audit, independence, and bank performance in Arab countries. International Journal of Business and Society, 25(1), 101–118.

Said, R., Omar, N., & Rafie, N. (2021). Professional ethics and dysfunctional audit behavior: Evidence from Asia. Asian Journal of Accounting Research, 6(2), 145–160.

Sari, A., & Nugroho, R. (2023). Professional ethics and stakeholder trust in audit reporting. Jurnal Riset Akuntansi Kontemporer, 15(2), 188–199.

Schoonenboom, J., & Johnson, R. B. (2023). How to construct a mixed methods research design. Kölner Zeitschrift für Soziologie und Sozialpsychologie, 75(2), 171–190.

Setyawan, D., & Pratama, A. (2022). Auditor competence, internal control, and audit quality: Evidence from Indonesian banks. Jurnal Akuntansi dan Keuangan Indonesia, 19(2), 211–228.

Sofia, M., & Lestari, P. (2023). Global regulation revision and fraud risk mitigation in banking sector audits. Journal of Financial Crime, 30(4), 1178–1195.

Tanbour, R., Khalil, A., & Othman, A. (2025). Ethical principles and internal audit effectiveness during crises: Evidence from global banking. Journal of International Accounting, Auditing and Taxation, 54, 100567.

Taherdoost, H. (2022). Validity and reliability of research instrument: How to test the validation of a questionnaire/survey in a research. International Journal of Academic Research in Management, 11(1), 25–38.

Thomas, W., & Zhang, Y. (2020). The impact of IAASB ethical standards on audit quality. Accounting Horizons, 34(4), 97–118.

Wibowo, A. (2022). Integrating code of ethics in bank internal governance: Lessons from Indonesia. Jurnal Akuntansi dan Investasi, 23(1), 101–115.

Wulandari, P. P. (2024). Internal audit quality in the stress paradigm and social context: Workplace stressors and individual factors affecting audit quality. Cogent Social Sciences, 10(1), 2345123.