From Ethical Recognition to Reviewable Action in External Auditing: Ethical Enactment Theory

Abstract Research on auditing ethics explains ethical recognition, judgment, intention, voice, collective deliberation, audit-firm conditions, and reduced audit quality acts. However, it does not provide a concern-level explanation of how matters become recognized as ethically significant and subsequently progress through external audit practice. Drawing on Traditional Grounded Theory and interviews with 30 South African professionals with external audit experience, including seven working in international offices, this paper develops Ethical Enactment Theory. The theory begins with ethical alertness, through which a matter becomes a recognized ethical concern. The ethical significance spectrum captures variation in how auditors register and weigh that significance, while ethical calibration compares these interpretations against evidence, professional requirements, and shared professional reference points. Governance-conditioned conversion explains how consultation makes a recognized concern jointly assessable, conditional escalation routes it where additional authority, independence, expertise, or protection is required, and documentation preserves the concern, evidence, reasoning, decision, and response for review. Ethical enactment occurs where the concern is incorporated into audit work through an appropriately supported response or reasoned closure. Where progression weakens, the concern may be deferred, diluted, or displaced. These forms describe what happened to the concern. Intentional procedural departure separately qualifies a form only where the evidence establishes that the auditor knew the required professional response and knowingly avoided it or substituted an inadequate response. The theory explains how ethical responsibility is enacted or weakened through distributed professional processes in external auditing.