Ethics for Internal Auditors
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The document provides an overview of ethics for internal auditors, highlighting the importance of ethical standards in the profession and describing various ethical frameworks derived from different religions. It also outlines the roles of Richard Cascarino and Jim Kaplan in the auditing field and presents resources made available through AuditNet, including training and templates. Additionally, it emphasizes the significance of continuous professional development, adherence to the IIA Code of Ethics, and the necessity of conducting ethics audits for organizations.
Ethics for Internal Auditors
- 1. Richard Cascarino CISM, CIA, ACFE, CRMA Ethics for Internal Auditors
- 2. ABOUT RICHARD CASCARINO, MBA, CIA, CISM, CFE, CRMA • Principal of Richard Cascarino & Associates based in Colorado USA • Over 28 years experience in IT audit training and consultancy • Past President of the Institute of Internal Auditors in South Africa • Member of ISACA • Member of Association of Certified Fraud Examiners • Author of Data Analytics for Internal Auditors 2
- 3. About Jim Kaplan, CIA, CFE President and Founder of AuditNet®, the global resource for auditors (available on iOS, Android and Windows devices) Auditor, Web Site Guru, Internet for Auditors Pioneer IIA Bradford Cadmus Memorial Award Recipient Local Government Auditor’s Lifetime Award Author of “The Auditor’s Guide to Internet Resources” 2nd Edition Page 3
- 4. ABOUT AUDITNET® LLC • AuditNet®, the global resource for auditors, serves the global audit community as the primary resource for Web-based auditing content. As the first online audit portal, AuditNet® has been at the forefront of websites dedicated to promoting the use of audit technology. • Available on the Web, iPad, iPhone, Windows and Android devices and features: • Over 3,100 Reusable Templates, Audit Programs, Questionnaires, and Control Matrices • Webinars focusing on fraud, data analytics, IT audit, and internal audit with free CPE for subscribers and site license users. • Audit guides, manuals, and books on audit basics and using audit technology • LinkedIn Networking Groups • Monthly Newsletters with Expert Guest Columnists • Surveys on timely topics for internal auditors Introductions Page 4
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- 7. The views expressed by the presenters do not necessarily represent the views, positions, or opinions of AuditNet® LLC. These materials, and the oral presentation accompanying them, are for educational purposes only and do not constitute accounting or legal advice or create an accountant-client relationship. While AuditNet® makes every effort to ensure information is accurate and complete, AuditNet® makes no representations, guarantees, or warranties as to the accuracy or completeness of the information provided via this presentation. AuditNet® specifically disclaims all liability for any claims or damages that may result from the information contained in this presentation, including any websites maintained by third parties and linked to the AuditNet® website. Any mention of commercial products is for information only; it does not imply recommendation or endorsement by AuditNet® LLC
- 8. Today’s Agenda Major terms involved in ethics and business ethics in particular Levels of business at which ethics is evaluated and the core issues involved Why ethics is necessary on the personal and organisational level Distinguish between ‘morality’ and ‘ethics’ Why IIA professional ethics and professional virtues are important. Page 8
- 9. Ethics Theory What are Ethics? Go beyond moral principles Designed for both practical and idealistic purposes "above the law but below the ideal" (Kell & Zeigler) A professional way of life Wheelwright's three key elements Ethics involve questions requiring reflective choice Ethics involve guides of right and wrong Ethics are concerned with consequences of decisions 9
- 10. Ethics in Differing Religions Common heritage going back a thousand years before Christ have important internal distinctions and structures Orthodox Judaism, Reform or Progressive Judaism Roman Catholic, Eastern Orthodox, Anglican, Protestant and Pentecostal ... and others Four shared features of the ethics of Jewish and Christian people.
- 11. Jewish Ethics Grounded in the Torah Mitzvoth (ethical commandments) The golden rule That which is hateful unto you, do not do unto others. Thou shalt love thy neighbour as thyself The Talmud Prophecy.
- 12. Christian ethics Ethics concerned with conscientiously living a whole Christian life Loving invitation and free response rather than law and duty Jesus of Nazareth Core moral guidelines in Christianity Natural law Sources of moral guidance The Bible Reason Tradition Experience Modern moral maze.
- 13. Islamic ethics Origins in Arabia Islam means peace – engaged surrender or submission to God or Allah’s will Central belief: acceptance of God’s oneness and the prophethood of Muhammad Sources of moral guidance • Qur’an • Muhammad’s example • shari’a (Islamic law) Basis for evaluating ethical behaviour: God’s will Action-based Modern debate for Muslims today.
- 14. Hindu ethics Origins in India – oldest of Indian traditions The eternal way A richly diverse value system – tolerant & flexible Deeds count more than sameness of belief Life’s goals Karma (actions) Dharma (right or appropriate actions) Sources of ethics Various scriptures, such as Great Epic, the popular Ramayana and the Gita Some controversial earlier practices Modern revitalising movements.
- 15. POLLING QUESTION
- 16. Internal Auditors must balance Their personal feelings and moral standards The IIA code of ethics Applicable statutes An empathetic approach to attitudes The auditee's Management's Society's The law's 16
- 17. A Body of Ethics The hallmark of a profession A profession characterised by Acceptance by society Service to society A common body of knowledge A body of standards of the technical requirements and methodology of the profession A body of ethics The imposition by itself or by society when the ethics or standards are not upheld 17
- 18. Ethics Therefore Help establish credibility of the members of the profession Establish public confidence in the profession as a whole Establish a common guideline for measurement Allow judgement by peers To be effective they must Be known Be enforced vigorously and objectively Be seen to be effective 18
- 19. Applicable areas within Internal Audit Attitudes and actions relative to the organisation • Management • Auditees • Others Attitudes and actions relative to other auditors Professional proficiency and competence Other ethical issues Integrity Objectivity Independence Acts bringing the profession into disrepute 19
- 20. POLLING QUESTION
- 21. Classes of Ethics (1) Imperative Principle Requires strict compliance with the code • No choices • No rules with exceptions allowed • No "lesser of two evils" May cause problems when two or more provisions appear to be at odds May cause problems when the ethical principle produces results out of proportion to the materiality 21
- 22. Classes of Ethics (2) Utilarianism Course of action bringing most good to most people Primary support of social ethics in countries Act utilarianism • Acts must lead to the greatest good for the greatest number • If rules do not assist this, they are to be broken Rule utilarianism • Firm and publicly advocated moral rules • All acts must conform to these • No special cases 22
- 23. Classes of Ethics (3) Deontological Ethics Concern is on the consequences of acts Actions result from the concepts of duty Principles are "independent of each person's conscience" (Kant) Consistency is a requirement and conscience may condone acts which could lead to societal disintegration 23
- 24. Role of Business Classical theories Plato, Aristotle and Adam Smith Business has no relationship to societal goals and social objectives "The purpose of business is business" (Friedman) The Ethics Egoist Achieving egoistical goals Following established rules for the benefit of all Social Responsibility Held by "Moralists" Business should have special goals Business as a good citizen (Kant) Social responsibilities beyond profits 24
- 25. Ethics of Employees The Duty of Obedience A duty to obey all reasonable directions No obligation to perform illegal or unethical acts The Duty of Loyalty Acts should be performed only in the interest of employers • Only when acting as an employee 25
- 26. The Duty of Confidentiality Information acquired as a result of the organization's operations may not be used to further the interests of the employee or another Does not apply if the information is general knowledge 26
- 27. Codes of Conduct Do not enforce "ethical" behavior Serve as a means of expelling non-conforming members of a population Should be in place for all companies (recommended in 1987 by the Treadway Commission and 1994 by King) Should be enforced Internal Auditors can assist management in its design Can then be reviewed and appraised by Internal Audit 27
- 28. POLLING QUESTION
- 29. Professional Practices Framework • Code of Ethics • Attribute, Performance, & Implementation Standards 29 Ethics & Standards Practice Advisories Development & Practice Aids •Books •Research Studies •Seminars •Conferences • Professional Practices Guidance, Representation
- 30. IIA Code of Ethics I Honesty, objectivity and diligence II Loyalty III No discreditable acts IV Conflict of Interest V Acceptance of gifts VI Professional competence VII Compliance with The Standards VIII Confidentiality IX Reporting of material facts X Strive for improvement XI Maintenance of standards 30
- 31. Honesty, Objectivity and Diligence Primary requirements Honesty Professional Opinions, truthfully expressed Not lying, cheating or stealing Objectivity Without fear or favor Uncoloured by the auditor's personal feelings or opinions Diligence Persistence of effort Following up on findings 31
- 32. Loyalty To Organization Management Auditee Public Placing the organization's interests first Loyalty does not require the Internal Auditor to break the law Non-disclosure of illegal activities Becoming party to an illegal act It does, however, preclude whistle-blowing except where the Internal Auditor has been so tasked 32
- 33. Discreditable Acts Internal Auditors shall not knowingly participate in: Acts which are discreditable to the organization Acts which are discreditable to Internal Auditing Discrediting Anything which leads to a loss of repute Anything which causes doubt Includes Unprofessional activities Acts directly against the interest of the organisation 33
- 34. Conflicts of Interest Activities in conflict with the interests of their organizations Activities which could prejudice the Auditor's ability to carry out his responsibilities Actual Perceived May include Auditing in areas where there was a recent line management role Auditing in areas where there will in the future be a line role Auditing in areas where there is a family connection Auditing in areas where there is a vested interest 34
- 36. Items of Value Items which could impair objectivity Actual Presumed Previously "Items which could not be utilized in one day" Previously acceptable if the gift had management's blessing Now only non-valuable and promotional items freely available may be accepted 36
- 37. POLLING QUESTION
- 38. Professional Competence Internal Auditors shall be professionally competent Refuse work in areas where they are not competent Competent Knowledge Skills Disciplines Does not imply infallibility 38
- 39. Confidentiality Prudence in the use of information acquired Not for personal gain Not for the gain of others Not in any manner contrary to the law Not in any manner detrimental to the welfare of the organization This includes "Whistle-blowing" where not specifically tasked to do so 39
- 40. Reporting of Material Facts Non-concealment of material facts Prevention of distortion of reports of operations Non-concealment of unlawful practices Material Important Essential Non-trivial 40
- 41. Strive for Improvement Continuous Improvement in Proficiency Improvement in the Quality of Service Efficiency Effectiveness Economy Ongoing Professional Development Training Reading Conferences 41
- 42. Maintenance of Standards Competence Morality Dignity Abiding by the Bylaws of the Institute Upholding the Objectives of the Institute 42
- 43. POLLING QUESTION
- 44. The Ethics Audit Systematic evaluation of an organization’s ethics program and performance to determine whether it is effective Regular, complete, and documented measurements of compliance with policies and procedures Can be a precursor to establishing an ethics program Helps to identify the firm’s current ethical standards, policies, and risk areas
- 45. Benefits of an Ethics Audit Identify potential risks and liabilities and improve legal compliance Can be key in improving organizational performance Improved relationships with stakeholders Pressure to account for actions in areas including corporate governance, ethics programs, customer relationships, employee relations, environmental policies, and community involvement
- 46. Risks in Ethics Auditing Ethics audits may uncover ethical problems that a company cannot remedy Stakeholders may be dissatisfied with the information Conducting the audits is a financial and record keeping burden No guarantee that auditing is the solution to ethics concerns
- 47. POLLING QUESTION
- 48. QUESTIONS? Any Questions? Don’t be Shy!
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