Title: Internal%20Audit%20Role%20in%20Order%20to%20Develop%20an%20Ethical%20Corporate%20Culture%20as%20a%20Competitiveness%20Factor
1Internal Audit Role in Order to Develop an
Ethical Corporate Culture as a Competitiveness
Factor
POLITEIA
Università degli Studi di Milano DIPARTIMENTO DI
STUDI SOCIALI E POLITICI ISTITUTO DI FILOSOFIA E
SOCIOLOGIA DEL DIRITTO
Centro per la ricerca e la formazione in
politica ed etica
Fourth Annual Forum on Business Ethics and
Corporate Social Responsibility in a Global
Economy
Roberto Villa
- A.I.I.A. - Internal Auditing body
Milan, 13th September 2007
2Agenda
- Internal Audit Role and Definition
- Internal Control
- The components of Internal Control System
- Code of Ethics (IIA)
- International Standards for the Professional
Practice of IA - Internal Audit and Ethics
- Findings
3Internal Audit Role and Definition
- Internal auditing is an independent, objective
assurance and consulting activity designed to add
value and improve an organization's operations.
It helps an organization accomplish its
objectives by bringing a systematic, disciplined
approach to evaluate and improve the
effectiveness of risk management, control, and
governance processes. - (source The Institute of Internal Auditors,
www.theiia.org )
4Internal Control
- Internal control is a process, effected by an
entity's board of directors, management and other
personnel, designed to provide reasonable
assurance regarding the achievement of objectives
in the following categories - Effectiveness and efficiency of operations.
- Reliability of financial reporting.
- Compliance with applicable laws and regulations.
- (source COSO, The Committee of Sponsoring
Organizations of the Treadway Commission)
5The five components ofInternal Control System
- Internal control consists of five interrelated
components - Control environment
- Risk Assessment
- Control Activities
- Information andCommunication
- Monitoring
- (source COSO, The Committee of Sponsoring
Organizations of the Treadway Commission)
6Code of Ethics (IIA)
- The purpose of The Institute's Code of Ethics is
to promote an ethical culture in the profession
of internal auditing. - Internal Auditors shall perform their work with
- Integrity The integrity of internal auditors
establishes trust and thus provides the basis for
reliance on their judgment. Internal Auditors - Shall perform their work with honesty, diligence,
and responsibility. - Shall observe the law and make disclosures
expected by the law and the profession. - Shall not knowingly be a party to any illegal
activity, or engage in acts that are
discreditable to the profession of internal
auditing or to the organization. - Shall respect and contribute to the legitimate
and ethical objectives of the organization. - Objectivity
- Confidentiality
- Competency
7International Standards for the Professional
Practice of I.A.
- 2130 Governance The internal audit activity
should assess and make appropriate
recommendations for improving the governance
process in its accomplishment of the following
objectives - Promoting appropriate ethics and values within
the organization. - Ensuring effective organizational performance
management and accountability. - Effectively communicating risk and control
information to appropriate areas of the
organization. - Effectively coordinating the activities of and
communicating information among the board,
external and internal auditors and management. - 2130.A1 The internal audit activity should
evaluate the design, implementation, and
effectiveness of the organization's
ethics-related objectives, programs and
activities.
8Internal Audit and Ethics
- All people associated with the organization share
some responsibility for the state of its ethical
culture. - Internal auditors and the internal audit activity
should take an active role in support of the
organizations ethical culture. They possess a
high level of trust and integrity within the
organization and the skills to be effective
advocates of ethical conduct. They have the
competence and capacity to appeal to the
enterprises leaders, managers, and other
employees to comply with the legal, ethical, and
social responsibilities of the organization. - The internal audit activity may assume one of
several different roles as an ethics advocate.
These roles include Chief Ethics Officer
(ombudsman, compliance officer, management ethics
counselor, or ethics expert), member of an
internal ethics council, or assessor of the
organizations ethical climate. - At a minimum, the internal audit activity should
periodically assess the state of the ethical
climate of the organization and the effectiveness
of its strategies, tactics, communications, and
other processes in achieving the desired level of
legal and ethical compliance.
9Internal Audit and Ethics
- The main elements in order to assure the best
possible result, are - Organizational positioning of IA in order to
guarantee maximum possible independence. - IA shall operate according to its code of ethics
and International Standards for the Professional
Practice. - Active involvement and example given by the top
management. - Still, if the problems
- Are related to the system or the market, IA
cannot do ...miracles! - Involve the top management, IA shall report to
the organs of Corporate Governance
10Findings
- Ethics is a strategic asset, as inestimable as it
is intangible. - Ethics is a pillar of corporate reputation, which
is surely one of the most important critical
resources for the competitiveness and the success
of any entrepreneurial shape. - The role of the Internal Audit and the
contribution that it can provide is therefore
extremely important, and is above all focused on
prevention. - The benefit of Internal Audit role goes beyond
the borders of the company for which it works.