Internal%20Audit%20Role%20in%20Order%20to%20Develop%20an%20Ethical%20Corporate%20Culture%20as%20a%20Competitiveness%20Factor - PowerPoint PPT Presentation

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Internal%20Audit%20Role%20in%20Order%20to%20Develop%20an%20Ethical%20Corporate%20Culture%20as%20a%20Competitiveness%20Factor

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Title: Internal%20Audit%20Role%20in%20Order%20to%20Develop%20an%20Ethical%20Corporate%20Culture%20as%20a%20Competitiveness%20Factor


1
Internal 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
2
Agenda
  • 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

3
Internal 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 )

4
Internal 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)

5
The 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)

6
Code 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

7
International 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.

8
Internal 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.

9
Internal 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

10
Findings
  • 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.
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