Ethics and Code of Ethics
The International Organization of Supreme Audit Institutions (INTOSAI) offers standards and guidelines to dictate the practices of audit institutions. Such principles are known as International Standards of Supreme Audit Institutions. This agency gives detailed definitions of specific terms and concepts in order to inform the practice of every professional auditor.
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Ethics: INTOSAI defines “ethics” as a personal model or philosophy that dictates what ought to be wrong or right (Code of ethics 2017). It can also refer to moral tenets that govern auditors’ behaviors whenever pursuing specific professional goals.
Code of Ethics: This refers to a document or policy that informs the actions, initiatives, behaviors, and practices of individuals in a given profession. INTOSAI goes further to define a “code of ethics” as a set of principles associated with a professional organization’s mission, vision, core values, and standards (Code of ethics 2017). SAI’s code of ethics, for instance, focuses on positive behaviors that are consistent with the expressed principles or guidelines.
Importance of Code of Ethics
The benefits of having a powerful code of ethics for a professional auditing body or organization are outlined below.
- It clarifies the most appropriate principles, missions, and values for auditing agencies, organizations, and firms.
- It links every outlined guideline with professional practice or conduct.
- It can be used by auditors and other employees to make better decisions.
- It has been observed to empower workers to address emerging ethical problems and dilemmas.
- It ensures that an organization follows existing laws.
- It serves as a powerful tool for marketing a professional body or auditing firm.
- It mitigates most of the risks arising from financial misappropriation or ethical misconduct.
Code of Ethics for Auditors
An effective code of ethics should include these aspects: integrity, independence and objectivity, competence, professional behavior, and confidentiality and transparency. This section offers a definition and a detailed analysis of each of these concepts.
- Integrity: This is the ability or willingness to act reliably, honestly, and in good faith (Code of ethics 2017). The concept means that every action or activity must be in the interest of the public.
- Independence and objectivity: This means being free from any form of influence that has the potential to compromise a person’s professionalism or functioning. The term “objectivity” is defined as the ability to act in an unbiased or impartial manner (Code of conduct & workplace ethics 2018).
- Competence: This term refers to the ability to possess desirable skills and knowledge for the intended role and to act in accordance with outlined or existing principles (Code of conduct & workplace ethics 2018).
- Professional behavior: This means complying with stipulated or applicable conventions, laws, and regulations. An individual who portrays this kind of behavior will not engage in any conduct that is against the profession’s principles (Code of ethics for professional accountants 2006).
- Confidentiality and transparency: The meaning of this term is that auditors must protect data and information while at the same time being accountable and precise.
- This value requires that every auditor is honest, transparent, and reliable.
- Every action undertaken should be in accordance with the existing ethical principles.
- According to the concept, auditors must always act in good faith.
- Lack of integrity can affect the effectiveness of auditing as a profession.
- The value can deliver positive results in auditing practice.
Independence and objectivity
- This value seeks to prevent or mitigate circumstances and behaviors that have the potential to affect the nature of auditing practice.
- Professionals in this field should avoid such sources of influence to reduce the chances of being compromised.
- For example, they must not accept bribes or funds whenever completing their roles.
- Every action or duty should be pursued with a sense of impartiality.
- Any form of bias should be eliminated since it is capable of affecting the integrity and effectiveness of a proficient auditor.
- The idea of “competence” can be used to identify desirable skills and concepts that dictate the nature of auditing practice.
- Individuals in this field must seek to acquire adequate knowledge that can propel them to the next level.
- They should also develop superior skills that resonate with the roles and responsibilities of an auditor.
- It is mandatory to achieve or develop competencies in accordance with every outlined standard or guideline.
- This value or attribute should also be developed continuously.
- This value is informed by the notion of integrity.
- It is taken seriously in order to deliver positive results.
- Auditors must always comply with existing laws and conventions.
- They must develop superior personal philosophies that are guided by various ethical principles.
- This kind of practice can ensure that the action of a given auditor does not discredit or affect the integrity of the affected auditing firm.
Confidentiality and transparency
- Auditors handle crucial or confidential information.
- They should always strive to protect it from unauthorized access.
- Whenever doing so, they must consider attributes such as accountability and transparency.
- This practice will ensure that auditing remains an admirable profession (or field).
- The approach will ensure that auditing meets the diverse needs of different stakeholders.
Penalties for Breaching the Code of Ethics
In the field of auditing, different international organizations such as INTOSAI outline specific aspects that should be considered whenever developing a code of ethics. Every code of ethics document describes the consequences and punishments available once an individual has acted contrary to it. The major penalties for breaching the code of ethics are outlined below.
- Minor breaches such as tardiness can attract penalties such as written or oral warnings for the leaders in a given auditing organization.
- The auditor might have his or her responsibilities and privileges trimmed.
- Warnings and punishments are usually documented in order to deal with the problem of repeat offending.
- Atrocities that are against the code of ethics, such as receiving bribes and accepting external influence, can result in harsher penalties.
- Auditors who commit such offenses might be demoted. They can also have their pays deducted.
- The damages or expenses arising from given malpractice can be incurred by such auditors.
- More often than not, auditors who fail to stick to the code can lose their membership or license.
- Some might also be barred from offering their auditing services for life or for a specified period depending on the intensity of the breach.
- In heightened cases where third-party actors are mentioned, the police might be involved to deal with the matter. This means that the targeted auditors will be prosecuted for going against the code.
- Offenses that amount to unprofessionalism, such as abusing others or engaging in heinous crimes, can result in imprisonment.
- This analysis explains why individuals in this field must exercise caution and always focus on the outlined code of ethics.
- This move can make it easier for them to achieve their aims and emerge successfully.
Code of Ethics for Administrative Employees
Individuals in administrative positions must be keen to support the welfare of their clients and followers. Since they connect employees to different customers, they have increased chances of being compromised or influenced. However, administrators who have a powerful philosophy will find it easier to act ethically and deliver positive results for their organizations. In order to succeed in their respective positions, administrative employees must follow every ethical standard in the provided code of ethics. Such standards are defined and described below.
- Fairness and justice: This term refers to the promotion of impartiality and evenhandedness for all clients and stakeholders in a given organization (Code of conduct & workplace ethics 2018).
- Conflict of interest: This term means that administrative employees should maintain the highest levels of integrity and trust whenever liaising with different stakeholders.
- Use of information: This term means that administrators should protect the liberties and rights of different individuals by acquiring, sharing, and using the information in a truthful manner (Code of ethics for professional accountants 2006). Honest communications with stakeholders should always be taken seriously.
- Leadership: This means that individuals should exhibit appropriate managerial attributes and act as role models in order to maintain the desired level of ethical conduct.
- Professional responsibility: The meaning of this standard is that administrators should meet the stipulated standards of competence and integrity whenever providing service to others (Code of ethics for professional accountants 2006). They should add value to their organizations and engage in actions that can result in improved credibility.
- Confidentiality of information: This standard refers to effective, truthful, and diligent handling and dissemination of information (Employee code of conduct 2015). This means that data should not be shared recklessly with unauthorized individuals or stakeholders. Informed consent is also crucial whenever using or distributing sensitive or confidential information.
Detailed Explanation: Ethical Standards
Fairness and justice
- These ethical standards guide administrators to be impartial and fair whenever supporting the needs of their followers.
- They should embrace the concept of justice whenever dealing with all employees and clients.
- This practice is essential because it results in increased confidence levels.
- A non-partisan approach should be considered whenever tackling problems and issues affecting different stakeholders.
- This approach will support the diverse needs of both professionals and customers.
Conflict of interest
- The purpose of this ethical standard is to ensure that administrative employees maintain a high trust level whenever interacting with stakeholders.
- They should be keen to protect the welfare of different individuals.
- They should also not favor specific individuals while ignoring the needs of others.
- The idea of integrity should be exhibited to minimize the chances of conflicts of interest within a given organization.
- Those who consider these crucial aspects will achieve their goals within a short time.
Use of information
- The purpose of this standard is to encourage and guide different professionals to use information in a proper manner.
- Confidential data should be gathered after getting the consent of the targeted subjects.
- Data should be used effectively. It should also not be shared with third-party users.
- Decision-making processes supported by the collected information must be impartial.
- The rights of different stakeholders and individuals should always be protected by using the information in a professional manner.
- Administrative employees are required to act as role models.
- These professionals should portray the highest level of professionalism, make proper decisions, and focus on the changing needs of different stakeholders.
- They should also be empowered to use appropriate leadership models depending on the needs of the targeted followers.
- The concept of ethical conduct should be evident whenever managing, empowering, and leading others.
- The promotion of these evidence-based leadership practices can result in positive organizational outcomes.
- Administrators can use this ethical standard to act ethically and responsibly whenever guiding others.
- Their actions should be able to transform or add value to the organization or agency being served.
- They should pursue positive goals and guide others to do so.
- They must accept their responsibilities and engage in lifelong learning in order to continue meeting the diverse needs of individuals from various backgrounds.
- It is necessary to focus on activities and roles that will enhance the value and credibility of the targeted organization.
Confidentiality of Information
- The manner in which information is shared (or handled) dictates the confidence levels of different stakeholders.
- Any form of mishandling or misuse of confidential information can affect the integrity or image of an organization. This means that administrators should gather and disseminate data in a professional manner.
- Information or data can be classified and categorized in terms of privacy. This approach will ensure that the right information is shared with the right recipient.
- Administrative employees should exercise caution whenever engaging in their personal affairs.
- This practice will make it easier for a professional administrative to achieve his or her objectives and make the organization successful.
Penalties for Breaching the Code of Ethics
There are various penalties for administrative employees and managers who breach the above ethical standards. Such punishments will depend on the nature of the violation and its subsequent implications. The inclusion of appropriate penalties compels different professionals to act ethically and meet the needs of their clients. The penalties for breaching this code include:
- Minor breaches or offenses attract penalties such as warnings (written or oral) for different administrative employees.
- Responsibilities and privileges can be reduced depending on the nature of the violation.
- Warnings and punishments are documented. This is done to identify repeat or notorious offending.
- Bribes and misuse of confidential information can attract harsh penalties.
- Offenses such as sharing unnecessary data might result in demotion.
- Pay deduction is also a common penalty for offenders.
- Serious violations can result in license revocation.
- Some administrators might even have their memberships canceled.
- Affected individuals might be barred from offering their services in different organizations or settings.
- Violations that result in the loss of a person’s liberty or right can attract the attention of the police. This means that criminal proceedings might be filed against an employee who has mishandled a client’s information or data.
Codes of ethics are powerful documents that guide individuals in administrative positions to act morally and support the needs of every stakeholder. This is also the same case for auditors practicing in different settings. The above analysis has revealed that those in the auditing field must always exercise caution and act in accordance with the presented code of ethics. This move can make it easier for professionals to achieve their goals and deliver quality services to different stakeholders.
Code of conduct & workplace ethics 2018. Web.
Code of ethics. 2017, INTOSAI Professional Standards Committee 2017, Copenhagen.
Code of ethics for professional accountants. 2006. Web.
Employee code of conduct. 2015. Web.