Brain Friendly Lecture Notes

Internal Audit ETHICS (CIA Students)

(Valid 2013)
by Hafiz Muhammad Adnan Rana Professional Accountant/Auditor Trained with PwC (A.F.Ferguson & Co Chartered Accountants) Author of following for CIA/Internal Auditing Proession Raising Above Personalities (Internal Control) Travel to Chitral (Urdu Story based) Keeping the SOX on (Corporate Governance) Real Life Examples Missing Millions (Fraud) Travel to Dubai (Urdu Story based) Souls are Weak, They are Liability (Risk Management / ERM) Travel to London (Urdu Story based) Chief Inspiring Officer @ Accurate Consultants, Sialkot (Audit/Tax/Advisory/Accounting) Socialprenuer @ The Student College, Research and Training Centre, Sialkot www.stuco786.com stuco786@gmail.com

A. Comply with The IIAs Attribute Standards

A-Comply with the IIAs Attribute Standards. 8. Abide by and promote compliance with the IIA code of Ethics.

Exam Context CIA Candidates can expect questions on it.

Qualification Context Make sure you remember each principle and code of conduct.

Business Context The internal audit ethics is the basic step towards AntiFraud development plan within your organization.

Before we begin with ETHICS (Principles/Rules of Conduct) lets read relationship between law, governance, social responsibility and ethics:

Law
Rules individuals and companies must follow. The minimum level of behavior society allows.

Corporate Governance

Publically listed companies only are regulated. Others are encouraged to follow best practice.

Social Responsibility
No Regulation. Individuals and companies have a free choice. Some social pressure to act in a socially responsible manner. Less Regulation, More Freedom of choice

Ethics
Values and Principles. Individuals and companies are expected to follow. Adopting an ethical position is down to free choice. No Regulation, Ultimate freedom of choice.

More regulation, less freedom of choice

Moderate regulation, Moderate freedom of choice

Ethics is not about legal or illegal. its about Right and Wrong. For example, chasing an Accounts Receivable is not legal or illegal. Its about how much you can go further to recover money by adopting right method of recovery.

A note for Pakistani Muslim Students on Ethics. Have you ever noticed in Islamiyat (Quran, Sunnah, Hadith) paper that non-muslim students are asked to solved IKHLAKIAT portion instead of Islamiyat portion. The IKHLAKIAT is actually ETHICS. We have values directly derived from Quran, Sunnah and Hadith and far superior than ETHICS. So Behave !!!

Now lets discuss the PRINCIPLES of code of ethics that iA apply and upholds:

PRINCIPLES Internal Auditors are expected to apply and uphold the following principles:

Since IODINE is in liquid form is used as antiseptic. Same way these principles are antiseptic for those who are susceptible to disease called breach of ethics.

I-Integrity of iA established trust to rely on his Report. O-Objectivity means report based on facts nor rumors. D/I-Dignity/Independence in appearance and infact.
(Scrap it D/I as it is used to complete memory jogger)

N-Necessary Confidentiality of info/records they obtain. E-Edgy (defence iA) or Competenct iA with knowledge, skills and experience.

Now lets discuss the Rules of Conduct. Failure to compliance with these attract disciplinary actions.

1 Integrity

To remember the FOUR rules under it we will use the term of

WADE.

Wade means to go or walk through water or mud with some difficulty. As iA is on firing line all the time. It will be difficult for the internal auditor to walk or go through the operations easily.

W-Work with honesty, diligence and responsibility. (1.1) A-Abide by the law and make necessry disclosures expected by law (1.2) D-Discreditable acts and activity to the profession of iA be avoided.(1.3) E-Ethical objectives of the Org be respected and help Org to achieve.(1.4)

2 Objectivity

To remember THREE rules under it we will use the Term ARABLE

Arable is land which is ready for crops to grow. Since being objective help iA establish authority and trust within organization thus providing platform for him/herself in arable industry.

AR-Activity participation and Relationships avoided that impair assessment (2.1) A-Acceptance of anything for impair professional judgment be avoided (2.2) B-Blessing sought from Allah/God and disclose all material facts knows (given the fact that he/she will lose job in this persuit but have faith of Allah/God) (2.3)

LE-for LE read the pic..and check ur IQ

3 Confidentiality

To remember TWO rules under it we will use the Term PIP

PIP means a seed of fruit like in Apple or seeds to be use is arable land for crops to grown. Since we are connecting the dots of WADE, ARABLE and now PIP. It follows the sense that now everything is set and Internal Auditor should be so carful in handling confidential information that is PIP and thus CORE or central point that will let him/her grow in the organization by developing trust and mutual respect for organization.

PI-Protection of Information obtained is responsibility of iA(3.1) P-Personal gain by using inside information is contrary to law and ethical objectives of the Org. (and is considered insider dealing and is punishable offence.) (3.2)

4 Competency

To remember THREE rules under it we will use the Term SICKLE

We now come down to cutting crop with sickle. Because of competence we are readymade to open iA shop in our organization. With all the foundations laid; now its time to cut the crop. Means iA is full of potential that can be trusted for his skills, knowledge and experience. Sickle is a tool with a curve blade to cut grains.

S-Standards iA should perform services as per Standards of IIA (4.2) I-Improve their own proficiency/effectiveness and quality of services and thus Competency (4.3) KLE-Knowledge, Learned Skills and Experience becomes the base to decide whether to undertake any assignment about which iA has KLE or disccuss with management for oursourching or co-sourcing.

Please study the Gliem Book for overview of what we had had done and tick the syllabus that we have covered. And solve the MCQ on Internal Audit Ethics.

Best of Luck !!!