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Question Onea. What is the purpose of the IIA’s Code of Ethics?b. An internal auditor has dual responsibilities — to his or her employer and to theprofessional organization(s) of which he or she is a member. How should theinternal auditor balance these two sets of responsibilities?Solution 1 a. The purpose of The Institute’s Code of Ethics is to promote an ethical culture in the profession of internal auditing. A code of ethics is necessary and appropriate for the profession of internal auditing, founded as it is on the trust placed in its objective assurance about risk management, control, and governance. The Institute’s Code of Ethics extends beyond the definition of internal auditingto include two essential components: 1. Principles that are relevant to the profession and practice of internal auditing; 2. Rules of conduct that describe behaviour norms expected of internal auditors. Theserules are an aid to interpreting the principles into practical applications and are intended to guide the ethical conduct of internal auditors. The Code of Ethics, together with The Institute’s Professional Practices Framework and other relevant Institute pronouncements, provide guidance to internal auditorsserving others. “Internal auditors” refers to Institute members, recipients of or candidates for IIA professional certifications, and those who provide internal auditing services within the definition of internal auditing. b. Internal auditors are expected to follow directions from their employers unless thosedirections violate the standards applicable to their profession. If an employer instructs an internal auditor to take an action that is in violation of the code of ethics or professional standards of the professional organization(s) of which the internal auditor is a member, the auditor is constrained, in following directions from his or her employer, not to do anything that contravenes those ethical and professional standards. In other words, the ethics and standards of the profession provide limits within which the internal auditor should follow the directions of his or her employer. If asked to do something that may be contrary to either general or professional ethics or standards, the internal auditor must use his or her professional judgment in deciding what response is appropriate in the circumstances, seeking advice from his or her professional association(s) where necessary.
Question TwoDuring the management seminar that you attended recently, you heard the following commentsmade by Nadia Howerchuk, the president of a major company:“I do not quite understand what this whole army of internal auditors is doing in the privatesector. They are certainly useful in the public sector, where they must make sure that a wholemultitude of laws, regulations, and directives are followed to the letter. But the situation is quitedifferent in private business, where profit is an important source of motivation.