Ethics for the Auditor
What are ethics? Are ethics encompassed by laws and codes? Corporate ethics focus on rules like not accepting gifts or not supervising family, conflicts that are easy to define., but life is complicated.
Laws, rules, and codes tend to be ‘Thin’ ethics and only address easily identifiable conflicts. ‘Thick’ ethics are the relationships between people. For example, family relationships are easy to spot, but how does an auditor perform an unbiased first-party audit of the auditor’s best friend that referred the auditor to the Quality Manager to hire in the first place?
Workplace relationships are natural, and can even arise on 2nd and 3rd party audits as well.
How we think about ethics: Of the four levels of ethical analysis (values, moral rules, ethical decision-making, and post-ethical), most people work at the first two levels. However, good/bad judgements are not sophisticated enough, and sets of rules are almost always too vague or too specific to apply in most situations. We have to operationalize ethics and make good decisions based the spirit and intent of the rules.
Ethical conflict: Ethical problems are conflicts. Important types include conflicts of interest, conflicts of authority, and role conflicts. For example, an internal auditor might receive guidance from the president of a company during an interview with Top Management, telling the auditor to dig deep, take extra time, and document everything possible. Afterward, the Quality manager may tell the auditor to only document significant findings. The auditor has received conflicting guidance from two authority figures.
How should the auditor reconcile this with his or her responsibility to apply criteria to evidence in an unbiased manner? (Examples of other types of conflicts will also be given.)
Ethical decision-making: This section describes in detail a model that can be used to make decisions when perceiving an ethical dilemma. First, gather information…who, what, when, where, etc. Next, define the ethical problem. A Conflict of Interest? Conflict of Authority? Role conflict? Third, identify alternatives. What courses of action are available? Next, project the consequences of each course of action. Finally, find the right fit by applying moral rules, rehearsing defenses, and especially applying the “Washington Post Test.” How would one feel if the decision made became widely known?
Business-level strategy: Unbiased auditing comes down to establishment of a culture of ethical behavior. The first step is prevention of conflict through leadership and alignment. How do leaders act to negative information?
Do managers fight against adverse findings (beyond all reason), or do they accept the input as an opportunity to get better? If the former, Top Management must be engaged to explicitly champion the latter. The next step is to engage the audit staff.
Auditors should be trained to recognize ethical conflicts and to use the decision-making model when conflicts are perceived, Then, rather than being uneasy about a situation, auditors will know that their uncertainty is normal and have a path to resolve the dissonance. Both of these strategies require regular reinforcement.