Ethics and Internal Auditors

Only available on StudyMode
  • Download(s) : 135
  • Published : November 22, 2012
Open Document
Text Preview
Professionalism, Ethical Codes and the Internal Auditor: A Moral Argument

Mary Ann Reynolds

ABSTRACT. This paper examines the case of the internal auditor from a sociological and ethical perspective. Is it appropriate to extend the designation of professional to internal auditors? The discussion includes criteria from the sociology literature on professionalism. Further, professional ethical codes are compared. Internal auditors’ code of ethics is found to have a strong moral approach, contrasting to the more instrumental approach of certified professional accountants. Internal auditors are noted as using their code of ethics to help resolve professional ethical dilemmas.

Introduction Society grants professional standing to those groups which contribute to the well being of the broader society. Business experts in such groups as business ethics consultants and internal auditors lay claim to professional standing which if granted enhances both their credibility and marketability. But is this claim justified? Although business ethicists are beginning to debate this issue they presently lack a common body of knowledge or agreed upon expertise. As defined expert knowledge is one of the common criterion for professional definition their claim awaits the development of consensus (Cohen, 1992; Stark, 1993; and Dean, 1997) However a similar group, internal auditor’s have a fifty year history of moving to achieve this recognition. This paper will examine the justification of their claim to professionalism in light of current practice. Mary Ann Reynolds is assistant professor of accounting at Western Washington University. Her current research publications are primarily in the areas of ethics, and environmental accounting.

This is of importance to society because internal auditor’s provide a peculiar service in that they contribute to the control of the integrity of financial information in a market economy. Public accountants, represented by the American Institute of Certified Public Accountants (AICPA) have long held professional status based on their responsibility to audit publicly issued financial statements. Public accountants provide a range of service but are specifically licensed to perform the external audit of publicly issued financial statements. Internal auditors in contrast have no licensure requirement and practice within the corporation or organization that employs them. There may be great similarity in the work performed by these two branches of accounting. Internal auditors may perhaps be considered a subset of accounting and as such may be included under the professional rubric. However they may also be viewed as a particular class of business expert or consultant, not serving the public good and not necessarily adhering to standards or codes of conduct, in which case the claim to professionalism would not hold. However, as a result of the Foreign Corrupt Practices Act of 1977 corporations are required to maintain effective internal controls to prevent fraud and bribery of foreign officials. Internal auditors have been instrumental in providing this service as well as compliance audits to ensure meeting regulatory requirements. Society appears to expect a professional service even though licensure has not been required nor formally granted. The internal auditor serves an important link in the business and financial reporting process of corporations and not for profit providers but can they be considered professionals?

Journal of Business Ethics 24: 115–124, 2000. © 2000 Kluwer Academic Publishers. Printed in the Netherlands.

116

Mary Ann Reynolds Professionalism: A societal perspective Accountants perform agreed upon services within an orderly social and economic context. The claim to classify accounting, and auditing, as classical professions is based upon their relationship to society as a whole and the question of professionalism must therefore be studied not just in the context of a...
tracking img