Seven Attributes of the Ethical Internal Audit Leader

Richard Chambers, CIA, CGAP, CCSA, CRMA, shares his personal reflections and insights on the internal audit profession. 

 

Every profession makes ethical behavior a cornerstone of accountability for its members. Internal auditors are no different, and we hold ourselves to a very high standard in this regard. This is exemplified by the International Professional Practices Framework (IPPF), which includes a well-defined code of ethics based on the principles of integrity, objectivity, confidentiality, and competency. As the code's introduction states, "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 governance, risk management, and control."

This is one of the primary reasons we perceive ourselves as the “guardians of trust” in our organizations, professionals who are far more likely to disclose ethical misconduct than to misbehave ethically ourselves. However, the reality may be disappointing. In a survey of 70 chief audit executives attending a March 17 Audit Executive Center Roundtable, 32 percent acknowledged that they have "discovered or witnessed unethical actions" within their internal audit functions.

To live up to our aspirations of being the guardians of trust, internal audit leaders must set the bar for the rest of the profession. In looking at what ethical behavior really means, I've identified seven attributes I believe internal audit leadership should model to provide the standard for ethical behavior.

Honest — This is table stakes for ethical behavior. All other attributes stem from this, as one cannot be considered ethical unless one is willing to deal in truth.

Courageous — Being honest is not always easy. One needs to look no further than the example of Cynthia Cooper, who blew the whistle at WorldCom. In spite of a situation fraught with personal and professional danger, she stepped forward with a truth that needed to be shared. It can be easy to know the right thing to do; it often takes courage to actually do it.

AccountableNothing will damage the perception of an individual's commitment to ethical behavior more than hypocrisy. “Be as ethical as I say, not as ethical as I am” can be grounds for poor reputation. While the survey above does not indicate hypocrisy within internal audit, it does show that we have to be constantly vigilant to ensure we are accountable for our actions and the resulting perceptions.

Empathetic — Honesty must be tempered by the realization that we are working with human beings — people with hopes, dreams, and feelings. Part of being accountable includes accountability for the impact of our actions on others. This does not mean that we avoid issues. But it does mean treating others with respect and compassion when the truth is being told.

Trustworthy — If we have not developed trust, our honesty and courage are useless — our words, thoughts, and beliefs will fall on deaf ears. To be trustworthy literally means to be worthy of other individuals’ trust. And that means we must build a history of ethical behavior, a foundation upon which people can place that trust.

Respected — It all comes together in respect. If you have been honest with people, if you have treated them with empathy, if you have shown courage, if you have exhibited the attributes of an ethical leader, then you will be respected. And that respect means they will turn to you as an ideal of ethical behavior.

Proactive — This may be the hidden trait in ethics; the one few think of. If you act only in a reactive manner, you are fulfilling only part of the ethical contract. While honesty and courage about past acts is important, it is just as important to keep an eye on the future and provide honesty and courage in reporting how situations can be averted. By acting proactively, you are exhibiting the deepest aspects of ethics — working to ensure things go right before they can go wrong.

And there is one final, and very important, point to add. I have used the word “leadership.” However, that does not mean I am speaking only to people who have been officially designated as leaders within internal audit. All internal auditors have a mandate to demonstrate leadership. And all auditors need to understand the necessity of exhibiting these traits, and helping ensure internal audit continues to be perceived as the profession that holds itself to a higher ethical standard.

Posted on Apr 1, 2013 by Richard Chambers

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  1. Internal auditors should not only develop in one dimension, that is technically, they should develop their business accumen as well. The profession is flooded by people who have developed in one dimension. These people do not do justice to the profession of internal audit. I have in my life worked with internal auditors who are in leadership position but can hardly lead even the smallest team. They lack foresight and insight. Their leadeship is limited to anaylsis of hindsight!! Nothing frustrates me like the occasional encounter with internal auditors that lack passion for the profession of internal auditing!!

  1. This is exactly what professionals like Richards & I are trying to bring about within the Internal Audit fraternity. Yes... you correctly said ... Internal Auditors need to not only develop but keep demonstrating their ability to showcase their expertise in these areas - business knowledge , foresight & insight. In order to remain an effective specialist advising the management , they need to learn how to live like a business leader ! There are many Organizations in which the AUDITOR has been ACCEPTED by one and all , this is very visible. It's not the knowledge acquisition that is difficult for people but it's the demonstration of their skills and showing the above qualities listed by Richards. I'm sure the audit fraternity will love to do that ! Best Regards. Raj....
  1. This is a great list.  One attribute that is missing is living below your means.  I am not sure of a more succinct way to state this, but the main point is that in order to have the seven attributes of an internal audit leader (the title should be, "The Seven Attributes of the Ethical Internal Auditor"), one must be in a position to blow the whistle and resign when needed.  To quote a former colleague, "you must not only keep your resignation letter in your back pocket, but you must be a able and willing to submit that letter."  To exercise courage and honesty, one must be able to do so.  If you live above your means, or from paycheck to paycheck, you are far less likely to live up to your professional and ethical responsibilities when the need to do so arises.

  1. Great list, Richard.  I also very much enjoyed your talk about ethics at the GAM conference.  So much that I bought the book you mentioned, Blind Spots, and read it.  It showed me that I have some blind spots too, even though I thought I had the qualities you list.

  1. FYI

  1. Good one Richard. A clear insight on role of IAs in the glbal Inc. Need to be practised by everybody in day-to-day affairs - ALN

  1. This is a great inspiration looking at the ethical aspect of Internal Auditors. Internal auditors are the champions of governance, and trust in our activities counts a lot in our profession. It is very unfortunate to experience some cases of dishonesty among internal auditors and at the same time expecting our clients to have trust in our work. Being ethical counts and makes the difference in the profession. So it is our duty to uphold best tenets of governance, trust and ethical behavior to enhance the objectives of the profession in these changing times. b
  1. I particularly like fostering empathy as part of ethical behavior in our profession. 

    I am just one person, I have encountered many times when something has been found in an audit that looked horrible and indefensible.  However, it so happened that it was not as bad as it seemed, and sometimes the responsible party would do the wrong thing but could provide good reason why they thought it was the right thing. 

    One such example from probably 15 years ago was when a manager moved a non-union person into a union position, which was a big no-no in the contract.  However, when discussed with him, the union employee was out on maternity leave and was going to have to take some extra leave due to circumstances and was expected out for 6 months.  The manager simply moved a cross-trained backup (who was not union) into the position temporarily with extra money for the higher work, rather than hire someone new, and hired a temp to assist with the cross-trained employees now-vacant position temporarily.  When the union employee returned from leave, their position would be given back to them, and the crossed trained backup would move back into their position.  He didn't think twice about it, as he was just ensuring coverage until the employee returned from caring for her child.  It was technically a violation of the agreement, but I definitely understood how an ethical person could do it with good intentions and not realize it was a violation.  It's not like it was a sneaky way to avoid having a union employee. 

  1. Of course courageous comes with the after effects, which may impact negatively onto you at the beginning as the auditor but as long as when being courageous you have also attended to the other attributes, which in a way are all intertwined, you will always win at the end ...
  1. Goodafternoon Richard:Wonderful attributes! You have them then u have it great.

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