A lead auditor comes to work one day and is instructed to do an audit engagement with another auditor. However, the lead auditor is aware that the indicated team member is not independent with regard to the underlying audit subject. The prudent and diligent lead auditor presents this information to the relevant superior and asks that the team member be replaced. Yet, not only is the compromised auditor left on the engagement, but the lead auditor is then instructed not to share this information with anyone and to conduct the audit engagement as initially planned. What should the lead auditor do?
Standard 1100: Independence and Objectivity says internal auditors are expected to be objective and independent in performing their professional duties. However, there isn't always specific guidance on how they should behave in situations that put ethical pressure on them. The first question is whether the auditor is even able to recognize such a situation. Once that is determined, the next relevant question is who can the auditor escalate the issue to. In such instances, the auditor may be afraid of losing his or her job by speaking up about these kinds of issues.
Several suggestions may help internal auditors deal with challenging ethical situations while protecting their own independence.
Start From the Beginning
Internal auditors are obligated to adhere to The IIA's Code of Ethics, the principles and expectations that govern the behavior of auditors in conducting their work. The Code of Ethics comprises integrity, objectivity, confidentiality, and competency. Although these principles are general in their nature, each has minimum requirements for conduct and behavioral expectations. Ultimately, they set the tone for the ethical practice or internal auditing. Thus, understanding and keeping in mind the requirements outlined in the Code of Ethics is an excellent starting point for every internal auditor in preserving his or her independence and conducting ethical audit engagements (see The IIA's implementation guidance on the Code of Ethics released in early 2019).
Presenting the situation realistically, based on facts, and with all the relevant details, can help auditors protect themselves. Internal auditors derive objective conclusions based on facts in their everyday work. By not speaking up, auditors can inadvertently become collaborators and supporters of ethical violations, which can impair their own independence. Regardless of the...