Ethics and the internal auditor

03-04-2017

By Shaer Halewood, Assistant Director of Finance, Oldham Council

As councils embark on more entrepreneurial and therefore potentially more risky initiatives in an attempt to mitigate funding cuts, officers may find themselves faced with ethical dilemmas. A faster paced environment often lends itself to more freedom and delegation of authorisation and situations can arise where if decisions are not taken, then opportunities can be lost. Who would want that on their watch, especially when fixed term or invest to save job contracts are at stake?

Officers are under increasing pressure to act now and validate later for one time only deals and have to exercise and draw on their professional experience and judgement to determine whether to take decisions or to delay them and potentially lose out to undertake the necessary due diligence.

But what happens if they make the wrong judgement and take the wrong decision, in good faith and in what they thought was for the benefit of taxpayer? Are they supported and protected from the inevitable chop? Generally not, as there is always the requirement for accountability.

Internal auditors can often find themselves side-lined or hindered in their quest to ascertain whether the governance around such decisions is adequate. Being asked to reschedule audits, delaying meetings, documents forgotten to be shared or worse still being told that certain areas will not be looked at. So much for independence. At least this provides the auditor with a bit of intuition as to what areas they definitely do need to look at and at the soonest opportunity.

But what if auditors (and officers) encounter their own ethical dilemmas whereby they do become party to such information that puts them at risk of being scapegoated or they report something unpopular and find themselves structured out at a later date. Where can they look to for support and advice?

CIPFA’s ethics working group have been updating and revising the Statements of Professional Practice (SOPP) in line with the International Ethics Standards Board for Accountants (IESBA) Code of Ethics, which it fully adopts. The group’s remit is to raise awareness and expectations of what members can and should do when faced with ethical dilemmas and to give members confidence in the SOPP and supporting guidance. The publication ‘Ethics and You’ is also in the process of being updated. Internal auditors also have to follow the code of ethics in the Public Sector Internal Audit Standards.

As CIPFA Members no matter how much of a good deal something looks or how busy we are with other things, we have a duty to ensure the appropriate due diligence and governance processes are in place. We are bound by the SOPP and to have it fall by the wayside has dire consequences. Sure the risk of being scapegoated or having your post deleted is extremely worrying but not to uphold ethical standards for fear of these is worse and carries with it a niggling conscience. 

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  • Shaer Halewood is Assistant Director of Finance at Oldham Council. She is a member of CIPFA’s ethics working group and the CIPFA North West President. She will be leading a workshop session at CIPFA’s Internal Audit Conference on ‘Ethics and the Internal Auditor’.