Internal auditors need to improve company ethics standards

The Chartered Institute of Internal Auditors (IIA) is calling for companies to take concrete steps to audit their corporate culture and behaviour in the wake of a string of recent scandals across several sectors, and says internal auditors have a key role to play in improving organisational ethics.

Dr Ian Peters, the IIA’s chief executive, said: ‘As organisations come under increasing pressure to demonstrate their commitment to improving standards of behaviour they must focus more closely on getting the underlying culture which dictates those behaviours right. But on the basis that what gets measured gets done, they must take seriously the need to audit their progress in addressing the need for change.’

The institute says there have been a number of recent examples of unacceptable activities, including the rigging of LIBOR rates and PPI mis-selling within the financial services sector, concerns over media ethics raised during the Leveson inquiry and the failure of some healthcare providers to adopt the right culture of care.

In a report, Culture and the Role of Internal Audit – looking below the surface, the IIA says  boards in both the public and private sector should tackle these failings by clearly defining and communicating the culture they require to produce the behaviour needed to meet their organisational goals and manage the risks to their achievement. They must then put in place the policies and systems that can be measured and work much more closely with their internal auditors to monitor and report on those measures. 

The report calls for internal auditors to go beyond a focus on processes and controls and undertake root-cause analysis to identify cultural weaknesses. They should also audit cultural indicators to gather evidence on how far culture and values are at the heart of every business decision, which will include evaluating indicators such as recruitment policies, training, performance management and reward.

In addition, the IIA recommends internal auditors assess and audit not  just the tone at the top of a company but throughout the organisation, and says they should trust their judgement even if at times this means taking a subjective approach.

The report can be viewed at


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