Dubai: Ethical lapses and fraud schemes continue to evolve in complexity, with serious consequences at the financial and reputational levels in organisations, and the role of internal auditors is to strengthen the governance framework to prevent them, the UAE’s internal auditing community has been told.
“As the business landscape changes with artificial intelligence and blockchain replacing conventional business transactions, consumers and regulators are demanding more accountability, integrity and ethics from leaders and businesses. Audit plays a pivotal role in providing insight on how to improve the governance framework and tackling the compliance and ethics challenges,” said Abdulqader Obaid Ali, Chairman of UAE Internal Auditors Association (UAE IAA).
“Audit is moving beyond the conventional compliance checks to face more challenges like auditing culture and behavioural controls while assessing the impact of technology on the organization in general and on the internal audit function in particular”, he added.
Addressing the Ethics Session as part of the monthly members’ meeting of the UAE Internal Auditors’ Association (UAE IAA), Colette Harb, Consultant, UAE IAA, said “ethics is a sensitive area that cannot be audited using a traditional audit approach”. To get a real feel of the ethical climate that the employees and customers are experiencing, a phased audit approach should be considered focusing on quick wins/high impact areas.
The internal audit activity must evaluate the design, implementation, and effectiveness of the organization’s ethics-related objectives, programs, and activities as per the requirements of the international professional practice framework. The session, which focused on the theme ‘Emphasize the Basics – Elevate the Standards’ espoused by the previous IIA Global Chairman Naohiro Mouri, deliberated on ways to ensure that ethics is applied in the day-to-day audit decisions.
“As trusted business advisors, Internal auditors must have high level of integrity and should be viewed as a role model and advocate of strong ethics; they should have the competence to influence the leaders and employees’ behaviour to comply with the ethical responsibilities,” said Colette Harb.
In order to foster a strong ethical culture, the session suggested the following measures: Set a strong tone at the top and lead by example; Establish a code of conduct and a system of checks and balances to minimize the opportunities for unethical behaviours; Assess the employees’ understanding and adherence to the code of conduct; Foster empowerment and interaction across the hierarchy to raise concerns and express grievances; Ensure transparency, open communication and clear accountability, implement effective disciplinary measures; Support effective whistleblowing and grievance mechanisms and build trust in the integrity of the reporting system.
In order to improve the governance framework and assess the organization’s ethics-related objectives, programs, and activities, the Session recommended the following audit approach:
- Conducting an entity-wide ethics assessment survey which provide a reasonably accurate perception measure of the ethical climate.
- Conducting a maturity assessment to identify gaps between the desired and actual ethical climate, leading to action plans to bridge those gaps.
- Review of ethics-related policies and activities assessing the methods used to measure their effectiveness.
- Audit of specific ethics-related functions and assessing the effectiveness of the key controls that serve to mitigate risks that impact ethics-related programs.
UAE IAA, a non-profit organisation of internal auditors, was set up in 1995 along the lines of its parent body the Institute of Internal Auditors (IIA) with 200,000 members from more than 190 countries and territories. The UAE accounts for about 45% of the total number of internal auditors working in the region, estimated at about 7,000 auditors, of which 22% are Emirati citizens.
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