Internal auditor’s compliance to code of ethics

Noor Furzanne Alias · Anuar Nawawi · Ahmad Saiful Azlin Puteh Salin

31 citations0/0 files storedJournal of Financial Crime

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Ethics in Business and Education Auditing, Earnings Management, Governance Accounting and Financial Management

Abstract

Purpose The purpose of this study was to determine the professional competency levels acquired by internal auditors in detecting unethical behaviour, to evaluate the position of internal auditors on objectivity and integrity in dealing with unethical behaviour and to examine the extent of their awareness on ethical issues in government-linked companies (GLCs). Design/methodology/approach Data were collected via questionnaires that were randomly distributed to the internal auditors of the selected GLS in Malaysia. These questionnaires were constructed from the Certified Internal Auditor (CIA) Examination Paper and The Institute of Internal Auditors (IIA) Competency Framework. Findings This study found that internal auditors of the GLCs had a high level of competency in performing audit engagements and were able to detect unethical practices in the companies. The majority of the internal auditors also had a high level of objectivity and integrity when faced with unethical behaviour during audit engagements. Research limitations/implications This study provided strong evidence that the internal auditors of Malaysian GLCs strongly complied with IIA Code of Ethics. Besides, they were also aware of the unethical behaviour which occurred within their organizations. However, this study is limited to the internal auditors in GLCs, while the questions of the survey instrument are restricted to the elements of integrity, objectivity and professional competencies of internal auditors. Practical implications This study highlights the level of internal-auditor competency and adherence to the IIA’s International Standards for the Professional Practice of Internal Auditing (ISPPIA) and IIA’s Practice Guide to identify unethical behaviour within the Malaysian GLCs. Originality/value This study is original as it focusses on GLCs which did not get much attention from previous researchers, particularly the GLCs that operate in a developing country such as Malaysia.

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References

1976Theory of the firm: Managerial behavior, agency costs and ownership structure 2010Bad apples, bad cases, and bad barrels: Meta-analytic evidence about sources of unethical decisions at work.2000Fraudulent Financial Reporting: Consideration of Industry Traits and Corporate Governance Mechanisms 2009Internal Audit Quality and Earnings Management 2002Ethics and accountability: from the for-itself to the for-the-other 2009The organizational context of professionalism in accounting 2006Practical Wisdom: Aristotle meets Positive Psychology 2005Internal auditing practices and internal control system

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