Chapter 9
Implementing and Auditing Ethics
Programs
The main elements
•
•
•
•
The ethics audit
Benefits of ethics auditing
The auditing process
The strategic importance of ethics auditing
1-The ethics audit
• What is ethics audit
What is the difference between ethics auditing
and financial auditing?
It’s a systematic evaluation of an organizational
ethics program and performance to determine
whether its effective.
It includes regular, complete, and documented
measurements of compliance with the
company’s published policies and procedures.
The ethics audit
• Antecedent and a condition to setting up an
ethics program in that it identifies the firm’s
current ethical standards and policies and risk
areas so that an ethics program can effectively
address problem areas
• Bring a sample audit from a certain company
• What is a Social audit?????
The ethics audit
• Social audit: is the process of assessing and
reporting a business’s performance in fulfilling
the economic, legal, ethical and philanthropic
responsibilities expected of it by its
stakeholders.
• In ethics auditing a company will be
stakeholder-responsive.
2- Benefits of ethics auditing
Before we talk about the benefits
• Recent ethical crisis and accounting scandals
are the secret behind all this and the reason
why companies choose to understand, report
on, and improve their ethical conduct.
• Many orgs started to concentrate on ethics
auditing along with SR, Corporate
Governance, and social accountability.
Benefits of Ethics Auditing
• At one extreme, a company may want to
achieve the most ethical performance
possible, whereas another firm may use an
ethics audit just to create a good image to
hide its corrupt culture. Other firms may just
want to comply with the legal and
governmental regulations.
2- Benefits of Ethics Auditing
•
•
•
•
•
•
•
For the org
For stakeholders
Identify potential risks and liabilities and
Improve its compliance with the law.
Improve relationship with stakeholders
Enron could have been saved!
Trust creation and building
Ethical Crisis Management and
Recovery
The process of ethics disaster recovery planning
involves
1-assessing the organizational values
2-developing an ethics program
3-performing an ethics audit
4-developing contingency plans for potential ethical
disasters.
The ethics audit provide the key link to preventing
ethical disasters.
Challenges of Measuring Nonfinancial
Performance
• Here we talk about social and ethical
accountability.
• The “Integrity” of an org has to focus on
nonfinancial areas of performance.
• It implies a balanced org that not only makes
ethical financial decisions but also is ethical in
more subjective aspects of its corporate
culture.
• Risks and requirements in ethics auditing
• A red flag or side effects of ethics audit when
uncovering a serious ethical problem that it
would prefer not disclose until it can resolve
and remedy the situation.
• Disclosure could be a problem and a benefit at
different times with different situations.
The auditing process
• Secure commitment of top mgrs and board of
directors- this is very clear and self evident.
• Establish a committee to oversee the ethics
audit- who do you suggest?
• Define the scope of the audit process: (for
example, environmental issues, employee
rights, discrimination, fraud, legal compliance)
The auditing process
• Review organizational mission, values, goals,
and polices and define ethical priorities. Why?
• Collect and analyze relevant information: this
is to identify the tools or methods for
measuring the firm’s progress in improving
employees’ ethical decisions and conduct.
The auditing process
• Verify results by an independent party.
• Report findings via the ethics audit report to
the board of directors, and external
stakeholders
The strategic importance of ethics auditing