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Audit of Ethics, ALSAI – Supreme Audit Institution of Albania


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This guideline is meant to give SAI guidance on how to conduct an audit on the ethics in public sector entities.

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Audit of Ethics, ALSAI – Supreme Audit Institution of Albania

  1. 1. AUDIT OF ETHICS Albana Gjinopulli MSC CIPFA CIA Director of Methodology and Development ALSAI – Supreme Audit Institution of Albania Tirana, June 2017
  2. 2. EUROSAI- Task force on Audit & Ethics  The guideline is meant to give SAI guidance on how to conduct an audit on the ethics in public sector entities  In line with ISSAI 5700  Who is the guidance for and how it can be used
  3. 3. What is an Audit of Ethics  An audit of Ethics is a process by which various dimensions of ethical conduct of an organisation can be evaluated  The Audit of Ethics addresses the ultimate responsibility and corresponding accountability of the organisation leadership to promote and ensure that its management of all levels and its staff behave in an ethical way and by doing so refrain from acts of fraud and corruption.  An Audit of Ethics may be used if there are specific issues or perceived risks that need to be addressed
  4. 4. What is an Audit of Ethics  Behavioural issues such as leadership, system , integrity  Identify areas of concern  Evaluate the extent to any perceived problems  Suggest ways forward by which these problems can be tackled  When there are no concerns  act as an ethical health check  Identify existing good practice  Further strengthen the organisation The audit of Ethic looks at the ethical health of the organisation
  5. 5. Types of Audits of Ethics  Compliance Audits  Cultural Audits  System Audits
  6. 6. Why SAI should audit the Ethics  Charts from yesterday  So many problems with compliance, make us forget about other issues like ethics and integrity  Although most cases of fraud and corruption are related to ethical behaviour of individuals or organisations and their integrity
  7. 7. Why SAI should audit the Ethics Structure of economic damage according to audit scope year 2016, in 000 ALL
  8. 8. Why SAI should audit the Ethics  Reform and modernisation of state administration and public management  Ethics turned out to be part of public governance and performance.
  9. 9. What is the role of SAI  Beside their traditional role to audit the execution of state budget, public spending and management of public property, the SAIs contribute to good management of public money and are an important pillar in the National Integrity System.  Are expected to contribute combating fraud and corruption
  10. 10. Benefits from Audits of Ethics  Embodies the view that ethics has real and practical implications in achieving goals, mission and vision of public sector entities  Encourages ethical behaviour and ethical decision making  Strengthening the existing mechanism for monitoring implementation of ethical principles and encourages the establishment of missing processes and/or relevant control activities.  Adds value and contributions to the improvement of management, controls and governance of the audited organisation  Leads to help restoring trust and confidence in public org.  Draws the attention of Parliament and public to the importance of ethical management
  11. 11. SAI mandate to audit ethics  No specific mandate to audit ethics  General mandate of SAI usually provide the power that either audit ethics /integrity as a general subject or to include ethical issues within the other audits.  Traditionally, the audit of ethics was part of audits such as compliance and financial audits.  Ethics is increasingly recognised as element of public organisation performance/potential topic for performance audits.  Audit of ethics may be organised in combination or as part of the main types of audit.
  12. 12. Definitions – what do we mean with ETHICS & INTEGRITY  Ethics- defines what is good for individual and society and establishes the nature of obligations and duties that people owe themselves and one another.
  13. 13. Definitions – what do we mean with ETHICS & INTEGRITY  Integrity- refers to something or someone that is untainted, intact and untarnished - refers to virtue. Incorruptibility and the state of being unimpaired.
  14. 14. Definitions – what do we mean with ETHICS & INTEGRITY Organisational ethics – ethics policies of an organisation , ethical thinking and ethical behaviour of board, management and employees.
  15. 15. Definitions – what do we mean with ETHICS & INTEGRITY  Ethical – relates to moral principles.  Ethical behaviour – prevention and detection of fraud and corruption  General expectations are that public servant should......  Serve the public interest with fairness  Manage the public resources properly  Impartial treatment based on legality and justice Public ethics are perquisites to underpin the public trust and are a cornerstone of good governance
  16. 16. Management of Ethics or integrity  Ethics Management – planning, implementation and coordination of activities of an organisation in achievement of the institutional integrity of that organisation.  Management control and internal control - element of a control system that enable the organisation to reach its goals, hard controls and soft controls  Internal control explicitly recognises ethical operations as an element of general objective to be achieved through effective, build in and on-going internal control by management and other personel
  17. 17. Subject matter for ethics audits  Audit problem / what is auditable  Ethics policy  Propriety of behaviour  Ethical culture / climate  Ethical infrastructure  Ethics/integrity management and control ( including risk assessment)
  18. 18. Examples of inherent vulnerable proccesses
  19. 19. Approaches in auditing ethics   Perspective   Expected result   Possible SAI’s activity     Identifying risks and highlighting the responsibility of public managers     Raise awareness on ethics’ management • Disseminate the key elements of ethics management and control • Encourage public organisations’ self- assessment and ethics related strategies • Work with other ethics or anti- corruption bodies in activities intended to promote ethical conduct     Supporting a more robust internal control system     Reinforce the ethics component of the internal control system • Give guidance to public organisations’ internal auditors • Review internal audit work • Include or reinforce the analysis of the ethics component of the internal control environment in the SAI’s traditional audits           Overseeing and holding public managers to account   Enforce ethical standards and ethics’ defined policies (general or subject related) • Assess the compliance to those standards and policies, either in the SAI’s ordinary audits or in ethics focused audits • Detect corruption and unethical behaviour     Improving ethics management in public sector organisations • Include ethics related questions in the SAI’s ordinary audits • Assess the existence, efficiency and effectiveness of the ethics management/control system in selected organisations • Assess the ethical culture in selected organisations     Creating insight into the whole public sector integrity       Improving the public sector integrity framework • Conduct transversal or cross- cutting analysis and assessments • Assess the existence, efficiency and effectiveness of a national ethics infrastructure/integrity framework/integrity system • Identify and assess national strategies to address wide integrity weaknesses
  20. 20. Approaches in auditing ethics which strategies exist (adv and disadv)  Raising the awareness activities – conduct or collaborate in such initiatives about the ethics management which can have a preventive effect in fighting corruption  Audit of ethics or integrity control system – control environment implies that the organization must demonstrate integrity and ethical values (part of ordinary audits). Advantages...  Raising no mandate doubts, no additional resources , covers a wide number of organizations  General conclusion as result of compared analyses  Collaborate with other auditors to reinforce the integrity control environment  Encouraging the work of internal auditors to audit ethics.
  21. 21. Approaches in auditing ethics which strategies exist ( adv and disadv)  Audit of ethics infrastructure within the organization  The efficiency in the functioning of the ethics infrastructures  Whether bodies have undertaken the required activities and developed appropriate practices to promote ethical values and ethical principles  While the ethical standards were being effectively achieved, assessing the level of their application and the actions taken in case of breaches to ethical conduct  Subject focused and transversal audit approaches  Tone at the top  Whistle blowing arrangements  Conflicts of interest  Discrimination and equity  Leaking of sensitive information  Integrity in public procurement  Gifts and hospitality
  22. 22. Approaches in auditing ethics which strategies exist ( adv and disadv)  Audit of ethics infrastructure within the whole government  Conduct a government wide inventory and analyses of laws and regulations ( related with ethics and integrity)  Assess the ability of the institutional structures to prevent and fight corruption  Evaluate the implementation of policies in order to enhance the integrity  Conduct a global performance audit to assess efficiency and effectiveness of the national integrity system
  23. 23. What is the relation with other types of audits  Financial audit – as part of control environment  Compliance audit – compliance with laws, rules and regulations. Treated as secondary element that can effect the audited subject  Performance audit – provides new information analyses, insights recommendations for improvements  When the audit of ethics is main scope of the audit – focus on ethics management and ethics infrastructure.
  24. 24. Main challenges  Adopting codes and mechanisms – are not enough  Creating ethical culture – key of the issue  Verification of  Existence of tools  Implementation of programmes  Their impact on organisational culture, values and behaviour  Constraints related with audit culture, confidentiality timelines and budget Involvement of stakeholders and raise the likelihood of widely accepted outcomes and future actions will be taken.
  25. 25. Audit framework and criteria  The audit of ethics - covers aspects of strategic and operational levels with an appropriate mix of hard and soft controls, both tangible aspects with ethics – related policies, functions and activities, and intangible aspects – overall ethical culture of the organization.  Carrying out analyses of risks to ethics  Designing specific audit questions and procedures  Assessing findings against a selected set of criteria  Adding value through showing areas and possibilities for improvement
  26. 26. Audit criteria  Assessment criteria should include  Good governance criteria for evaluation of the construction of an ethics management system  Compliance criteria for verification of the functioning of hard controls  Outcome criteria addressing ethical culture  Source of criteria  National level  Specific requirements  International level  Types of criteria  Government criteria  Compliance criteria  Outcome criteria
  27. 27. Audit Planning  Objective of planning  Selection of topics  Audit design – audit scope , subject matter and objectives  Understanding the audited object and its environment  Audit approach and audit plan  Material  Risk assessment  Data collection  Audit program
  28. 28. Methods and tools
  29. 29. Reporting and communication  The audit report of the audit of ethics shall follow the standards applicable for any audit report:  It comprises sections on: introduction; objectives (clearly stating the purpose and reason of the audit); audit scope, approach and criteria; observations; conclusions; and recommendations.  It must be objective, complete, clear, convincing, relevant, accurate, constructive, and concise. An effective quality control system is required to help ensure that the reports exhibit these qualities.
  30. 30. Reporting and communication  Audit evidence  Audit findings including corruption and non-compliance incidents  Recommendations  Confidential issues  Publication  Communication of audit results  Impact  Follow – up  Communication with auditees through the audit process
  31. 31. Reporting and communication
  32. 32. IMPACT The audit and the recommendations given on the basis of the particular facts and findings identified are able to produce the following types of improvements in the public sector: • Increasing the effectiveness of the control systems in place, since ethics is a relevant factor of risk assessment and an element of the internal control environment of the organisation • Encouraging the set-up of missing processes and/or relevant control activities • Stimulating and improving the set up and functioning of ethical infrastructures in public bodies • Improving prevention of fraud and corruption • Increasing public awareness
  33. 33. IMPACT • Stimulating relevant training and education on ethics • Fostering the consistent application of rules and regulations related to ethics and ethical behaviour • Enhancing ethical behaviour and ethical decision making • Strengthening mechanisms for monitoring the implementation of ethical principles • Decreasing the number of breaches and irregularities • Improving prevention of fraud and corruption • Increasing public awareness 
  34. 34. IMPACT • Change of management practices • Increased public officials’ accountability • Amendments to legislation introduced • Dismissal of public officials • Sanctions applied to identified cases
  35. 35.  SAIs and their auditors face challenges when auditing ethics.  The main lessons coming from the experience of facing those challenges in assessments and audits already conducted are included into the session What should auditors make sure to do and what should they really try to avoid?  Wish you a successful audit of ethics.......  Thank you ...........