Question

Consider the concepts of independence and “whistleblowing” in relation to auditors. How do these concepts relate to the public interest requirements mentioned in the APES 110 Code of Ethics for Professional Accountants document? (300 - 400 words)

Answer 1

Independence of auditors is a key criterion for ensuring the objectivity of the audit work being done in relation to the financials of an organization. Internal audit’s independence from the executive team of a company is of paramount importance and it is this independence that gives the internal audit an element of objectivity and the power to be involved in whistleblowing arrangements. An auditor can be involved with various aspects of whistleblowing – in a triage role or may work and function as a channel of communication or may carry out investigations and do fact finding.

One of the primary roles of internal audit is to provide assurance to the board with regards to the level of corporate governance and internal control within an organization. This makes the audit team an integral component and part of the process of internal whistleblowing within an organization. The internal auditor’s involvement in whistleblowing, however, should in no way dilute or undermine its ability to carry out its main functions of assurance.

When audit teams come into possession of critically sensitive information that is substantial to the organization and that poses significant potential consequences to the organization then it is their duty to inform the issue to senior management who will be the first channel of communication. If senior management does not pay heed and take the issue seriously then the information will have to be communicated outside the organization.

APES 110 Code of Ethics for Professional Accountants state that it is the duty and responsibility of professional accountants to act responsibly so that public interest is upheld. The account’s work does not end with satisfying the needs of the client. The work and responsibility of the accountant also extends to and includes identification of key threats to compliance, evaluation of the importance and significance of the threats, and then ensuring that necessary safeguards are applied so that the threats are eliminated in a systematic manner and in a manner that reduces these threats to acceptable levels.

(332 words)