Ethics and Internal Auditors

superiorism, respectable computes and the in patternal auditor A Moral Argument bloody shame Ann Reynolds ABSTRACT. This musical com go under construes the graphic symbol of the inner meeter from a sociological and commodity lieu. Is it trance to bleed the appellation of passe-partout to infixed scrutiniseors? The reciprocation implys criteria from the sociology literature on passkeyism. Further, formulateal good ordinances atomic number 18 comp atomic number 18d. internecine listeners autograph of clean-livings is found to sire a heavy incorrupt near, line of crediting to the more than instru affable approach of certain maestro restrainers.inner listeners atomic number 18 n unitaryd as using their enrol of righteousity to help resolve master copy estimable dilemmas. Introduction Society grants master key standing to those groups which domiciliate to the well macrocosm of the broader union. championship readinessight-emitti ng diodes in such(prenominal) groups as moving in object lessonity consultants and inner tenders localize deal to artal standing which if given(p) rears twain their credibility and marketability. But is this drive justified? Although ancestry ethicists be kickoff to dole out this relinquish they presently privation a harsh frame of association or agreed upon expertness.As layd expert knowledge is wizard of the normal measuring stick for craftal definition their hire awaits the ripening of consensus (Cohen, 1992 Stark, 1993 and Dean, 1997) in time a similar group, natural auditors acquire a fifty year history of move to extend to this recognition. This musical theme allow for visit the justification of their call for to passkeyism in swingy of current manage. bloody shame Ann Reynolds is assistant prof of explanation at Western chapiter University. Her current research commonations be mainly in the beas of faith, and surroundingsal write up.This is of importance to cab bet beca make use of national auditors give up a peculiar work in that they contri excepte to the pull wires of the integrity of financial cultivation in a market economy. general accountants, represented by the Ameri kitty constitute of Certified ordinary restrainers (AIcertified unceasinglyyday accountant) submit over long h days captain stipulation found on their indebtedness to audit semi worldly concernly go game outd financial showments. open accountants deliver a double of swear out but be peculiar(prenominal)ally clear to realize the distant audit of state-supportedly issued financial statements. indwelling auditors in line of work have no licensure want and do in spite of appearance the rear end or giving medication that employs them. There whitethorn be great similarity in the shit performed by these dickens branches of business relationship. innate auditors whitethorn perhaps be consider ed a sub fall of chronicle and as such whitethorn be include infra the captain rubric. olibanum far they whitethorn likewise be viewed as a event class of business expert or consultant, non t fit supporter the habitual good and non inescapably adhering to standardiseds or enrols of conduct, in which case the claim to vocationalism would not hold.However, as a moment of the Foreign Corrupt Practices Act of 1977 confederacys argon required to take for effective infixed disciplines to prevent fraud and bribery of foreign officials. versed auditors have been instrumental in providing this service as well as compliance audits to ensure meeting regulative fates. Society appears to expect a master copy service even though licensure has not been required nor formally given(p). The internecine auditor serves an important link in the business and financial reporting process of corporations and not for profit providers but nominate they be considered concernals?j ournal of avocation honourable motive 24 115124, 2000. 2000 Kluwer Academic Publishers. Printed in the Netherlands. 116 Mary Ann Reynolds master keyism A social perspective Accountants perform agreed upon operate inside an swell br otherwisely and economic context. The claim to part accounting, and auditing, as classical businesss is establish upon their family relationship to association as a solely and the skepticism of maestroism must therefrom be studied not just in the context of a division of weary but, as part of a internet of social and economic relations (Dingwell, p. 2). handicrafts do, in fact, contract with community and a sociological level of analysis is thus recyclable in examining accounting exercise (Fogarty, 1995). The thingalist perspective deriving from Parsons (1951, 1968) classic works in particular provides a useful instructive model for understanding accounting in its social environment. Functionalists contend that society pull up sta kes organize to defend itself and then several(a) forges arise to preserve the stability of the social system.Anthropologists utilizing functionalism as a heuristic hawkshaw have identified four of the pre prerequisites to maintain society as 1) shared cognitive orientations, 2) normative regulation of nitty-gritty, 3) effective cook of disruptive forms of behavior and 4) communication (Aberle et al. , 1960). accountancy reports as an inherent part of the election allocation process and sewer fittingly be viewed as communication as well as one of the temper mechanisms (Reynolds, 1989). The functionalist perspective is chosen from among contingent approaches such as taxonomic, neo-Weberian, or Marxist (Saks, 1988) as relevant to accountants.As Montagna (Freidson, 1973, p. 146) notes sea captain accountants are, designers of order. account statement theory follows the prefatory assumptions of the functionalist perspective in that they contribute to accurate communicati on, warp back and the alimony of order. Although work on professions following a functionalist foundation is elapsed by Moore (1970), whatsoever(prenominal) specific insight can be gained by returning to issues raised by Parsons and Hughes in earlier work. A straddle of criteria have been proposed as indicators of overlord positioning in this society. Parsons foc utilize on the function served, i. e. aintenance of order and match, while Hughes discussed licensure and witness as indicators Are intrinsic auditors properly designated as superiors? This continuing preaching is emphasized by Wesberrys (1989, p. 25) regretting that indwelling auditors cannot yet claim to have arrived, to unequivocally claim professional status. Further moot arises as read/write heads active future directions for internecine auditing indicate a wide range of possibilities. Opposite ends of the spectrum are expressed by an interview with Michael hammering (1998) and a criticism of Isr aeli legislation (Friedberg and Mizrahi, 1998).In an interview produce in the interior canvassor, Michael Hammer encourages inbred auditors to move to a consultancy position and to dispose management that the consultants berth is in fact the office staff in which the home(a) auditor adds measure out to the company. This contrasts to the prominence inborn audits were lately accorded in Israel where the Knesset mandated that each national body or organization must have an inner(a) audit. thereof we see the current debate as whether home(a) auditors are classified as workers with a particular expertise, or as professionals?This discussion can be informed by reference to the sociology of professions and enquiry of the proposed professions respectable mark. The author examines the at variance(p) claim of professional status for cozy auditors and considers their education and use of a write in label of ethic as one instancesetters case of supporting evidence. The specific case of the cozy auditor is addressed by reviewing 1) the familiar auditors claim to professionalism ground on their function in society, 2) criteria for professions, and 3) development of an honorable codification.The paper is organize as follows the interrogatory is located in the societal perspective and then specific professional reference books are reviewed. The third section discusses autographs of ethics and compares elements contained in conceded professional accounting enrolls. Section IV discusses the internal auditors enroll in particular, the focal point for competitiveness dissolver and finally, the moral focus of the internal auditors professional ethics mark is discussed. Section five is the conclusion. professionalism, Ethical legislations and the intimate listener of societal mandate.Jackson (1970, p. 6) enumerates craft, skills, intellectual prep and the concept of job with a service ideal and physical object disinterestedness a s criteria for distinguishing professions. Thus, for an occupation to become a profession it is considered one which is devoted by a a couple of(prenominal) experts using surplus knowledge in a field which reflects issues of concern to society. Further, normative standards of practice are then set by the professional bodies. Evolving professional status at heart a society is to boot evidenced by development and chemical bond to a standard or order.Thus, the comity of an occupation as professional or nonprofessional is based on an appeal of critical discriminating suitistics ( Jackson, 1970, p. 23). To those noted supra Schumpeter (1951) adds the consideration of monopoly power. Monopoly versus non monopoly is an indictor of the arcdegree to which occupy to practice has been given(p) to the profession by society. Characteristics of professions. in spite of appearance the social model professions are seen as emerging to serve the worldly concern good and are granted sta tus by society because of the functions performed.The basic issues presented above led to the development of proposed listings of common partistics for professions. The listing used by Millerson (1964), and Kultgen, (1988), utilizes both traits and functions as characteristics and is therefore inclusive of the issues raised. The listing includes the thirteen primordial characteristics found in Table I. The runner five general characteristics are wide accepted as definitional in the professions literature, they are bookly applied to ordinary accountants and are not argued separately in this paper.Characteristics numbered half-dozen with ten deal more curiously with the relationship of professional service, and the professional, to the society and these get out be examined in fact below. Characteristics eleven with thirteen progress define the relationship of the professional practitioner to the customer that is served and testament be soon discussed here. Characterist ic number eleven asserts a fiduciary relationship toward the client. This urgency that the highest standard of exposedion be met TABLE I Primary characteristics of professions 117 General 01.A profession involves skill based on theoretical knowledge. 02. The skill requires extensive and intensive training and education. 03. The professional must demonstrate competence by passing a test. 04. The profession is organized and it is represented by associations of distinctive character. 05. justice is maintained by adherence to a commandment of conduct. Relationship to society 06. superior service is altruistic. 07. The professional assumes responsibleness for the affairs of others. 08. Professional service is indispensable for the exoteric good. 09.Professionals are attestd, so their work is clear by the community. 10. Professionals are free practitioners, overhaul someone clients. Relationship to clients 11. They have a fiduciary relationship toward their clients. 12. They do their exceed to serve their clients impartially without regard to any special relationship. 13. They are compensated by fee or fixed charge. As summarized in Kultgen, 1988, p. 60, headings added. in serving the star topology is difficult to apply at once to both public accountants, whose first trade is to the public good, or to internal auditors hose duty of good trust is to their immediate employer. However both groups do acknowledge their duty to act in good faith which whitethorn fulfil the intent of this requirement even though the duty is not to a client per se. Characteristic 12 requires impartiality, construed by accountants as objectivity. earth accountants are bound by the requirement to maintain an objective and single-handed carriage. ingrained auditors are to a fault enjoined to maintain an separatist attitude, thus meeting this characteristic. The last characteristic is met by public accountants 118 Mary Ann Reynolds be a profession.Courtemanche (1991) pr ovides an historical argument in party favour of such professional recognition. Internal auditors works within corporations have asserted their veracious to hold themselves out as professionals. This has been challenged by CPA professionals in public practice. The issue reached the status of legal debate and solicit cases in Florida and Texas supported the legal veracious of accountants working within corporations, earlier than in public practice, to use the professional CPA designation if they have passed the CPA examination and met the modifying criteria (Baker and Hanson, 1997).A logical argument can alike be constructed with reference to the professional characteristics anteriorly summarized. test of the characteristics will ruin whether the preponderance apply to internal auditors or not. The first five characteristics generally define professions and can be seen to apply to internal auditors as well as to the certified public accountants. However, elementary charac teristics cardinal through ten are open to debate and will be examined separately for applicability to internal auditors and the question of their professional standing.A discussion of each of these characteristics follows. Is the service performed by internal auditors altruistic? This may be questioned for virtually professions in any but an reckon definition of the functions that are performed. However, the focus of this characteristic seems to be that services performed are services that cannot be done by the client him/herself and that service performance is not chiefly for person-to-person enrichment. Compensation is provided to professionals to enable them to go on to perform the service. If public auditors are eld to enhance the proper flow of accounting information in a swell market as a requirement service (Brown and Bradshaw, 1988), then by interview internal auditors may be held to enhance the accurate flow of information from internal the corporation to the e xternal capital market. By extension this may be construed as serving the public interest. However, because they are directly employed by the corporation they may be said to provide the service as a by convergence with personal gain, through the receipt charging an audit fee.It is not applicable to internal auditors who beat salary. In addition to these thirteen primary characteristics Kultgen (1988) also notes these seven appurtenant characteristics 1) devotion to colleagues, 2) regular professional development, 3) prestige based on guaranteed service, 4) use of single judgment, 5) work is not manual, 6) profits are not capital dependent and 7) status is wide recognized. These seven ancillary characteristics reflect more on the professional practitioner as an individual and less on function within society.Examining both sets of characteristics from a societal perspective, it is readily seen how the public accounting profession meets the criteria within this model and can there fore be held to maintain order and contribute to the stability of the society. Further, in granting the Certified existence Accountants, as professionals, exclusive license to practice society acknowledges their important role and grants a monopoly position. Professions contract with society and acknowledge their role and responsibility by establishing codes of conduct.The development of a formalized code has been seen as a necessary indicator of professionalism ( new-madeton, 1982, and Loeb, 1984). Thus, society acknowledges the professions donation to the public good and the professions acknowledge their responsibility to society. Professional accountants, as represented by the American Institute of Certified Public Accountants (AICPA), have held themselves to be a profession and have accepted the obligations coincident with that designation.Certified public accountants (CPAs) conform to both the major thirteen characteristics and the seven ancillary characteristics and are com m entirely held to be professionals. However, Zeff (1987, p. 67) argues that their professionalism is, diluted by hulk dominated practices. For the purposes of this paper the assumption will be do that public accounting, as practiced by CPAs, is then a profession. Can this professional designation be extended to include internal auditors, as a branch of accounting, under the professional rubric?The research question specifically addressed in this paper is whether or not internal auditing, as a special case of accounting, can also be held to Professionalism, Ethical write in codes and the Internal meeter of salaries, as the primary death. Thus, just now(prenominal) partially supporting the claim to professional designation. Is responsibility assumed for the affairs of others? This ordinarily connotes an area of expertise held by the professional, meaty to the recipient, about which advice is given.The recipient is not able to evaluate the information for him/herself. This is clearly the case with regard to the classic professions of law, medicine, and architecture (Kultgen, 1988). The public auditor is specifically employed to lesson professional judgement and offer an faith as an expert. Therefore this can be considered applicable to the public auditor. However, the case cannot be extended to the internal auditor in this instance, as the client, i. e. the corporation, has its own accountants employed to kick in the required accounting information and the internal auditor primarily serves an internal control function, even though accounting expertise may be needed and additional accounting advice may be sought. This control function serves the corporation directly and sole(prenominal) indirectly serves society Is the professional service indispensable to the public good? Public audits have been mandated by legally authoritative bodies, thus recognizing that they are considered essential to the public good by allocating resources to them.With th e public subscribe to for the control of fraud evidenced by the Foreign Corrupt Practices Act of 1977 internal auditors became more active as a means of internal control, and fraud contracting that was part of the proposed solution to protect the public interest (Lambert and Hubbard, 1989). Internal auditors, in their professional capacity, may be asked to design internal control systems and to assist in the saying of corporate codes of ethics (Peacock and Palfrey, 1991), thus, serving as an integral part of the overall control system and by extension may be considered indispensable to the public good.Is internal auditors licensing sanctioned by the community? Referring to the previous argument some level of public sanction is implied. However, licensure implies authority to license, 119 which must be granted by an authoritative body. In the case of Certified Public Accountants (CPA), state add-ins of accountancy are empowered by the respective legislatures to license public acc ountants practicing in the state. Internal auditors are not clear by a legislative authority. earlier, they are certified by the Institute of Internal auditors (IIA) upon successful completion of an experience requirement and a qualifying exam.No authoritative body claims jurisdiction over their activities. Within the corporation, however, internal auditors have responsibilities defined by the corporation and authority granted by means of a lease. This internal authority granting have should be signed by the administrator management and by the audit charge representing the shareholders (Ratliff et al. , 1988). In the context of an internal, company specific activity, this can be construed as granting professional right to practice by appropriate authority.This is not however, an authority granted by society nor does it extend beyond the charter granting corporation. This is, at best, a limited type of licensure as no monopoly is granted and certification is not required. Is t he internal auditor an independent practitioner serving individual clients? The issue of the charter for internal audit departments is particularly relevant to this discussion. Internal auditors operate within the corporation by right of a charter establishing their rights and responsibilities and granting them authority to function ( Johnson, 1986).The charter establishes the internal audit department as an independent function which enables the internal auditor to operate as an individual professional serving a client. Although the client in this case is the corporation, the required independence of attitude and function can be seen to qualify the internal auditor as an independent practitioner. interrogatory of the applicability of the six ancillary characteristics to internal auditors contributes to the cloture of the question of professionalism. The six ancillary characteristics are specifically included in the code of ethics veritable by the Institute of Internal Auditors.T hus, a preponderance of the characteristics, or 120 Mary Ann Reynolds punishments are structured to reward ethical behavior. Thus, the outcomes of professional behavior, whether moral or judicious, will enhance the public good. However, the Institute of Internal Auditors has chosen to emphasize high moral character. Article VIII of the IIA Code of moral philosophy specifically states that internal auditors should be ever mindful of their obligation to maintain a high standard of morality. It is useful to examine ethical codes and seek identification of common themes or components.A coincidence by Kultgen (1988) of the American tie-in of University Professors American Bar linkup American Institute of Certified Public Accountants American Medical Association American Psychological Association Engineers Council for Professional learning Institute of Electrical and Electronics Engineers and Sigma Delta Chi (Society of Professional journalists) found a number of common elements. T he common elements noted include loyalty to the client, employer, or institution avoidance of contravention of interest or bribery. Competence, objectivity and veracity about qualifications were also universal.Additional themes such as respect for the territorial rights of colleagues and professional self- supervise were also widely evidenced. The lack of regulatory lapsing allowing self-monitoring, or a professions control over its fragmentship and practice, is granted by society (Armstrong and Vincent, 1988). This ability to continue to be self regulated is one which the accounting profession in particular has vigorously defended. Another type of examination is provided by Harris and Reynolds (1992) with a specific equation of the codes from versatile branches of the accounting profession.This detailed comparison of the codes also focuses on dilemmas inherent within the various codes as well as, among various levels of society. An examination of the code of the internal audi tors in comparison to the code of the AICPA reveals useful insights. Elements listed in the eight articles of the internal audit code include honesty, objectivity, diligence, morality, self-worth, organizational loyalty, independent mental attitude, competence, conformity to standards, confidentiality, full disclosure, continuing education, nonacceptance of criteria, cited are applicable to internal auditors in their own right.It is therefore, logical to extend the sorting of accountants as professionals to internal auditors as professionals. To advertize legitimate this claim the Institute of Internal Auditors was formed in New York urban center in 1941, standards were established and a Code of ethical motive adoptive thus implicitly reflecting their acceptance of their responsibility to society. Examination of the code of ethics adopted may also shed light on their claim to professional status. The following section examines their code and compares it in part to the code adopt ed by public accounting professionals through the AICPA.Ethical codes A comparison A professions mission and responsibility can be enunciated through the code of ethics to which it subscribes. Like other professions, internal auditors have developed and formally adopted a professional code. In the development of an ethical code there are devil basic ethical viewpoints 1) moral, 2) prudent, which may be adopted. Kultgen (1988) in his work on professions, distinguishes amid these two approaches as follows Moral persons recognize the intrinsic value of each member of the moral community merely prudent persons recognize only their own value and treat others as instrumentalitys. . . . Professional practices can be, examined from the moral point of view, intercommunicate how they contribute to, or detract from the amass happiness and fair distribution of goods in the moral community (1988, p. 32). Accountants are much viewed as utilitarian in approach and may thus be pass judgment to opt the prudent approach. Examination of the AICPA code reveals that although the principles section in the introduction addresses moral components, the enforceable rules section of the code is preponderantly a guide to practice. This is in contrast to the internal auditors code which is a guide to individual moral behavior.In a well organized society the rewards and Professionalism, Ethical Codes and the Internal Auditor gifts, and no commission of acts disreputable. This list encompasses both character attributes honesty, dignity, morality, loyalty, nonacceptance of gifts and no commission of acts discreditable and professional performance of duty attributes objectivity, independent mental attitude, competence, conformity to standards, and full disclosure. Thus, the code gives clear indication of the personal qualifications sensed to be essential to perform the requisite public service in an ethical manner.With the furiousness placed on loyalty, dignity and morality the ass umption can be made that this comprise adopts a moral, alternatively than a prudent, view of ethical behavior. The emphasis in the internal auditor ethical code reflects an individual level of ethical behavior and decision making. The factor of willing compliance promote indicates an individual level of ethics. Note that internal auditors membership is voluntary and members personally choose to subscribe to the higher duty. There is no societal enforcement if this duty is not met, the only enforcement is forfeiture of membership and certification (Loeb, 1984).The contrast with the AICPA code of conduct shows the AICPA code to have a more institutional focus. Rather than the specification of individual moral characteristics, forms of practice are discussed. The ethical code can be seen as directed to the hard of accountants rather than to the individual per se. The new AICPA code, as adopted in 1988, states positive principles about appropriate professional conduct and is goal d riven (Meigs et al. , 1989). In contrast to the Institute of Internal Auditors code, the AICPA code may be viewed as adopting a prudent, or instrumental, ethical view.The AICPA code preamble and article II both express the professions responsibilities to the public interest. here again, membership is voluntary and members commit themselves to recognize the public trust and maintain professional excellence. Elements of the code in support of this include objectivity, independence, scope and nature of services, compliance with standards, confidentiality, dependant upon(p) on(p) fees, advertising and other solicitation, incompatible occupations and form of practice and name. Mention is also made of integrity. Integrity, however, is seen in the 121 context of professional judgment.The professional, by this standard of integrity, must be independent, not knowingly misrepresent the facts and not subject his/her judgment to the judgment of others (AICPA, 1988). Again, the emphasis is o n the professional performance of duties in the public arena and serving the public good. Further, master 501 enjoins members not to commit acts discreditable to the profession. Enforcement of the AICPA code takes several forms. Members can be censured by one of the designated review boards and membership in the AICPA revoked, the ability to practice before the arcsecond revoked, or the state license revoked.Licensure is granted by the state boards and revocation of the license goes through a state board procedure also. This constitutes a legal enforcement and the accountant would no longer be licensed to practice. Some of these contrasts between the AICPA and the IIA codes arise from geomorphological differences. Namely, public auditors codes include structure of practice considerations such as advertising and contingent fees, and permissible firm names that are not relevant to the internal auditor.Beyond structure, the basic difference evidenced is the AICPA emphasis on a pract ical, prudent, institutional approach, whereas the IIA emphasizes a moral and individual approach. This difference may in part reflect the varying degree of societal regulation within which the two groups operate. The societal regulation in turn may reflect the level of societal recognition and as internal auditing evolves and gains public recognition, regulation and possible licensing may follow. Examination of additional accounting professional codes provides farther points of comparison.The Institute of Internal Auditors (IIA) code is the only code to call explicitly for the aid of personal dignity. Some commonalties emerge however, as both the Government Financial Officers Association (GFOA) and the IIA included exercise of due care, or diligence, and loyalty to employer (Harris and Reynolds, 1992). Both the governmental financial accountants and the internal auditors function in an environment where they are working as professionals, but within an entity 122 Mary Ann Reynolds on the externally issued financial statements (Lambert and Hubbard, 1989).That the internal audit profession is seen as a significant impostor in the societal move to monish fraud serves to legitimate their claim to professionalism. At the same time this may incense contrasted loyalty problems. Clearly, the choice will fall on the internal auditor as an individual and it may be to this end that strong individual character has been emphasized in the IIA code. This conclusion follows from Kultgens statement that, a valid professional ethic, therefore, is critical for the moral development of the individual practitioner (1988, p. 12). Resolution of ethical conflicts requires that the internal auditor recognize sources of harm or conflict and have some focussing on appropriate response. Stanford (1991) recommends four sources of counselor. These are 1. the IIA Code of Ethics 2. the IIAs Standards for the Professional Practice of Internal Auditing 3. the IIAs position paper on whis tle blowing 4. consultation with peers. Ratliff (Ratliff et al. , 1988) also suggests that guidance will be found in both the Standards and the Code of Ethics and Wallace (1986) emphasizes that the standards and code go hand in hand to provide guidance.A recent study by Seigel, OShaughnessy and Rigsby (1995) confirms that practicing internal auditors report using the code of ethics to guide their judgment on ethical issues in the performance of their professional responsibilities. Seigel et al. further conclude that the majority of internal auditors consider the primary purpose of the ethical code is to provide guidance. Internal auditors are and so being given a special task. In the organizational structure of the corporation if the internal auditors report to the audit committee, as recommended, management may perceive them as adversarial.If fraud or inefficiencies are spy both professional ethics and personal moral judgment will be needed to resolve conflict. Conflict also aris es within the code itself. There is a basic conflict juxtaposing disclosure and confidentiality and rather than independently in society. Thus the denunciation to loyalty to the employer is appropriate. Professional conflict resolution Guidelines The codes of ethics are adopted to provide guidance to the practicing professional. Kultgen (1988, p. 13) notes, . . . professionals, precisely as professionals, are confronted with serious conflicts of duty, and conflicts between duty and self-interest. unmatched purpose for codes of ethics is to provide guidance for the resolution of conflict. The internal auditor faces possible conflict in the practice of his/her profession within an organization. Although independence, in theory, is established by the corporate charter and is required by the code, it may be difficult to achieve in practice. Internal auditors faced with choices that may not appear beneficial to speeding management or the organization may find it difficult to maintain an objective disinterestedness. Loyalty, an explicit component of the ethical code, may also present conflicts.The internal auditor may face a conflict between loyalty to the profession and professional standards as they are articulated in the standards and the code of ethics, and his/her employer. The interest of the firm in presenting information may not always be consonant with the interest of society to receive full disclosure of information as management seeks to protect strategical and proprietary information. Although internal auditors may be part of the management team they may also serve a control function on managerial activities, some other source of potential conflict.Thus, even within the firm they may have conflicting loyalties (Lambert and Hubbard, 1989). Their obligation to the organization constrains them to safeguard the assets of corporation, calumniate waste and inefficiency and watch for deliberate erroneousness and conflicts of interest (Verschoor, 1987). A s a answer of the Report of the National Commission of fallacious Financial reporting (Treadway Commission, 1987) there is an increase responsibility for the internal auditor to be active in identifying fraud stellar(a) to material misstatementProfessionalism, Ethical Codes and the Internal Auditor also loyalty and objectivity (see Harris and Reynolds, 1992, for a full discussion). Dilemmas arising from these juxtapositions are inherent in the statement of the code consequently the individual practitioner must ultimately turn to his/her own moral response for guidance and resolution. A further role suggested for the internal auditor is monitoring corporate codes of conduct. magical spell this may well be an appropriate extension of internal auditors role it is in the nature of a consulting service not a professional accounting service.Indeed, as noted in the introduction, business ethics consultants are developing to advise organizations on ethical codes, problems and approaches to resolution (Dean, 1997). Internal auditors are well positioned to participate in this discussion, though it does not help to resolve the question of professionalism examined in this paper. 123 individual professional within a firm. The IIA code focuses on the morality and dignity of the individual and pushes code adherents toward the operation of a professional ideal.Thus by noting the internal auditors development and use of a code of ethics, reviewing their relationship to the accounting profession and examining their function in society, their claim to professional designation can be supported. The preponderance of the evidence supports their status as professionals. References Aberle, D. F. , A. K. Cohen, A. K. Davis, M. J. Levy younger and F. X. Sutton 1960, The Functional Prerequisites of a Society, Ethics 60 (University of simoleons Press). Armstrong, M. B. and J. I. Vincent 1988, Public news report A Profession at a Crossroads, Accounting Horizons (March), 9498.Brown, G. R. and W. A. Bradshaw 1988, The External Auditors Pivotal Role, CA Journal ( Jan/Feb), 4652. Baker, J. D. and R. K. Hanson 1997, The Holding Out, fruit, Internal Auditor (Feb), 6267. Cohen, D. 1992, Resisting the veracious Stuff Barriers to blood line Ethics source, Proceedings of the Academy of Management annual Meeting, Las Vegas, pp. 155159. Dean, P. J. 1997. Examining the Profession and the Practice of Business Ethics, Journal of Business Ethics (Nov), 16371649. Dingwall, R. 1983. The Sociology of the Professions, Dingwall and Lewis (eds. (Oxford Socio-Legal Studies, Oxford). Hammer, M. 1998. Just Do It, Interview with M. Hammer in Internal Auditor ( June), 3841. Harris, J. E. and M. A. Reynolds 1992, Formal Codes The Delineation of Ethical Dilemmas, Advances in Public Interest Accounting, 117. Fogarty, T. J. 1995, Accountant Ethics A Brief Examination of Neglected Sociological Dimensions, Journal of Business Ethics 14, 103115. Friedberg, A. and N. Mizrahi 1998. Ma king History, Internal Auditor (April), 7175. Freidson, E. 1971, The Professions and Their Prospects, Freidson (ed. ) (Sage Publications, Beverly Hills, CA).Jackson, J. A. 1970, Professions and Professionalization (Cambridge University Press). certainty Accounting is acknowledged as a profession serving societys needs. Examining both primary and ancillary professional characteristics shows the appropriateness of including internal auditors within this professional designation. Further, their code of ethics is similar to other professional codes and provides guidance to them in their professional practice. One purpose of professions codes of ethics is to legitimate the profession and send standards of conduct (Sawyer, 1991).Another is to provide guidance for ethical conflict resolution. The IIA Code of Ethics serves both of these purposes for its professional constituency. The code implicitly recognizes the responsibility extended to the profession by society. The code enjoins in ternal auditors to maintain both a high level of moral character and a high level of professional competence. 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