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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
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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