KSB_AUD679_IPPF_APRIL2021

MOHD NIZAM BIN MD SAID MAC2208A

TUTORIAL IPPF

ANSWER ALL QUESTION

Based on each situation below, discuss the ethical issues according to IIA’s Code of Ethic.

a. A former purchasing assistant performs a review of internal controls over purchasing

four months after being transferred to the internal auditing department.

Based on Code 1120 under Individual Objectivity interpret that the internal
auditors must have an impartial, unbiased attitude and avoid any conflict of interest.

The situation shows that the internal auditors who is a former purchasing assistant
only four months ago performs a review towards his/her past department can create
an appearance of impropriety that can undermine confidence in the internal audit
activity even though there is no unethical or improper act results.

The situation also shows that he/she is performs the assurance activity, thus based
on Code 1130.A1, he/she must refrain from assessing specific operations for which
he/she were previously responsible. Objectivity is presumed to be impaired if an
internal auditor provides assurance services for an activity for which the internal
auditor had responsibility within the previous year.

b. A payroll accounting employee assists an auditor in verifying the physical inventory of

small motors.

An assurance services generally involve three parties which is the process owner,
the internal auditor, and the user of the assessment. A payroll accounting employee
is unrelated with the three parties, then he/she had no significant to present in the
audit activity. Based on Code 1000 under Purpose, Authority, and Responsibility,
there is nothing relate to bind him towards the Internal Audit Charter.

While Code 1100 under Independence and Objectivity interpret that the internal
auditors do not subordinate their judgement on audit matters to others.

c. An auditor reviews the procedures for a new electronic data interchange connection
to a major customer before it is implemented.

This is consulting activities. According to code 1210 under Proficiency, it is not

prohibited but with condition they have the knowledge, skills, and competencies to
perform the responsibilities.

Code 1210.C1 stated the chief audit executive must decline the consulting
engagement or obtain competent advice and assistance if the internal auditors lack
of knowledge, skills, or other competencies needed to perform all or part of the
engagement.
KSB_AUD679_IPPF_APRIL2021
MOHD NIZAM BIN MD SAID MAC2208A

d. Continuing on an audit assignment at a division for which the auditor will soon be
responsible as the result of a promotion.

There is no violation in code of ethics since the auditor had no control over the
decision of that division before this. But according to Code 1130 under Impairment
to Independence or Objectivity, if independence or objectivity is impaired in fact or
appearance, the details of the impairment must be disclosed to appropriate parties.
The nature of the disclosure will depend upon the impairment.

e. A Certified Internal Auditor (CIA) is working in a non– internal audit position as the
director of purchasing. The CIA signs a contract to procure a large order from the
supplier with the best price, quality, and performance. Shortly after signing the
contract, the supplier presents the CIA with a gift of significant monetary value.

A Certified Internal Auditor (CIA) is subject to forfeit the IIA’s membership or CIAs
designation if he/she violated the code of ethics even he/she is currently working in a
non-internal audit position because the code is applicable to all members.

The CIA should not accept the gift with significant monetary value because it shows
that the CIA get some benefits for himself on the authority he has. This will lead to
violate code 1120 under Individual Objectivity where the CIA members should
avoid any conflict of interest and the action will impair the independence and
objectivity.

f. An auditor, nearly finished with an audit, discovers that the director of marketing has
a gambling habit. The gambling issue is not directly related to the existing audit, and
there is pressure to complete the current audit. The auditor notes the problem and
passes the information on to the chief audit executive but does no further follow-up.

The auditor’s actions would not be in violation in the code of ethics.

g. During an audit, an auditor learned that the company was about to introduce a new
product that would revolutionize the industry. Because of the probable success of the
new product, the product manager suggested that the auditor buy additional stock in
the company, which the auditor did.

The auditor should be independence and must avoid any conflict of interest. By
holding the company’s stock, it would turn the auditor as one of the owners of the
company which may affect the independence status. Furthermore, using confidential
information for personal gain is unethical.

h. An auditor was subpoenaed in a court case in which a merger partner claimed to

have been defrauded by the auditor’s company. The auditor divulged confidential
audit information to the court.

There are some circumstances that required the auditors to disclose confidential
information which are:
1) Disclosure is required by law,
2) disclosure is permitted by law and is authorized by the client, and
3) there is a professional duty or right to disclose when it is not prohibited by law.

On the above situation, there is no violation in the code of ethics and standard
because the disclosure is required by law.
KSB_AUD679_IPPF_APRIL2021
MOHD NIZAM BIN MD SAID MAC2208A

“There is a voice that doesn’t use words. Listen.” Rumi