CHAPTER 4

INTERNATIONAL
PROFESSIONAL
PRACTICES
FRAMEWORK (IPPF)
Learning Objectives
After going through this chapter, you should be
able to:
Understand International Professional Practices
Framework (IPPF)
Describe the importance of ethics in internal audit
profession
Discuss the principles and rules of conduct of IIA
Code of Ethics

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International Professional Practices
Framework (IPPF)

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International Standards for the Professional
Practice of Internal Auditing (ISPPIA)
 Conformance with the ISPPIA (the standards) is essential
in meeting the responsibilities of internal auditors and the
internal audit activity
 The standards apply to individual internal auditors and
internal audit activities
 The purposes of the standards are to:
 Delineate basic principles that represent the practice of internal
auditing.
 Provide a framework for performing and promoting a broad
range of value-added internal auditing.
 Establish the basis for the evaluation of internal audit
performance.
 Foster improved organizational processes and operations.

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Structure of ISPPIA
 3 components:
 Attribute Standards - address the attributes of organizations
and individuals performing internal auditing
 Performance Standards - describe the nature of internal
auditing and provide quality criteria against which the
performance of these services can be measured
 Implementation Standards - provided to expand upon the
Attribute and Performance Standards, by providing the
requirements applicable to assurance or consulting activities3
components:
 Terms employed in the standards:
 “must” - specify an unconditional requirement
 “should” - conformance is expected unless, when applying
professional judgment, circumstances justify deviation

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Attribute Standards
1000 Purpose, Authority and Responsibility
1100 Independence and Objectivity
1110 Organizational Independence
1120 Individual Objectivity
1130 Impairments to Independence or Objectivity
1200 Proficiency and Due Professional Care
1210 Proficiency
1220 Due Professional Care
1230 Continuing Professional Development
1300 Quality Assurance and Improvement Programme
1310 Quality Programme Assessments
1311 Internal Assessments
1312 External Assessments
1320 Reporting on the Quality Programme
1330 Use of “Conducted in Accordance with the Standards”
6 1340 Disclosure on Non-Compliance
Performance Standards
2000 Managing the Internal Audit
Activities
2010 Planning
2020 Communication and Approval
2030 Resource Management
2040 Policies and Procedures
2050 Coordination
2060 Reporting to the Board and
Senior Management
2100 Nature of Work
2110 Risk Management
2120 Control
2130 Governance
2200 Engagement and Planning
2201 Planning and Consideration
2210 Engagement Objectives
2220 Engagement Scope
2230 Engagement Resource Allocation
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2240 Engagement Work Programme
2300 Performing the Engagement
2310 Identifying Information
2320 Analysis and Evaluation
2330 Recording Information
2340 Engagement Supervision
2400 Communicating Results
2410 Criteria for Communicating
2420 Quality of Communications
2421 Errors and Omissions
2430 Engagement Disclosure of Non-
Compliance with the Standards
2440 Disseminating Results
2500 Monitoring Progress
2600 Resolution of Management’s
Acceptance of Risk
Implementation Standards
 Apply only to specific types of engagements
 Multiple sets of Implementation Standards – a set for each of the
major types of internal audit activities
 E.g. Assurance, Consulting activities

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What is Ethics?
 Ethics in general:
 Set of moral principles, values or acceptable behaviour
 Science of morals, study of principles of human duty, rules of conduct
 Provide standard of conduct in daily life

Breach of ethics Corruption Monetary/financial loss + tarnished image

 Definition of ethics:
 A set of moral principles that distinguish between what is right and what
is wrong
 It is a set of values that guide the conduct and the behavior of the
individuals, enabling them to differentiate between rights and wrong,
good and bad and what should and should not be done
 “Ethical behavior is not an act BUT a HABIT…”
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Roots of Unethical Behaviour
 Favour own interest over well-being of shareholders/stakeholders
 Willing to abuse position/power to enhance individual interest
 Rewards for behaviours that violate ethical behaviours
 Managerial values undermine integrity

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IIA’s Code of Ethics
Purpose
 All members of the IIA must maintain high standards of
conduct in order to effectively discharge their responsibility
 The purpose of Code of Ethics is to promote an ethical culture
in the profession of internal auditing

Applicability and Enforcements

 The code is applicable to all members of the IIA
 Code of ethics applies to both individuals and entities that
provide internal auditing services

Violation of the Codes

 Subject to forfeiture of the IIA’s membership or CIAs
designation

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Ethical Principles and Rules of Conduct
 This code is divided into 2 components:
 Principles
 Rules of conduct

Intergrity Objectivity

Confidentialit
Competency
y

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Ethics and Independence
 Independence – not depending on authority of another, autonomous,
free
 Independent of the management – should not be part of the
management
 Reporting to the Audit Committee
 Power to appoint/remove and performance appraisal of internal
auditor should not rest with the management – should be the power
of Audit Committee
 Internal auditor should be independent of the activities they audit,
work should be carried out freely, objectively, impartially an unbiased
judgments
 Could be achieved through organisational status and objectivity
- Organisational status: Should be sufficient to assure broad range of
audit coverage adequate consideration of an effective action on audit
findings and recommendations
- Objectivity: Internal auditor should have independent mental
13 attitude, honest belief in their work and avoid any conflict of interest
END CHAPTER 4