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ACCOUNTEMPS CPA STUDY MATERIAL CODE
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To demonstrate value and build credibility, internal audit must demonstrate a sound knowledge of the business and its strategies and apply that knowledge in assessing risk, the report said. The internal auditor has to be aware of those changes and build relationships, particularly with the audit committee.' These changes, some respondents reported, also led to instances where 'previously unacceptable behaviors became acceptable.'īusiness acumen is required. 'There are changes in the board, changes in the CEO.

'We see changes, maybe some investor-type pushes to change the organization to perform better,' Rittenberg said. A new CEO or set of executives might be focused more on short-term, market-related goals than on long-term organizational objectives.

He said these changes caught CAEs off-guard as well. 'One of the things that surprised us was how quickly an organizational climate can change,' Rittenberg said. Know the culture of the organization, but understand that it can change.

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Among the lessons learned for how to handle political pressure while performing internal audit duties: Some survey participants took part in follow-up case studies. Rittenberg said there was a sense of pressure not to communicate a finding with certain people so that those people could have plausible deniability. Other times, audit executives faced off with company lawyers who wanted to protect an executive. Sometimes, the blame for issues fell to ineffective audit committees, Rittenberg said. The survey found that 32% of respondents were asked to audit low-risk areas so that an executive could investigate or retaliate against another individual. Richard Chambers, president and CEO of The IIA, said, 'I wouldn't want to suggest that it is commonplace, but I think, as have done an outstanding job of documenting, this is not that uncommon, either.' Miller, CPA, former IIA global chairman and Deloitte & Touche LLP partner, found that 55% of survey respondents had been asked at least once, and some more than once, to omit or modify an audit finding. Larry Rittenberg, CPA, a professor emeritus at the University of Wisconsin, said he and report co-author Patricia K. NEARLY ONE-THIRD ASKED TO AUDIT LOW-RISK AREA

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The AICPA code says members should take a three-step process in addressing threats: identify the threat, evaluate the threat's significance, and identify and apply safeguards. One section mentions the undue influence threat, which could include the following: 'A member is pressured to change a conclusion regarding an accounting or a tax position.' The Conceptual Framework for Members in Business-part of both the AICPA code and the Code of Ethics for Chartered Global Management Accountants-addresses threat categories that may be encountered.

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The AICPA Code of Professional Conduct has a section for how business members should behave when facing a threat. For instance, the IIA's Code of Ethics states, under the topic of objectivity, that all internal auditors 'hall disclose all material facts known to them that, if not disclosed, may distort the reporting of activities under review.' Several codes of ethics address what finance professionals should do when asked to do something that they consider unethical. That's an easier discussion for auditors to have when they have built a relationship with the C-suite in advance and can explain why it matters to the organization as a whole to report the finding accurately. For instance, sometimes the instruction to modify an audit finding could be worked out with a discussion between the CAE and the executive who asked for the modification. Many times, the follow-up interviews yielded positive lessons. Other times, the pressure was more subtle some CAEs reported budget cuts or a decline in internal audit staffing that they perceived as tacit pressure. Sometimes, the threats are clear and easy to understand some CAEs were told they would be fired. That's according to a report by The Institute of Internal Auditors (IIA) Research Foundation, based on a survey of 494 CAEs and some follow-up interviews. More than half of North American chief audit executives (CAEs) said they had been directed to omit or modify an important audit finding at least once, and 49% said they had been directed not to perform audit work in high-risk areas.

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