What do you mean by ethics audit? Is it different from a financial audit?


  • Ethics audit refers to an audit conducted in order to adjudge whether the organization is following the code of conduct goals and values that it has set for itself in the social sphere.
  • It measures the culture and behaviour of an organization, and determines the extent to which its values are embedded across its people and processes.
  • Common parameters which may be evaluated in an ethics audit include job satisfaction, awareness of the organization’s policy on equality and diversity, contribution towards the society, whether the processes of the organization follow ethical standards set by the society etc.
  • Assessing the outcomes and achievements of corporate social responsibility in order to improve future outcomes is an example of ethics audit. Another example is performance related to company’s policies on whistleblowers and grievance redress.

It differs from financial audit. The areas of divergence are:

  • Ethics audit deals with adherence to code of conduct values and mindset whereas financial audit only checks whether the principles of financial propriety are adhered to by the organization.
  • Ethics audit deals with whether the processes followed by the company to achieve its objectives are ethical from societal point of view, whereas financial audit deals with efficient utilization of the organization’s resources.
  • While financial audit deals with verification of only financial records and quantitative data, ethics audits serves to assess qualitative and subjective parameters such as the integrity and honesty of the employees and also whether their attitude reflects the core societal values.

Emergence of various moral lapses in the corporate world, such as the Sahara issue, Satyam scam, Volkswagen’s “cheat device” scandal and even the lending policies followed by banks before the 2008 financial crisis etc. make ethics audit imperative today.


 

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