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An Overview of Ethical Audits

An ethical audit is an examination or inspection of systems or processes hey to make sure that they are compliant with ethics-related requirements. It is an assessment of how well or how badly an organisation, or a company conforms to the applicable ethical standards of industry or society in general. Ethical audits are designed to dig deeper into business practices and IT dealings in order to see how accurately a company organisation follows its own rules and to see how far it is in compliance with any external standards or guidelines regarding ethics that are nationally recognised. Compliance and ethics are often linked inextricably, even though compliance refers to adherence to legal regulations while ethics pertain to behaviours. However, an organisation can be completely compliant with specific legal regulations yet may still be engaged in unethical practices. This is why organisations conduct ethical audits along with operational audits and financial audits. Ethical audits are very different kinds of audits that generally deal with a lot of quantitative data which is easily measurable. However, ethical audits are more subjective and qualitative in nature and involve consideration of various different perspectives in order to gain a holistic understanding of the organisations' commitment to ethics and compliance.

Purpose of an Ethical Audit

The following is the purpose of an Ethical Audit:

  • An ethical audit has conducted any impropriety that can otherwise go unchecked. The scan includes discovering illegal unscrupulous activity within the business of the organisation, like unfair or unethical treatment of employees. For instance, the audit can also reveal a myriad of breaches of any existing external standards or regulations or labour laws in relation to unsafe working environments and working hours.
  • An ethical audit can also help identify unacceptable behaviour that fails to comply with existing internal guidelines with respect to how top management and staff members are required to conduct themselves. These behaviours or actions may not necessarily amount to violations under standard law requirements or any statutory provisions, but they shall still be deemed as unacceptable and unethical workplace practices.
  • An ethical audit is conducted not only to ensure that practices that are prohibited are not taking place but also to keep a check on the behaviours of the management and staff members and to see if they are in accordance with behaviours mandated by the code of conduct of the company and the written policy is and procedures in practice. The value statement of an organisation must not be in contrast with how the people of these organisations behave, and it is imperative to avoid setting dangerous precedents where behaviours or practices violating the organisation’s ethical policy go unchecked.
  • The primary objective of conducting an ethical audit is to make employees and management comply with the ethical values of the company and to ensure that these values are embedded in the everyday practices of the organisation. The primary purpose of an ethical audit is to compare the external and internal guidelines with the actual behaviours of the employees and the management that are relevant to various ethics-related categories. The audit can also identify many additional issues that require to be addressed through communications, training and subsequent audits.

Creating Ethical Culture

The following steps can be effectively used to create an ethical culture in an organisation:

Step 1: Company Values

Every organisation must have values that are clearly stated to create a culture of compliance and ethics. Values that shape the ethical culture of a company through daily work practices can include respect, integrity, diversity, conscientiousness, safety, and creativity, among other things. For example, a manufacturing or construction company can focus on safety as one of the foremost values of the company since the employees would be working in construction and manufacturing worksites and nuclear plants, which may involve working with dangerous and hazardous substances. Hence, the safety code form one of the top values that is fundamental to the company ethics program and is prioritised the daily work practices of the employees or workers.

Step 2: Code of Conduct and Code of Ethics

The values that have been chosen in the above step must be incorporated into the code of ethics of the organisation. The code of ethics shall contain guidelines regarding behaviours and principles that would govern decision-making. The code of conduct shall have ways to apply the code of ethics to a range of actions and situations. Both Documents must include guidelines pertaining to compliance and ethics risk areas. Code of conduct directions to the employees to apply the code of ethics to the various issues that are valuable to the company. However, an understandable formal code of conduct will not guarantee real-world compliance. A code of conduct audit shall assess whether the code of conduct and code of ethics that exists in material form has been understood and internalised by the employees in their daily experiences. In an internal ethics audit, you must ensure that all the directors, employees and agents are provided with the code of conduct and to assess steps being taken to make sure that the code of conduct is understood by the employees and that they are familiar with what is required from them.

Step 3: Assessment of risk

Once the company has a code of ethics which is understood and believed in by the employees, the next step shall be to understand the risk areas pertaining to compliance along with the risks and the guidelines and the code of conduct that was provided by the company.To complete this task, the company should conduct a risk assessment to assess whether it has been focusing on the current risks to business due to changes in business practices, organisation, laws and regulations. When preparing the risk assessment with respect to compliance for each business unit with applicable laws and regulations, it is imperative to include issues that are addressed in the code of conduct like harassment issues, protection of assets of the company, anti-kickback, and anti-bribery, among other things.

Step 4: Ethics and Conduct of Business Policies

An effective compliance and ethics program must include procedures and policies that address specific risks that a company is facing. For instance, procedures and policies that are relevant to international trade risks that are related to necessary export, money laundering,and anti-boycott measures, among others.

An ethics audit and business conduct policies audit shall assess whether all the employees are aware of these policies, have understood them and on implementing the min their daily work life.The internal audit must examine the list of policies to check if high-risk areas from the code of conduct and the risk assessment have been addressed.For existing policies, the company should conduct employee interviews to examine awareness of these policies. It should ask employees how well they understand their responsibilities with respect to the business conduct policies and ethics policies.In case an employee says that they are unaware of the guidelines of the company on a particular policy, they must meet made aware of the same by referring them to the specific section of the code of conduct and the respective policy. A company must also identify policies which the majority is not familiar with so as to provide additional training in those areas.

Step 5: Awareness training audit

It is not sufficient enough for a company to simply have policies. It is imperative also to have a training program that helps employees be aware of compliance and ethics issues. While creating or evaluating a training programme, things like the following must be considered:

  • The mode of delivery of the training to the employees. Whether it will be a live session or will it be an online programme. Whether the delivery method is sufficient enough for all the employees that are required to take up the ethics and compliance course.
  • Ways in which the completion of a course shall be assessed, like a quiz with the minimum score requirement after the training course ends.
  • Percentage of employees that have completed the required courses after tracking the completion status of the requisite course. The company must also consider the records that it shall take to follow up with those employees that have not passed training or completed the course.

Step 6: Mechanisms for inquiry and reporting

The ethics and compliance programme of a company must include the process of asking questions or reporting their concerns about violations of company policies, laws and regulations, and ethics for employees, customers, suppliers and other persons carrying business with the company. To examine the above mentioned process reported through mechanisms like the company hotline, the audit must consider the below mentioned:

  • Whether there is a prioritisation of concerns that have been received based on the severity of the issues
  • Whether there exists a former protocol on how investigations shall be conducted and by whom.
  • whether there is a formal protocol to make sure that the investigations are conducted, consistent standards and guidelines to ensure thoroughness
  • whether the investigations were formally Documented in reports
  • whether the investigations were completed well within the established timeline
  • whether the investigations were thorough enough to reach a decision with respect to the validity of the concerns
  • whether there were any explanations for actions that what taken or not taken based on the concerns received and the subsequent investigations conducted
  • whether any ensuing action was taken up after appropriate management approvals and consultation with experts like the HR or the legal team
  • whether the callers were made aware of the investigation results.

Step 7: Communication program

a communication plan must be developed to increase awareness inspector the ethics of the company and remind employees that compliance and ethics are essential to the company. For the communication programs to be effective, they should engage the audience with particular messages about ethics through our variety of media. Effective communication programmes can include the below mentioned:

  • Individual pages on compliance and ethics on the internal and external websites of the company.
  • Ethics blogs from senior management and executives to help set the tone
  • incorporating messages, Q & As, and short videos with respect to ethical issues in the newsletter of the company.
  • Ethics posters must be displayed prominent locations of the office space which the contact details of the ethics officer and a toll-free hotline number. These posters must clearly state that concerns about whether respect to ethics and compliance can be reported anonymously and that there would be no retaliation for reporting even unsubstantiated concerns.
  • The company must ensure that the code of conduct, code of ethics and ethics messages are provided in the native language of the employees.
  • A strong communication programme will help keep ethics and compliance the top priority for all employees.

    Step 8: Assessment and Evaluation of the Ethics and Compliance Program

    When implementing the culture of ethics and compliance, it is imperative to conduct conference program evaluation and assessment. There must be regular external and internal audits programs of the company, and evaluation of the internal controls must be tested. The company must conduct focus groups and employee surveys to assess employee impressions of the company’s ethics and compliance culture. Program evaluation and constant vigilance are essential to maintain a robust culture of ethics.

    Step 9: leadership commitment

    In order to achieve and maintain an ethics and compliance culture in the company, there must be a strong commitment five from the top management to instil a perception that compliance and ethics-related issues are essential to the company.It is fundamental that the leadership and the top management take responsibility throughout the above-mentioned steps to demonstrate the importance of ethics and compliance through their actions. There are many ways the activities and organisational structure can depict leadership commitment:

    • The CEO can make a formal statement of the commitment of the company to the highest ethical conduct with respect to all aspects of the business
    • the leader of the ethics organisation can directly report to the CEO or the board of directors
    • The ethics and compliance committee, with a senior executive like the committee chairman, can provide oversight and leadership to the ethics programme and assess the status of the activities conducted under it. The committee should include senior leaders from human resources, legal, communications, internal audit, security, IT, operations and other departments.

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    How is an Ethical Audit Conducted?

    Ethical audit primarily focuses on how an organisation treats its employees,how it addressesany grievances that may arise, the existence of equal opportunity and employee discrimination. An ethical audit can also focus on various other areas like client relations, the impact of the company’s operations on the environment, how efficiently the company disclosures its finances, conflict of interest, access to information pertaining to the company, awards and bidding practices, receiving and giving of gifts among other things.

    There are many ways in which an ethical audit may be conducted.Some companies choose to adopt a formal code of ethics and conduct regular ethical audits to keep a self-check on the organisation and determine how closely the staff and the management follow the company's own rules. This will involve an extensive and comprehensive review of the company records and various related information, observation of workplace practices and processes, and interviews with managers and employees. Before an ethical audit is conducted, the auditing team for the individual auditor shall be required to decide after the people that shall be interviewed and the information that they are required to obtain and the parameters of the observations that shall be made by them.

    An internal auditing team shall consist of a nominated auditor, a compliance and ethics officer, a legal manager as well as an HR manager. This auditing team can play an essential role in responding to the ethical, compliance or any legal issues that have been identified in the audit while deciding how the response shall take the form of integrating it as a topic in training, disseminating it as educational material or disciplining an employee. It can be carried out either internally or as part of the ongoing audit cycle external auditor can be appointed in order to contact the audit to meet specific contractual requirements related to ethics.

    How to Detect Unethical Standards?

    The following tips shall help organisations to better detect an ethical standard that will help and strengthen ethical policies of the corporate culture of the organisation:

    • Create a clear code of ethics that is based on the values of your organisation. They shall be considered the central Document based on which ethics-related guidelines shall be incorporated into the procedures and policies of the organisation. This can be used as a benchmark against which the audit shall be conducted.
    • Create metrics against which the ethical conduct can be measured against. Ethical measures are easier to conduct when there are tangible measures in place, like performance goals that are ethics based.
    • Regularly carry out routine ethical audits wherein continuous monitoring of ethical performance will ensure that applicable ethical standards are being upheld.
    • Unannounced ethical audits must be carried out where there is any inkling of unethical activities within the business. Announced audits may defeat the purpose of observing the actual standard daily workings of the company.
    • Develop a cross-functioning and reliable audit team that would act impartially and responsibly. It is also prudent to have an independent external auditor in order to ensure greater transparency and objectivity.An outside perspective giving unbiased findings is extremely imperative depending upon the magnitude and nature of ethical issues.

    CorpbizEthical Audit Expertise

    The ethical audits carried out byCorpbiz auditors are compliant with a plethora of internationally recognised standards which include, inter alia, the ISO 9000 standards for the quality management system. Many of our ethical auditors are experienced, and capable professionals with a proven track record in their respective subject matters, and they undergo regular training and assessment. When an ethical audit is conducted by the Corpbizauditors, they deploy extensive procedures and comprehensive reviews to gauge whether an organisation is competent and capable of meeting the specific requirements of the company. An ethical audit conducted byCorpbizshall involve the following:

    • Waste management
    • Health, hygiene and safety Cortana
    • child labour
    • working hours and wages
    • labour practices, including worker representation, forced labour, discrimination and disciplinary practices

    Corpbiz shall tailor ethical audit protocols according to the company and its needs. If your company already has in place a social accountability programme, Corpbiz shall tailor ethical audit programs to suit your requirements and ensure compliance of your vendors with your specific needs.

    Corpbiz offers the best in class protocol for ethical audits using the existing standards and modifying and building up on our own expertise and experience performing numerous audits annually.

    When Corpbiz auditors visit a factory, they employ GPS coordinates to ensure that your products are being manufactured at approved facilities and no subcontracting is taking place.

    Our on-site process includes the following:

    • factory tour
    • opening meeting
    • worker interviews (both individual and group)
    • Document review
    • closing meeting with a corrective action plan review

    Moreover, our ethics workshops conducted by us both before and during the audit shall help educate your suppliers or employees of the audit programme with a view of getting them more involved to help achieve compliance.

    Our workers or employee interviews are structured in a way that ensures honesty and transparency. During the interview, our auditors crosscheck the information and use voice stress analysis to detect any inconsistencies or deception. The staff are also given opportunities to provide anonymous feedback.

    All Corpbiz auditors are professionally certified, and they undergo regular training to stay up to date with the latest regulatory requirements and standards.

    Once the ethical audit is conducted by our experienced auditors, all the findings will be collated in a comprehensive audit report which shall be provided along with a corrective action plan that shall be given in order to prioritise the most important collective actions to improve upon the working of the company. Progress after implementing the corrective actions can be further measured by conducting follow-up audits, phone calls, and desktop reviews, among other things. An ethical audit that is carried out by expert auditors shall yield reports within 72 hours.

    Our ethical audit packages are primarily customisable and offer a very high degree of flexibility to meet the specific needs of every business. The following services can also be included to add on to the evaluation process and allied services provided by Corpbiz:

    • Technical Audit: A technical audit is a comprehensive assessment to evaluate a supplier's capacities and capabilities. It grants a company extensive visibility on whether a manufacturer shall be able to meet its requirements with respect to quality introduction. It also aids in revealing how actively the manufacturer will manage all the aspects involved in the production process. Findings from these audits will help companies to reach an informed decision before placing an order with a vendor and get an idea of the ethical, operational, and quality risks that might be involved.
    • Manufacturing audits: These audits area systematic and comprehensive evaluations of the manufacturing process in order to identify and curate solutions to errors found during different stages of the manufacturing process. It essentially involves a plethora of aspects like the competence and capacity of the manufacturer, systems employed, and workplace environment in order to make sure that the manufacturer is competent enough to produce products that gel well with the requirements and specifications of a business.
    • Structural audits: This help in analysing the integrity and safety of the manufacturing premises. This also involves a comprehensive audit of the fire safety measures, relevant code, and structural integrity, among other things.
    • Assessment of procurement conditions
    • evaluation of the entity's social responsibility and associated compliance
    • research and development pertaining to the sampling capacity
    • evaluating health, hygiene and safety standards of the unit
    • assessing the environmental impacts of the factory processes involved
    • any other evaluations as required

    Frequently Asked Questions

    An ethical audit is an examination or inspection of systems or processes hey to make sure that they are compliant with ethics-related requirements. It is an assessment of how well or how badly an organisation or a company conforms to the applicable ethical standards of an industry or society in general. Ethical audits are designed to dig deeper into business practices and it dealings in order to see how accurately a company organisation follows its own rules and to see how far it is in compliance with any external standards or guidelines regarding ethics that are nationally recognised.

    An ethical audit has conducted any impropriety that can otherwise go unchecked. The scan includes discovering illegal unscrupulous activity within the business of the organisation, like unfair or unethical treatment of employees.An ethical audit is conducted not only to ensure that practices that are prohibited are not taking place but also to keep a check on the behaviours of the management and staff members and to see if they are in accordance with behaviours mandated by the code of conduct of the company and the written policy is and procedures in practice.

    Ethical audits must be conducted to ensure decent working conditions and human rights throughout your supply chain, comply with statutory requirements, prevent unauthorised subcontracting, receive an accurate picture of ethical compliance in your supply chain, foster cooperative relations with your suppliers, and improve brand image and increase consumer loyalty.

    There are many ways in which an ethical audit may be conducted.Some companies choose to adopt a formal code of ethics and conduct regular ethical audits to keep a self-check on the organisation and determine how closely the staff and the management follow the company's own rules. This will involve an extensive and comprehensive review of the company records and various related information, observation of workplace practices and processes, and interviews with managers and employees.

    Create a clear code of ethics that is based on the values of your organisation. This shall be considered the central Document based on which ethics-related guidelines shall be incorporated into the procedures and policies of the organisation. Create metrics against which the ethical conduct can be measured against. Regularly carry out routine ethical audits wherein continuous monitoring of ethical performance will ensure that applicable ethical standards are being upheld. Unannounced ethical audits must be carried out where there is any inkling of unethical activities within the business. Develop a cross-functioning and reliable audit team that would act impartially and responsibly. It is also prudent to have an independent external auditor in order to ensure greater transparency and objectivity.

    An ethical audit that has been carried out by Corpbiz'sexpert auditors shall yield reports within 72 hours.

    An ethical audit is an investigation into how poorly or wellan organisation or a company complies with the ethical standards of a specific industry and society in general. Conducting ethical audits helps detect any existing impropriety and aids in demonstrating responsibility as both a business and an employer.

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