AUDITING

AN
ETHICS
PROGRAM
 The Ethics Audit
• Systematic evaluation of an organization’s
ethics program and performance to
determine whether it is effective
– Regular, complete, and documented
measurements of compliance with
policies and procedures
– Can be a precursor to establishing an
ethics program
– Helps to identify the firm’s current ethical
standards, policies, and risk areas
 Social Auditing

Process of accessing and reporting a business’s

performance in fulfilling the economic, legal,
ethical, and philanthropic responsibilities
expected by its stakeholders

• Broader in scope than an ethics audit

• An ethics audit might be a component of a
social audit
 Benefits of an Ethics Audit

(1) Identify potential risks and liabilities and

improve legal compliance

(2) Can be key in improving organizational

performance

(3) Improved relationships with stakeholders

 Risks in Ethics Auditing

(1) Ethics audits may uncover ethical problems

that a company cannot remedy
(2) Stakeholders may be dissatisfied with the
information
(3) Conducting the audits is a financial and
record keeping burden
(4) No guarantee that auditing is the solution to
ethics concerns
 The Auditing Process

(1) Secure top management and board commitment.

(2) Establish an ethics audit committee.
(3) Define the scope of the audit.
(4) Review the organizational mission, goals, and values.
(5) Collect and analyze relevant information.
(6) Verify the results through an outside agent.
(7) Report the findings to:
Audit committee, managers, and stakeholders.
 Strategic Importance of Ethics Auditing

(1) Should be conducted regularly rather than in response to problems

(2) Audits provide a benchmark as to the overall effectiveness of ethics
initiatives and is important in asset allocation and program development.
(3) Quality and effectiveness in ethics auditing:
Inclusivity; Comparability; Completeness; Evolution; Management policies and systems;
Information disclosure; Continuous improvement
BUSINESS
ETHICS
IN A
GLOBAL
ECONOMY
 INTERNATIONAL
BUSINESS  Business ethics emerged as a field in the 1970s but international
business ethics did not emerge until the late 1990s.

ETHICS Many new practical issues arose out of the international context
of business.
 Theoretical issues such as cultural relativity of ethical values
receive more emphasis in this field.
 Country differences give rise to some interesting ethical issues:
 Whether they should do business in totalitarian countries
that violates the human rights of their citizens (e.g: China)
 Whether firms should invest in countries where the
government represses its citizens in political and/or
economic freedom.
 Whether an international firm should adopt high levels of
worldwide regulations or focus only on meeting local
regulations.
 CROSS CULTURAL
ETHICAL Culture is a system of values and norms that
ISSUES are shared among a group of people and
that when taken together constitute a
design for living.

Values are abstract ideas about what a society

believes to be good, right, and desirable.
Norms are social rules and guidelines that prescribe
the appropriate behavior in particular situations.
 CROSS CULTURAL
ETHICAL The social structure of a country can be
ISSUES described along two major dimensions:
individualism vs. group.

Individual: A focus on the individual and individual

achievement is common in many Western societies.
The Group: In sharp contrast to the Western
emphasis on the individual, in many Asian societies
the group is the primary unit of social organization.
 DOs AND DONTs
INTERNATIONAL
BUSINESS CALLS
GLOBAL ETHICS
DEBATE
ISSUES
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