The Chartered Institute of Internal Auditors will launch a report today calling for boards in both the public and private sectors to take concrete steps to audit their corporate culture and behaviour.
The Institute's report will be launched at the profession's global conference in London, with over 2000 internal auditors and risk professionals from 117 countries worldwide in attendance. The conference will address a range of issues which influence the culture and ethics of organisations, such as: whistleblowing, preventing fraud, non-financial reporting, managing risks to sustainability, as well as auditing culture itself.
The need to change corporate culture in the financial services sector was most recently recognised earlier this year when recommendations to establish a new Banking Standards Review Council included a strong focus on the improvement of culture and behaviour within banks. The Leveson Inquiry into media intrusion similarly highlighted the importance of culture and ethics. And the Francis Report into the Mid Staffordshire Foundation Trust failures pointed to the need to identify and put in place the right culture of care. The current review of the BBC in the wake of the Jimmy Saville scandal, by Dame Janet Smith, is also focused on culture and management behaviours.
According to the Institute's report, boards must start by clearly defining and communicating the culture they require to produce the behaviour needed to meet their organisational goals and manage the risks to their achievement. They must then put in place the policies and systems that can be measured and work much more closely with their internal auditors to monitor and report on those measures.
Dr Ian Peters, Chief Executive of the Chartered Institute of Internal Auditors said:
"As organisations come under increasing pressure to demonstrate their commitment to improving standards of behaviour they must focus more closely on getting the underlying culture which dictates those behaviours right.
"But on the basis that what gets measured gets done, they must take seriously the need to audit their progress in addressing the need for change."
The report calls for internal auditors to:
• Go beyond a focus on processes and controls and undertake root-cause analysis to identify cultural weaknesses
• Audit cultural indicators to gather evidence on how far culture and values are at the heart of every business decision
• Include indicators such as recruitment policies, training, performance management and reward
• Audit not just tone at the top but throughout the organisation
• Trust their judgement even if at times it means taking a subjective approach.