Ethics and Internal Auditors

Professionalism, Ethical Codes and the Internal Auditor: A Moral Argument Mary Ann Reynolds ABSTRACT. This paper examines the case of the internal auditor from a sociological and ethical perspective. Is it appropriate to extend the designation of professional to internal auditors? The discussion includes criteria from the sociology literature on professionalism. Further, professional ethical codes are compared. Internal auditors’ code of ethics is found to have a strong moral approach, contrasting to the more instrumental approach of certified professional accountants.Internal auditors are noted as using their code of ethics to help resolve professional ethical dilemmas. Introduction Society grants professional standing to those groups which contribute to the well being of the broader society. Business experts in such groups as business ethics consultants and internal auditors lay claim to professional standing which if granted enhances both their credibility and marketability . But is this claim justified? Although business ethicists are beginning to debate this issue they presently lack a common body of knowledge or agreed upon expertise.As defined expert knowledge is one of the common criterion for professional definition their claim awaits the development of consensus (Cohen, 1992; Stark, 1993; and Dean, 1997) However a similar group, internal auditor’s have a fifty year history of moving to achieve this recognition. This paper will examine the justification of their claim to professionalism in light of current practice. Mary Ann Reynolds is assistant professor of accounting at Western Washington University. Her current research publications are primarily in the areas of ethics, and environmental accounting.This is of importance to society because internal auditor’s provide a peculiar service in that they contribute to the control of the integrity of financial information in a market economy. Public accountants, represented by the Americ an Institute of Certified Public Accountants (AICPA) have long held professional status based on their responsibility to audit publicly issued financial statements. Public accountants provide a range of service but are specifically licensed to perform the external audit of publicly issued financial statements.Internal auditors in contrast have no licensure requirement and practice within the corporation or organization that employs them. There may be great similarity in the work performed by these two branches of accounting. Internal auditors may perhaps be considered a subset of accounting and as such may be included under the professional rubric. However they may also be viewed as a particular class of business expert or consultant, not serving the public good and not necessarily adhering to standards or codes of conduct, in which case the claim to professionalism would not hold.However, as a result of the Foreign Corrupt Practices Act of 1977 corporations are required to maintain effective internal controls to prevent fraud and bribery of foreign officials. Internal auditors have been instrumental in providing this service as well as compliance audits to ensure meeting regulatory requirements. Society appears to expect a professional service even though licensure has not been required nor formally granted. The internal auditor serves an important link in the business and financial reporting process of corporations and not for profit providers but can they be considered professionals?Journal of Business Ethics 24: 115–124, 2000.  © 2000 Kluwer Academic Publishers. Printed in the Netherlands. 116 Mary Ann Reynolds Professionalism: A societal perspective Accountants perform agreed upon services within an orderly social and economic context. The claim to classify accounting, and auditing, as classical professions is based upon their relationship to society as a whole and the question of professionalism must therefore be studied not just in the context of a division of labor but, â€Å"as part of a network of social and economic relations (Dingwell, p. 2). Professions do, in fact, contract with society and a sociological level of analysis is thus useful in examining accounting practice (Fogarty, 1995). The functionalist perspective deriving from Parsons (1951, 1968) classic works in particular provides a useful explanatory model for understanding accounting in its social environment. Functionalists contend that society will organize to maintain itself and then various functions arise to preserve the stability of the social system.Anthropologists utilizing functionalism as a heuristic tool have identified four of the prerequisites to maintain society as: 1) shared cognitive orientations, 2) normative regulation of means, 3) effective control of disruptive forms of behavior and 4) communication (Aberle et al. , 1960). Accounting reports as an inherent part of the resource allocation process and can appropriately be viewed as commun ication as well as one of the control mechanisms (Reynolds, 1989). The functionalist perspective is chosen from among possible approaches such as taxonomic, neo-Weberian, or Marxist (Saks, 1988) as relevant to accountants.As Montagna (Freidson, 1973, p. 146) notes professional accountants are, â€Å"designers of order†. Accounting theory follows the basic assumptions of the functionalist perspective in that they contribute to accurate communication, control and the maintenance of order. Although work on professions following a functionalist foundation is continued by Moore (1970), some specific insight can be gained by returning to issues raised by Parsons and Hughes in earlier work. A range of criteria have been proposed as indicators of professional status in this society. Parsons focused on the function served, i. e. aintenance of order and control, while Hughes discussed licensure and certification as indicators Are internal auditors properly designated as professionals? This continuing discussion is emphasized by Wesberry’s (1989, p. 25) regretting that internal auditor’s cannot yet claim to â€Å"have arrived†, to unequivocally claim professional status. Further debate arises as questions about future directions for internal auditing indicate a wide range of possibilities. Opposite ends of the spectrum are expressed by an interview with Michael Hammer (1998) and a review of Israeli legislation (Friedberg and Mizrahi, 1998).In an interview published in the Internal Auditor, Michael Hammer encourages internal auditors to move to a consultancy position and to convince management that the consultant’s role is in fact the role in which the internal auditor adds value to the company. This contrasts to the prominence internal audits were recently accorded in Israel where the Knesset mandated that every public body or organization must have an internal audit. Thus we see the current debate as whether internal auditors are class ified as workers with a particular expertise, or as professionals?This discussion can be informed by reference to the sociology of professions and examination of the proposed profession’s ethical code. The author examines the unresolved claim of professional status for internal auditors and considers their development and use of a code of ethic as one type of supporting evidence. The specific case of the internal auditor is addressed by reviewing: 1) the internal auditor’s claim to professionalism based on their function in society, 2) criteria for professions, and 3) development of an ethical code.The paper is organized as follows: the examination is located in the societal perspective and then specific professional characteristics are reviewed. The third section discusses codes of ethics and compares elements contained in recognized professional accounting codes. Section IV discusses the internal auditors code in particular, the guidance for conflict resolution and f inally, the moral focus of the internal auditor’s professional ethics code is discussed. Section five is the conclusion. Professionalism, Ethical Codes and the Internal Auditor of societal mandate.Jackson (1970, p. 6) enumerates: craft, skills, intellectual training and the concept of duty with a service ideal and objective disinterestedness as criteria for distinguishing professions. Thus, for an occupation to become a profession it is considered one which is practiced by a few experts using special knowledge in a field which reflects issues of concern to society. Further, normative standards of practice are then set by the professional bodies. Evolving professional status within a society is additionally evidenced by development and adherence to a standard or code.Thus, the consideration of an occupation as professional or nonprofessional is based on an accumulation of critical discriminating characteristics ( Jackson, 1970, p. 23). To those noted above Schumpeter (1951) ad ds the consideration of monopoly power. Monopoly versus non monopoly is an indictor of the degree to which charter to practice has been granted to the profession by society. Characteristics of professions. Within the social model professions are seen as emerging to serve the public good and are granted status by society because of the functions performed.The basic issues presented above led to the development of proposed listings of common characteristics for professions. The listing used by Millerson (1964), and Kultgen, (1988), utilizes both traits and functions as characteristics and is therefore inclusive of the issues raised. The listing includes the thirteen primary characteristics found in Table I. The first five general characteristics are widely accepted as definitional in the professions literature, they are appropriately applied to public accountants and are not argued separately in this paper.Characteristics numbered six through ten deal more particularly with the relati onship of professional service, and the professional, to the society and these will be examined in detail below. Characteristics eleven through thirteen further define the relationship of the professional practitioner to the client that is served and will be briefly discussed here. Characteristic number eleven asserts a fiduciary relationship toward the client. This requirement that the highest standard of loyalty be met TABLE I Primary characteristics of professions 117 General 01.A profession involves skill based on theoretical knowledge. 02. The skill requires extensive and intensive training and education. 03. The professional must demonstrate competence by passing a test. 04. The profession is organized and it is represented by associations of distinctive character. 05. Integrity is maintained by adherence to a code of conduct. Relationship to society 06. Professional service is altruistic. 07. The professional assumes responsibility for the affairs of others. 08. Professional service is indispensable for the public good. 09.Professionals are licensed, so their work is sanctioned by the community. 10. Professionals are independent practitioners, serving individual clients. Relationship to clients 11. They have a fiduciary relationship toward their clients. 12. They do their best to serve their clients impartially without regard to any special relationship. 13. They are compensated by fee or fixed charge. As summarized in Kultgen, 1988, p. 60, headings added. in serving the principal is difficult to apply directly to either public accountants, whose first duty is to the public good, or to internal auditors hose duty of good faith is to their immediate employer. However both groups do acknowledge their duty to act in good faith which may fulfil the intent of this requirement even though the duty is not to a client per se. Characteristic twelve requires impartiality, construed by accountants as objectivity. Public accountants are bound by the requirement to maintain an objective and independent attitude. Internal auditors are also enjoined to maintain an independent attitude, thus meeting this characteristic. The last characteristic is met by public accountants 118 Mary Ann Reynolds be a profession.Courtemanche (1991) provides an historical argument in favor of such professional recognition. Internal auditors working within corporations have asserted their right to hold themselves out as professionals. This has been challenged by CPA professionals in public practice. The issue reached the status of legal debate and court cases in Florida and Texas supported the legal right of accountants working within corporations, rather than in public practice, to use the professional CPA designation if they have passed the CPA examination and met the qualifying criteria (Baker and Hanson, 1997).A logical argument can also be constructed with reference to the professional characteristics previously summarized. Examination of the characteristics will reveal whether the preponderance apply to internal auditors or not. The first five characteristics generally define professions and can be seen to apply to internal auditors as well as to the certified public accountants. However, primary characteristics six through ten are open to debate and will be examined separately for applicability to internal auditors and the question of their professional standing.A discussion of each of these characteristics follows. Is the service performed by internal auditors altruistic? This may be questioned for most professions in any but an idealized definition of the functions that are performed. However, the focus of this characteristic seems to be that services performed are services that cannot be done by the client him/herself and that service performance is not primarily for personal enrichment. Compensation is provided to professionals to enable them to continue to perform the service. If public auditors are eld to enhance the proper flow of accounting information in a capital market as a necessary service (Brown and Bradshaw, 1988), then by extension internal auditors may be held to enhance the accurate flow of information from inside the corporation to the external capital market. By extension this may be construed as serving the public interest. However, because they are directly employed by the corporation they may be said to provide the service as a by product with personal gain, through the receipt charging an audit fee.It is not applicable to internal auditors who receive salary. In addition to these thirteen primary characteristics Kultgen (1988) also notes these seven ancillary characteristics: 1) loyalty to colleagues, 2) regular professional development, 3) prestige based on guaranteed service, 4) use of individual judgment, 5) work is not manual, 6) profits are not capital dependent and 7) status is widely recognized. These seven ancillary characteristics reflect more on the professional practitioner as an i ndividual and less on function within society.Examining both sets of characteristics from a societal perspective, it is readily seen how the public accounting profession meets the criteria within this model and can therefore be held to maintain order and contribute to the stability of the society. Further, in granting the Certified Public Accountants, as professionals, exclusive license to practice society acknowledges their important role and grants a monopoly position. Professions contract with society and acknowledge their role and responsibility by establishing codes of conduct.The development of a formalized code has been seen as a necessary indicator of professionalism (Newton, 1982, and Loeb, 1984). Thus, society acknowledges the professions’ contribution to the public good and the professions acknowledge their responsibility to society. Professional accountants, as represented by the American Institute of Certified Public Accountants (AICPA), have held themselves to b e a profession and have accepted the obligations coincident with that designation.Certified public accountants (CPAs) conform to both the major thirteen characteristics and the seven ancillary characteristics and are commonly held to be professionals. However, Zeff (1987, p. 67) argues that their professionalism is, â€Å"diluted by rule dominated practices. † For the purposes of this paper the assumption will be made that public accounting, as practiced by CPA’s, is indeed a profession. Can this professional designation be extended to include internal auditors, as a branch of accounting, under the professional rubric?The research question specifically addressed in this paper is whether or not internal auditing, as a special case of accounting, can also be held to Professionalism, Ethical Codes and the Internal Auditor of salaries, as the primary goal. Thus, only partially supporting the claim to professional designation. Is responsibility assumed for the affairs of ot hers? This normally connotes an area of expertise held by the professional, essential to the recipient, about which advice is given.The recipient is not able to evaluate the information for him/herself. This is clearly the case with regard to the classic professions of law, medicine, and architecture (Kultgen, 1988). The public auditor is specifically employed to exercise professional judgement and offer an opinion as an expert. Therefore this can be considered applicable to the public auditor. However, the case cannot be extended to the internal auditor in this instance, as the client, i. e. the corporation, has its own accountants employed to generate the required accounting information and the internal auditor primarily serves an internal control function, even though accounting expertise may be needed and additional accounting advice may be sought. This control function serves the corporation directly and only indirectly serves society Is the professional service indispensable t o the public good? Public audits have been mandated by legally authorized bodies, thus recognizing that they are considered essential to the public good by allocating resources to them.With the public demand for the control of fraud evidenced by the Foreign Corrupt Practices Act of 1977 internal auditors became more active as a means of internal control, and fraud detection that was part of the proposed solution to protect the public interest (Lambert and Hubbard, 1989). Internal auditors, in their professional capacity, may be asked to design internal control systems and to assist in the construction of corporate codes of ethics (Peacock and Palfrey, 1991), thus, serving as an integral part of the overall control system and by extension may be considered indispensable to the public good.Is internal auditors’ licensing sanctioned by the community? Referring to the previous argument some level of public sanction is implied. However, licensure implies authority to license, 119 which must be granted by an authoritative body. In the case of Certified Public Accountants (CPA), state boards of accountancy are empowered by the respective legislatures to license public accountants practicing in the state. Internal auditors are not licensed by a legislative authority. Rather, they are certified by the Institute of Internal Auditors (IIA) upon successful completion of an experience requirement and a qualifying exam.No authoritative body claims jurisdiction over their activities. Within the corporation, however, internal auditors have responsibilities defined by the corporation and authority granted by means of a charter. This internal authority granting charter should be signed by the executive management and by the audit committee representing the shareholders (Ratliff et al. , 1988). In the context of an internal, company specific activity, this can be construed as granting professional right to practice by appropriate authority.This is not however, an authorit y granted by society nor does it extend beyond the charter granting corporation. This is, at best, a limited type of licensure as no monopoly is granted and certification is not required. Is the internal auditor an independent practitioner serving individual clients? The issue of the charter for internal audit departments is particularly relevant to this discussion. Internal auditors operate within the corporation by right of a charter establishing their rights and responsibilities and granting them authority to function ( Johnson, 1986).The charter establishes the internal audit department as an independent function which enables the internal auditor to operate as an individual professional serving a client. Although the client in this case is the corporation, the required independence of attitude and function can be seen to qualify the internal auditor as an independent practitioner. Examination of the applicability of the six ancillary characteristics to internal auditors contrib utes to the resolution of the question of professionalism. The six ancillary characteristics are specifically included in the code of ethics developed by the Institute of Internal Auditors.Thus, a preponderance of the characteristics, or 120 Mary Ann Reynolds punishments are structured to reward ethical behavior. Thus, the outcomes of professional behavior, whether moral or prudent, will enhance the public good. However, the Institute of Internal Auditors has chosen to emphasize high moral character. Article VIII of the IIA Code of Ethics specifically states that internal auditors should be ever mindful of their obligation to maintain a high standard of morality. It is useful to examine ethical codes and seek identification of common themes or components.A comparison by Kultgen (1988) of the American Association of University Professors; American Bar Association; American Institute of Certified Public Accountants; American Medical Association; American Psychological Association; Eng ineers Council for Professional Development; Institute of Electrical and Electronics Engineers; and Sigma Delta Chi (Society of Professional Journalists) found a number of common elements. The common elements noted include; loyalty to the client, employer, or institution; avoidance of conflict of interest or bribery. Competence, objectivity and honesty about qualifications were also universal.Additional themes such as respect for the territorial rights of colleagues and professional self-monitoring were also widely evidenced. The lack of regulatory oversight allowing self-monitoring, or a profession’s control over its membership and practice, is granted by society (Armstrong and Vincent, 1988). This ability to continue to be self regulated is one which the accounting profession in particular has vigorously defended. Another type of examination is provided by Harris and Reynolds (1992) with a specific comparison of the codes from various branches of the accounting profession.T his detailed comparison of the codes also focuses on dilemmas inherent within the various codes as well as, among various levels of society. An examination of the code of the internal auditors in comparison to the code of the AICPA reveals useful insights. Elements listed in the eight articles of the internal audit code include: honesty, objectivity, diligence, morality, dignity, organizational loyalty, independent mental attitude, competence, conformity to standards, confidentiality, full disclosure, continuing education, nonacceptance of criteria, cited are applicable to internal auditors in their own right.It is therefore, logical to extend the classification of accountants as professionals to internal auditors as professionals. To further legitimate this claim the Institute of Internal Auditors was formed in New York City in 1941, standards were established and a Code of Ethics adopted thus implicitly reflecting their acceptance of their responsibility to society. Examination of the code of ethics adopted may also shed light on their claim to professional status. The following section examines their code and compares it in part to the code adopted by public accounting professionals through the AICPA.Ethical codes: A comparison A profession’s mission and responsibility can be enunciated through the code of ethics to which it subscribes. Like other professions, internal auditors have developed and formally adopted a professional code. In the development of an ethical code there are two basic ethical viewpoints: 1) moral, 2) prudent, which may be adopted. Kultgen (1988) in his work on professions, distinguishes between these two approaches as follows: â€Å"Moral persons recognize the intrinsic value of each member of the moral community; merely prudent persons recognize only their own value and treat others as instrumentality’s. . . . Professional practices can be, â€Å"examined from the moral point of view, asking how they contribute to, or detract from the aggregate happiness and fair distribution of goods in the moral community (1988, p. 32). † Accountants are often viewed as utilitarian in approach and may thus be expected to choose the prudent approach. Examination of the AICPA code reveals that although the principles section in the introduction addresses moral components, the enforceable rules section of the code is predominantly a guide to practice. This is in contrast to the internal auditor’s code which is a guide to individual moral behavior.In a well organized society the rewards and Professionalism, Ethical Codes and the Internal Auditor gifts, and no commission of acts discreditable. This list encompasses both character attributes: honesty, dignity, morality, loyalty, nonacceptance of gifts and no commission of acts discreditable; and professional performance of duty attributes: objectivity, independent mental attitude, competence, conformity to standards, and full disclosure. Thus, the code gives clear indication of the personal qualifications perceived to be essential to perform the requisite public service in an ethical manner.With the emphasis placed on loyalty, dignity and morality the assumption can be made that this institute adopts a moral, rather than a prudent, view of ethical behavior. The emphasis in the internal auditor ethical code reflects an individual level of ethical behavior and decision making. The factor of voluntary compliance further indicates an individual level of ethics. Note that internal auditor’s membership is voluntary and members personally choose to subscribe to the higher duty. There is no societal enforcement if this duty is not met, the only enforcement is forfeiture of membership and certification (Loeb, 1984).The contrast with the AICPA code of conduct shows the AICPA code to have a more institutional focus. Rather than the specification of individual moral characteristics, forms of practice are discussed. The ethical code can be seen as directed to the firm of accountants rather than to the individual per se. The new AICPA code, as adopted in 1988, states positive principles about appropriate professional conduct and is goal driven (Meigs et al. , 1989). In contrast to the Institute of Internal Auditors code, the AICPA code may be viewed as adopting a prudent, or instrumental, ethical view.The AICPA code preamble and article II both express the professions’ responsibilities to the public interest. Here again, membership is voluntary and members commit themselves to honor the public trust and maintain professional excellence. Elements of the code in support of this include: objectivity, independence, scope and nature of services, compliance with standards, confidentiality, contingent fees, advertising and other solicitation, incompatible occupations and form of practice and name. Mention is also made of integrity. Integrity, however, is seen in the 121 context of professional judgment.The professi onal, by this standard of integrity, must be independent, not knowingly misrepresent the facts; and not subject his/her judgment to the judgment of others (AICPA, 1988). Again, the emphasis is on the professional performance of duties in the public arena and serving the public good. Further, Rule 501 enjoins members not to commit acts discreditable to the profession. Enforcement of the AICPA code takes several forms. Members can be censured by one of the designated review boards and membership in the AICPA revoked, the ability to practice before the SEC revoked, or the state license revoked.Licensure is granted by the state boards and revocation of the license goes through a state board procedure also. This constitutes a legal enforcement and the accountant would no longer be licensed to practice. Some of these contrasts between the AICPA and the IIA codes arise from structural differences. Namely, public auditors’ codes include structure of practice considerations such as ad vertising and contingent fees, and permissible firm names; that are not relevant to the internal auditor.Beyond structure, the basic difference evidenced is the AICPA emphasis on a practical, prudent, institutional approach, whereas the IIA emphasizes a moral and individual approach. This difference may in part reflect the varying degree of societal regulation within which the two groups operate. The societal regulation in turn may reflect the level of societal recognition and as internal auditing evolves and gains public recognition, regulation and possible licensing may follow. Examination of additional accounting professional codes provides further points of comparison.The Institute of Internal Auditors (IIA) code is the only code to call explicitly for the maintenance of personal dignity. Some commonalties emerge however, as both the Government Financial Officers Association (GFOA) and the IIA included: exercise of due care, or diligence, and loyalty to employer (Harris and Reyn olds, 1992). Both the governmental financial accountants and the internal auditors function in an environment where they are working as professionals, but within an entity 122 Mary Ann Reynolds on the externally issued financial statements (Lambert and Hubbard, 1989).That the internal audit profession is seen as a significant player in the societal move to deter fraud serves to legitimate their claim to professionalism. At the same time this may exacerbate conflicting loyalty problems. Clearly, the choice will fall on the internal auditor as an individual and it may be to this end that strong individual character has been emphasized in the IIA code. This conclusion follows from Kultgen’s statement that, â€Å"a valid professional ethic, therefore, is critical for the moral development of the individual practitioner (1988, p. 12). Resolution of ethical conflicts requires that the internal auditor recognize sources of harm or conflict and have some guidance on appropriate resp onse. Stanford (1991) recommends four sources of guidance. These are: 1. the IIA Code of Ethics; 2. the IIA’s Standards for the Professional Practice of Internal Auditing; 3. the IIA’s position paper on whistle blowing; 4. consultation with peers. Ratliff (Ratliff et al. , 1988) also suggests that guidance will be found in both the Standards and the Code of Ethics and Wallace (1986) emphasizes that the standards and code go hand in hand to provide guidance.A recent study by Seigel, O’Shaughnessy and Rigsby (1995) confirms that practicing internal auditors report using the code of ethics to guide their judgment on ethical issues in the performance of their professional responsibilities. Seigel et al. further conclude that the majority of internal auditors consider the primary purpose of the ethical code is to provide guidance. Internal auditors are indeed being given a special task. In the organizational structure of the corporation if the internal auditors repor t to the audit committee, as recommended, management may perceive them as adversarial.If fraud or inefficiencies are discovered both professional ethics and personal moral judgment will be needed to resolve conflict. Conflict also arises within the code itself. There is a basic conflict juxtaposing disclosure and confidentiality and rather than independently in society. Thus the adjuration to loyalty to the employer is appropriate. Professional conflict resolution: Guidelines The codes of ethics are adopted to provide guidance to the practicing professional. Kultgen (1988, p. 13) notes, â€Å". . . professionals, precisely as professionals, are confronted with serious conflicts of duty, and conflicts between duty and self-interest. One purpose for codes of ethics is to provide guidance for the resolution of conflict. The internal auditor faces possible conflict in the practice of his/her profession within an organization. Although independence, in theory, is established by the corp orate charter and is required by the code, it may be difficult to achieve in practice. Internal auditors faced with choices that may not appear beneficial to upper management or the organization may find it difficult to maintain an objective disinterestedness. Loyalty, an explicit component of the ethical code, may also present conflicts.The internal auditor may face a conflict between loyalty to the profession and professional standards as they are articulated in the standards and the code of ethics, and his/her employer. The interest of the firm in presenting information may not always be consonant with the interest of society to receive full disclosure of information as management seeks to protect strategic and proprietary information. Although internal auditors may be part of the management team they may also serve a control function on managerial activities, another source of potential conflict.Thus, even within the firm they may have conflicting loyalties (Lambert and Hubbard, 1989). Their obligation to the organization constrains them to safeguard the assets of corporation, minimize waste and inefficiency and watch for deliberate wrongdoing and conflicts of interest (Verschoor, 1987). As a result of the Report of the National Commission of Fraudulent Financial reporting (Treadway Commission, 1987) there is an increasing responsibility for the internal auditor to be active in identifying fraud leading to material misstatementProfessionalism, Ethical Codes and the Internal Auditor also loyalty and objectivity (see Harris and Reynolds, 1992, for a full discussion). Dilemmas arising from these juxtapositions are inherent in the statement of the code consequently the individual practitioner must ultimately turn to his/her own moral response for guidance and resolution. A further role suggested for the internal auditor is monitoring corporate codes of conduct. While this may well be an appropriate extension of internal auditors role it is in the nature of a c onsulting service not a professional accounting service.Indeed, as noted in the introduction, business ethics consultants are developing to advise organizations on ethical codes, problems and approaches to resolution (Dean, 1997). Internal auditors are well positioned to participate in this discussion, though it does not help to resolve the question of professionalism examined in this paper. 123 individual professional within a firm. The IIA code focuses on the morality and dignity of the individual and pushes code adherents toward the achievement of a professional ideal.Thus by noting the internal auditor’s development and use of a code of ethics, reviewing their relationship to the accounting profession and examining their function in society, their claim to professional designation can be supported. The preponderance of the evidence supports their status as professionals. References Aberle, D. F. , A. K. Cohen, A. K. Davis, M. J. Levy Jr. and F. X. Sutton: 1960, ‘The Functional Prerequisites of a Society’, Ethics 60 (University of Chicago Press). Armstrong, M. B. and J. I. Vincent: 1988, ‘Public Accounting: A Profession at a Crossroads’, Accounting Horizons (March), 94–98.Brown, G. R. and W. A. Bradshaw: 1988, ‘The External Auditor’s Pivotal Role’, CA Journal ( Jan/Feb), 46–52. Baker, J. D. and R. K. Hanson: 1997, ‘The â€Å"Holding Out†, Issue’, Internal Auditor (Feb), 62–67. 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Freidson, E. : 1971, The Professions and Their Prospects, Freidson (ed. ) (Sage Publications, Beverly Hills, CA).Jackson, J. A. : 1970, Professions and Professionalization (Cambridge University Press). Conclusion Accounting is acknowledged as a profession serving society’s needs. Examining both primary and ancillary professional characteristics shows the appropriateness of including internal auditors within this professional designation. Further, their code of ethics is similar to ot her professional codes and provides guidance to them in their professional practice. One purpose of profession’s codes of ethics is to legitimate the profession and publicize standards of conduct (Sawyer, 1991).Another is to provide guidance for ethical conflict resolution. The IIA Code of Ethics serves both of these purposes for its professional constituency. The code implicitly recognizes the responsibility extended to the profession by society. 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Sill (ed. ), International Encyclopedia of the Social Sciences, XII (Macmillan and The Free Press, New York). Peacock, E. and S. H. Pelfrey: 1991, ‘Internal Auditors and the Code of Conduct’, Internal Auditor (Feb), 45–49. Ratliff, R. L. , W. A. Wallace, J. K. Loebbecke and W. G. McFarland: 1988, Internal Auditing Principles Wes tern Washington University, Department of Accounting, College of Business and Economics, WA 98225-9071, Bellingham, U. S. A. E-mail: MaryAnn. [email  protected] edu.