Determinants of ethics auditing: Structural equation model approach

It is generally accepted that behaving ethically is essential to the success of organizations. The failure to behave ethically in the eyes of key stakeholders can impair the health of organizations. This is particularly the case with organizations who are potentially vulnerable to direct consumer action and also the state agencies who provide various services for their citizens. In this paper, we analyze the involvement of internal audit in the provision of assurance in relation to the ethics implementations in organizations. Internal audit is expected to conduct an effective ethical audit as a high priority in a risk-based internal audit planning process which is required by the International Professional Practices Framework (IPPF) of the Institute of Internal Auditors (IIA). The provision of assurance concerning successful implementation of an ethics policy as a contribution to the achievement of organizational objectives is becoming increasingly critical. That’s why, it is examined whether internal audit is ready for responding to this challenge globally. The Common Body of Knowledge (CBOK) data of IIA are used for analyzing the current situation about determinants of ethics auditing all over the world. We propose a structural equation model (SEM) utilizing a worldwide dataset of CBOK data with responses from internal auditors. The determinants of ethics auditing is estimated by using SEM with 20 observed variables loaded to six factors namely, Audit Policy Documents, Auditor Integrity, Audit Policy Documents, Ethics Standards, Ethics Audit, and Corporate Governance. Finally, policy recommendations are made based on empirical findings to add value to internal audit profession and stakeholders. © 2019, Springer Nature Singapore Pte Ltd