Certified Internal Auditors (CIA) are often faced with situations that may involve ethical considerations.

Required
Consider the following cases. For each of the cases, identify the relevant principle or rule of conduct of the IIA’s Code of Ethics, and state whether the condition is a violation of the Code.
Ethical Scenarios for Certified Internal Auditors:
a. An internal auditor participates in the activities of a religious organization that provides sanctuary to undocumented political refugees.
The refugees are then hired, with the auditor’s assistance, to work for substandard wages by the company that also employs the auditor.
b. An internal auditor discovers evidence that the company has been disposing of toxic waste in a manner contrary to contractual provisions and public policy. The responsible department manager insists that what it is doing is in the company’s best interest and requests that the auditor not mention this matter in the report.
c. An internal auditor has been assigned to work with the company’s acquisition team to analyze the potential acquisition of a company that is a direct competitor.
d. The internal auditor receives the following message from the company’s CEO, to whom the auditor reports administratively:“The controller informs me that you have discovered a number of questionable account classifications involving the capitalization of research and development expense. You are directed to discontinue any further investigation of this matter until informed by me to proceed. Under no circumstances is this matter to be discussed with the outside auditors.”
e. While performing assistance work for the external audit firm as part of their annual audit, the internal auditor discovers a problem in purchasing that looks like fraud. The internal auditor reports it to management, which then assures the internal auditor that there is no problem. Because of the assurance, the internal auditor does not report the item to the external auditor.
f. Three years ago the internal auditor participated as part of a systems development review team for a major new computer application. In that role, the internal auditor
(a) Recommended controls that needed to be built into the system;
(b) Reviewed all comprehensive testing performed by users; and
(c) Wrote an audit report that the computer system met the company’s control criteria and was operating in compliance with the objectives for the system. The internal auditor has now been requested to perform an audit of the system.
g. The internal auditor has reviewed the major accounting estimates made by the firm as they affect the year-end financial statements. The review included an analysis of the models used in making the estimates as well as the appropriateness of the estimate. The audit committee has already reviewed the estimates with the external auditors. The internal auditor believes the model contains serious flaws and communicates his analysis to the audit committee (as requested), but not to the external auditors.