IIA-CIA-PART1 practice question 14 of 35

In which of the following situations has the internal auditor violated the IIA's Code of Ethics?

Answer options

A: An employee confided in an internal auditor and told him about fradulent activities. Although the employee asked for confidentially, the auditor disclosed her identity later during police questioning.

B: While auditing payroll controls, an auditor was granted temporary access to salary data. The auditor referred to the acquired information while negotiating her work conditions three months later. Correct answer

C: Management considers an auditor to be highly competent and asked the audit to participate in an upcoming acquisition project. The auditor declined the request, calming a lack of knowledge.

D: An internal auditor failed to acquire the continuing education credits needed for the year and requested that. The IIA change his certification status to inactive until the completed the required education activities.

Correct Answer:

B. While auditing payroll controls, an auditor was granted temporary access to salary data. The auditor referred to the acquired information while negotiating her work conditions three months later.

Explanation

The internal auditor violated the IIA's Code of Ethics by using confidential information, acquired during the performance of their duties, for personal gain. The principle of Confidentiality explicitly prohibits this. According to Rule of Conduct 3.2, "Internal auditors... shall not use information for any personal gain or in any manner that would be contrary to the law or detrimental to the legitimate and ethical objectives of the organization." Accessing salary data during an audit and later using that specific information to negotiate one's own salary is a clear and direct breach of this rule.

Why Incorrect

A. Disclosing information during a police investigation falls under the exception of a "legal or professional obligation to do so," as stated in the Confidentiality principle.
C. Declining an assignment due to a lack of knowledge upholds the principle of Competency (Rule of Conduct 4.1), which requires auditors to only engage in services they are qualified to perform.
D. Requesting inactive status for failing to meet Continuing Professional Education (CPE) requirements is a responsible action that complies with IIA certification policies and supports the principle of Competency.

References

1. The Institute of Internal Auditors (IIA). (2000). Code of Ethics.

Principle: Confidentiality: "Internal auditors respect the value and ownership of information they receive and do not disclose information without appropriate authority unless there is a legal or professional obligation to do so."

Rule of Conduct 3.2: "Internal auditors... Shall not use information for any personal gain..." (This directly supports why B is a violation).

Principle: Competency: "Internal auditors apply the knowledge, skills, and experience needed in the performance of internal audit services."

Rule of Conduct 4.1: "Internal auditors... Shall engage only in those services for which they have the necessary knowledge, skills, and experience." (This supports why C is not a violation).

2. Moeller, R. R. (2016). Brink's Modern Internal Auditing (8th ed.). John Wiley & Sons.

Chapter 4, "Internal Audit Professionalism: The IIA Code of Ethics," discusses the application of the Code. It clarifies that using information gained during an audit for personal advantage, such as salary negotiations, is a fundamental breach of the confidentiality rule. The text also emphasizes that recognizing one's own limitations and declining assignments is a mark of professional competence.

3. Reding, K. F., et al. (2013). Internal Auditing: Assurance & Advisory Services (3rd ed.). The IIA Research Foundation.

Chapter 3, "Governance, Risk Management, and Control," and Chapter 15, "The Internal Audit Function's Role in Other Organizational Activities," explain the ethical responsibilities of internal auditors. The text reinforces that the misuse of confidential information for personal enrichment is one of the most serious ethical violations an internal auditor can commit, undermining the trust essential to the profession.

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