Culture drives behaviour, shaping how employees engage with risks, controls, and ethical dilemmas. The IIA defines corporate culture as "how an organisation conducts business and executes its strategy." Corporate culture encompasses shared values, beliefs, and behaviours shaping interactions and decision-making within an organisation. Ethics, on the other hand, refers to principles and standards guiding behaviour. Together, they form the foundation of an organisation’s control environment and influence overall performance.
Auditing corporate culture and ethics is therefore crucial for ensuring an organisation's long-term success and sustainability. The ACFE’s Occupational Fraud 2024 report highlights cultural failures as significant contributors to fraud. For instance, the override of internal controls (19%) ranks as the second most common fraud factor, often stemming from poor leadership tone and inadequate reporting mechanisms.
Ethical leadership that sets a strong tone from the top
Transparent communication and open dialogue
Aligned incentives reinforcing core values
High levels of employee engagement and ethical accountability
By fostering these traits, organisations can build a robust ethical foundation that supports their strategic goals and enhances overall performance.
This article is the first of a series of three. The next articles will look into the internal audit’s expanding role in cultural oversight, as well as effective approaches and practical steps for auditing culture.
Reference: Auditing Culture, 2nd Edition, Global Practice Guide
