PRINCIPLE 1: Demonstrating Commitment to Integrity and Ethics
The following focal points highlight essential features of this principle.
Focus Points
It creates the ethical approach of top management
The Board of Directors and management at all levels of the organization recognize the importance of integrity and ethical values in supporting the functioning of internal control; they show it through their instructions, actions, and behavior.
The ethical approach of top management and the organization is fundamental to the functioning of an internal control system. Without a solid top management approach to support a robust internal control culture, risk awareness may weaken, and the response to risks may not be appropriate. Control actions may be poorly defined or not followed, information and communication may falter, and feedback on monitoring activities may not be received or acted upon.
Expectations from top management in this regard are expressed in the following ways:
- Mission and value statements
- Standards or rules of conduct
- Policies and procedures
- Operating principles
- Instructions, guides, or other supporting messages
- Actions and decisions of management units and the board of directors at various levels
- Attitudes taken and responses to deviations from expected standards of behavior
- Informal routine activities and communication of leaders at all levels of the organization
- Sets Standards of Conduct
The expectations of the Board of Directors and senior management regarding integrity and ethical values are defined in the organization’s standards of conduct. They are known and understood at all levels of the organization and by external service providers and business partners.
Standards of conduct, in line with the organization’s achievement of its goals:
- By determining what is right and what is wrong,
- By providing directional guidance between right and wrong, taking into account the associated risks,
- Reflecting applicable laws, rules, regulations, standards, and other expectations that the organization’s stakeholders may have, such as corporate social responsibility,
It guides the organization in behavior, actions, and decisions.
Evaluate Compliance with Standards of Conduct
Processes are in place to evaluate the performance of individuals and teams against expected standards of behavior.
Established standards of conduct provide the basis for assessing the commitment to integrity and ethical values of all levels of the organization and its external service providers. These standards of conduct are communicated through the organization’s policies and procedures and employment or service contracts.
Investigates Deviations in Time
Deviations from the organization’s expected standards of behavior are detected and corrected promptly and consistently.
The process of assessing individuals’ and teams’ adherence to standards of conduct requires:
- Several indicators (e.g., training completion rates, privacy violations, harassment cases, etc.) are defined to identify issues and trends regarding standards of conduct for the organization, including external service providers.
- Ongoing and periodic compliance procedures are established to confirm that expectations and requirements are met both within the organization and by external service providers.
- Problems and trends related to the execution of the business are identified, analyzed, and reported to senior management and the board of directors.
- Leadership power in displaying honesty and ethical values in performance reviews and wage and promotion decisions is considered an appreciated behavior.
- Allegations made are collected centrally. And it is evaluated by people independent of the claim.
- An investigation is conducted and evaluated according to established investigation protocols.
- Implementation of corrective measures is monitored to ensure that problems are corrected in a timely and consistent manner.
- Problems are analyzed periodically to identify trends and the source of the issues, sometimes requiring changes in policies, communications, training, and controls.
Resources of Internal Control Article
- International Internal Auditing Standards, International Institute of Internal Auditors
- Dr. Davut Pehlivanlı, Current Internal Audit Practices, Beta 2010
- Prof. Dr. Nejat Bozkurt, Accounting Audit, Alfa 1998
- Prof.Dr.Nejat Bozkurt, TÜRMOB Independent Audit Training Lecture Notes, 2012
- Dr.Özgür Çatıkkaş, KGK, Marmara University. Corporate Governance Lecture Notes, 2013
- İSMMMO-Practical Information for Internal Audit in SMEs, 2013
- Turkish Internal Audit Institute, www.tide.org.tr
- Alp Buluch, Article, Internal Control, Hurses, 19 March 2013
- Turkish Commercial Code No. 6102
- International Internal Auditing Standards, www.theiia.org
- Treadway Commission Supporting Institutions Committee, Internal Control-Integrated Framework, 2013
- Public Financial Management and Control Law
- Public Internal Control Standards
- Public Internal Control Guide
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