Preventing Professional Misconduct: Best Practices For Governance Auditors

Professional institutions bear the weighty responsibility of nurturing the growth of their members, preserving the gains achieved, and shielding the profession from potential setbacks. This involves safeguarding the profession's image against internal and external influences that may compromise the value derived from the services provided by its members. These institutions maintain high standards through codes accepted by members and diligently enforce them.

The Governance profession, to which governance auditors pledge allegiance, adheres to a set of codes outlined by the Institute under the Governance Guidelines (GG001) for all its members. While not explicitly tailored for practices outside Company Secretarial functions, these guidelines offer a valuable framework applicable to understanding various governance assignments.

This article seeks to exemplify the broad standards that governance auditors, and indeed all governance practitioners aspiring to uphold the highest professional standards, should adhere to. These standards include, but are not limited to:

A. Developing Clearly Defined Service Delivery Contracts:

  • Establishing a written and signed service delivery contract with clearly defined deliverables is paramount. This not only prevents ambiguity but also mitigates the personal liability of auditors, providing a foundation for evaluating, minimizing exposures, and taking necessary appraisals and protections.
  • Enumerated elements in a written contract include:
    • Scope and limitations.
    • Fees and charges payable.
    • Chain of communication and command, typically answerable to the Board Audit and Risk Committee.
    • Dispute resolution mechanisms.
    • Force majeure considerations.
    • Defined deliverables.

B. Ensuring Management Representation Letter Signing by Management:

  • In the intricate landscape of governance, auditors delve deep into organizational management, necessitating a comprehensive understanding. To ensure the integrity of the audit process, senior management/directorship must indicate that information provided to the auditor is complete and devoid of significant omissions that could impact the final audit conclusion.

C. Maintaining Confidentiality:

  • Upholding non-disclosure of information to third parties or the general public is imperative. Auditors must refrain from leveraging information obtained during their role as a Governance Auditor for personal or professional benefits. For instance, an auditor contracted for an assignment with a company cannot engage in transactions based on privileged knowledge of the client's business.

D. Avoiding Ownership or Association with the Client:

  • Governance auditors should refrain from owning or participating in the management of the client organization. Independence is crucial to prevent the appearance of bias, especially if the auditor stands to benefit beyond contracted fees, be it through relatives or personal gain.
  • Professional independence from the client is essential to preserve the integrity and reliability of audit findings.

E. Maintaining Professionalism in Dealing with Clients:

  • Governance auditors must engage with clients professionally, respecting boundaries and tasks outlined in professional arrangements. Record-keeping of all communications with the client serves to limit exposure to professional misconduct claims against the auditor.

F. Maintaining Objectivity:

  • Developing a roadmap for key audit areas and employing scientific research designs, where possible, helps minimize bias and ensures objectivity in audit findings. Acknowledging the importance of circumstantial evaluation and recognizing that context is key are fundamental principles.
  • For example, if a contracting company falls below its articles’ prescribed standards and the Board calls for a meeting likely to lack quorum, the auditor must evaluate this situation with a discerning eye, considering the Articles of Association.

G. Prioritizing Client Welfare:

  • Governance auditors must consistently prioritize the interests of the client. Understanding the potential repercussions of a qualified opinion in an audit exercise underscores the importance of evaluating whether such an opinion is warranted beyond reasonable doubt.

H. Effective Communication with Outgoing Auditor:

  • Incoming Governance Auditors should communicate their appointment to the retiring Governance Auditor in writing and seek professional clearance. This facilitates the ventilation of any outstanding issues and identification of reasons to decline the engagement.
  • However, auditors should acknowledge the client's right to choose a different practitioner.

I. Respecting and Embracing Diversity:

  • Governance auditors should actively respect and embrace diversity, guarding against biases related to gender, disability, race, economic status, pregnancy, and profession, among other diversities.

In conclusion, practitioners aspiring to build enduring careers in this profession must strive for the highest standards of professional ethics. Any deviation leading to professional misconduct can derail ambitions. Continuous self-appraisal of professional codes of conduct is not only crucial for personal growth but also for the benefit of clients and, ultimately, the entire profession.