Building a strong ethical environment is critical to ensuring an organisation can withstand both internal and external scrutiny. While embedding culture early delivers the greatest benefit, strengthening it at any stage can significantly reduce reputational risk.
Ethical culture is not a “nice-to-have” HR concept. It reflects the organisation’s collective values, attitudes, and behaviours. How these are lived internally and perceived externally by stakeholders such as suppliers, partners, and regulators. It is evident in everyday decisions: how targets are set, how performance is rewarded, how mistakes are handled, and whether employees feel safe to challenge inappropriate behaviour.
As a systemic part of the organisation, culture is deeply embedded and often remains unseen by staff at all levels. This can quickly become a concern for those at Board level as the consequences of ethical failure are severe and enduring. Regulatory penalties, litigation costs, loss of investor confidence, talent attrition, and reputational damage can far outweigh any short-term gains achieved through unethical behaviour. Moreover, regulators increasingly expect boards to demonstrate proactive oversight of culture, not merely reactive responses to incidents.
By understanding and creating an ethical environment on which your business operates and governs, you are able to create a control from which the likelihood of individual misconduct is reduced.
A well-defined ethical culture acts as a control environment, reducing the likelihood of individual misconduct. To understand and evaluate this environment, organisations should consider internal audit.
When effectively designed and executed, internal audit is uniquely positioned to assess, challenge, and strengthen ethical culture. Independent from operational pressures and implementation responsibilities, it provides an objective view of how the organisation truly operates.
The key advantages of an internal audit in this context include:
Enterprise-wide visibility: An internal audit objectively sees how behaviours and controls operate across functions, divisions and geographies.
Independence: Reporting lines to the board or audit committee support unbiased challenge.
Risk-based focus: Ethical culture can be assessed as part of broader conduct, fraud, and governance risks.
Credibility: An internal audit’s findings carry weight with senior leadership and regulators.
If you find yourself questioning whether people feel empowered to speak up, whether your incentives are driving the right behaviours and whether your culture aligns with your values, then it’s time to invest resource in an internal audit.
Our approach to internal audits, with a focus on ethical culture are split into the below areas:
Evaluating leadership tone and behaviour
Leadership is the most powerful driver of culture, and an audit assesses whether leaders consistently demonstrate ethical values through their actions, not just their words. Namely across decision-making processes, escalation practices, responses to when things go wrong and how consistently they act.
We approach personnel-led audit sections with people-first tactics, namely through interviews, observation and document review to identify discrepancies between stated values and actual behaviour.
Assessing Performance Drivers and Incentives
KPIs and goals layer up into organisation objectives with varying incentives to hit these. An internal audit’s role would be to assess whether these incentives unintentionally encourage excessive risk-taking or rule-bending, and the suitability of disciplinary action from junior to senior levels.
If there’s a chance of unethical behaviour occurring as a result, an internal audit will flag this and help senior teams to implement actionable change with protections against retaliation.
Reviewing feedback practices
To have an ethical culture is to nurture the ability of employees of any level to feel safe to raise concerns, with internal audits identifying if this is at risk. Often concerns include the accessibility and confidentiality of reporting channels, awareness and training across the organisation, timeliness and quality of investigations, protection against retaliation and trends and root causes of reported concerns.
We often approach this via surveys and interviews, benefitting from our status as an outside and unbiased auditor.”
Cultural integration
It is important to consider differing divisions or departments, particularly within complicated Group structures. Are procurement decisions influenced by conflicts of interest? Do project teams escalate issues early or conceal problems? Is financial reporting shaped by undue management pressure?
By observing behaviour in all organisation areas, internal audits are able to pinpoint areas that do not align with the wider business’ values.
Outsourced and co-sourced internal audit teams are particularly well placed to do this, as they can draw on patterns observed across multiple organisations and sectors.”
Board reporting
Internal audits go beyond compliance checklists. When delivering feedback at board level we focus on clear, practical insight that highlights emerging risks and actionable recommendations. Including balanced qualitative and quantitative indicators, root cause analysis rather than isolated findings, clear articulation of cultural strengths and vulnerabilities, and forward-looking themes and trends.
By doing this, boards are able to their oversight responsibilities with confidence and credibility.”
Why co-source or outsource internal audit?
Independence is the defining advantage of outsourced and co-sourced internal audit. Internal auditors operate without the influence of internal hierarchies, relationships, or organisational politics, enabling them to challenge constructively and report objectively. This independence is particularly critical when assessing ethical culture, where sensitivities, biases, or entrenched behaviours may otherwise go unchallenged.
Beyond independence, outsourced internal audit brings immediate access to specialist expertise. Experienced practitioners draw on cross-sector insights, regulatory knowledge, and exposure to a wide range of organisational models. This allows them to identify risks, patterns, and leading practices that may not be visible from within. Crucially, this expertise is delivered without the need to increase permanent headcount, providing a cost-effective and scalable solution.
Co-sourcing models take this a step further by combining the strengths of internal and external teams. Internal audit functions contribute valuable organisational knowledge, context, and continuity, while external partners provide independent challenge, technical depth, and fresh perspective. The result is a balanced, high-impact approach that enhances both capability and credibility.
This flexibility is particularly valuable for organisations undergoing growth, transformation, or increased regulatory scrutiny. As risk profiles evolve, co-sourced and outsourced models can adapt quickly scaling up resource, introducing specialist skills, or focusing on emerging risk areas such as conduct, ESG, or governance.
At AssurAcc, we support organisations through outsourced and co-sourced internal audit solutions, designed to provide independent assurance while delivering practical, actionable insight.
Engage our experienced team to deliver an Internal Audit with value. Get in touch via email on enquiries@assuracc.co.uk
