International Association of Independent Private Sector Inspectors General

Code of Ethics

Preamble

An Independent Private Sector Inspector General (IPSIG) is an independent, private sector firm with legal, auditing, investigative, management and loss prevention skills, employed by an organization (voluntarily or by compulsory process) to ensure compliance with relevant law and regulations, and to deter, prevent, uncover and report unethical and illegal conduct by, within and against the organization.

The “independence” of IPSIGs is their hallmark: they must report any unethical and illegal conduct they uncover both to the organization and, independently of the organization, to a reporting entity. The reporting entity may, or may not, be an agency of government. If the reporting entity is not an agency of government, it must, in both appearance and fact, be independent of the host organization, and have a fiduciary responsibility, or otherwise be legally accountable, for ensuring that the mandate of the IPSIG, as defined by the agreement between the IPSIG and the host organization and as set forth herein, is appropriately effectuated. In addition, the reporting entity must ensure that the host organization, after becoming aware of an offense, reports that offense to appropriate governmental officials without unreasonable delay and in a manner that is satisfactory to the IPSIG. Endowed with this position of trust and public responsibility, IPSIGs must be strongly committed to ethical standards, in particular the values of diligence and impartiality.

Members of the International Association of IPSIGs (IAIPSIG) believe that adherence by individual IPSIGs to the values of integrity, honesty, impartiality and professionalism are fundamental to the effectiveness and credibility, and hence the prosperity, of the IPSIG profession. IAIPSIG members believe that the IPSIG profession will stand on its dedication to ethical principles and standards of conduct.

The purpose of this Code is to provide a set of ethical guidelines for members in their conduct of work as IPSIGs. Each ethical canon is followed by explanatory notes and examples of conduct that would constitute a violation of the provisions of the Code. These examples are intended to be illustrative rather than exhaustive.

The Code sets the standards for membership of the IAIPSIG to the extent that a proven violation would be grounds for the removal of a member from the IAIPSIG. However, the Code is not intended to give rise to any legal obligations or to provide a basis for disciplinary action by the IAIPSIG or any other professional association in the event of its violation.

This is a living document. Members of the IAIPSIG are encouraged to contribute to the evolution of this Code by drawing on their experience and their inspiration.


1. Introduction

An IPSIG is responsible to the public and to the organization it serves. An IPSIG’s independence and its dual reporting responsibilities impose on it a special position of trust. To undertake the role of an IPSIG is to acknowledge and accept that the exercise of expert and objective judgement is fundamental to preserving the integrity and credibility of the individual IPSIG and the IPSIG profession.

The purpose of this Code is to provide a framework for the ethical conduct of the work of IPSIGs.

Notes:

a. The preamble incorporates the key elements of the IPSIG: independence, integrity and expertise.

b. “Dual reporting responsibilities” means that the IPSIG reports both to the organization it serves and to a reporting entity. Throughout this Code, the organization for which the IPSIG performs services is referred to as “the host organization.” The “reporting entity” is described in the Preamble to this Code. “IPSIG members” means the individuals comprising a particular IPSIG.

2. Independence

An IPSIG shall not engage in any conduct that would tend to or would in fact compromise its independence.

Notes:

a. Independence means that the IPSIG is independent of both the host organization and the reporting entity. To be independent, an IPSIG must be impartial and objective in its fact gathering, fact finding, analytic, and reporting activities. It must be unconstrained by the host organization’s internal politics and biases. Its activities must be guided by a singular dedication to the assignment, untainted by self-interest. Its work must be thorough and expert, directed towards uncovering and reporting any and all illegalities and irregularities and diligently investigating any issues of fact required by the assignment. Without detached and objective judgement, an IPSIG will lack credibility, and may prove not only ineffective but counterproductive by providing the host organization with no more than a facade of legitimacy.

b. The following are circumstances in which an IPSIG’s independence would be compromised:

i. an IPSIG or an IPSIG member uses an IPSIG assignment as a means of nurturing a future professional relationship with or within the host organization or the reporting entity that is unrelated to the assignment.

ii. an IPSIG undertakes an assignment with less than complete diligence, in order to either provide, or acquire a reputation for providing, host organizations with a clean bill of health.

iii. an IPSIG accepts an assignment with an organization that has previously retained the IPSIG or one of its members on another matter in circumstances giving rise to the potential for or appearance that the IPSIG’s objectivity may be at risk.

iv. an IPSIG accepts an assignment with an organization and the reporting entity is not in fact and appearance independent, or continues in an assignment in which the reporting entity does not maintain its independence in fact and appearance.

3. Conflicts of Interest

An IPSIG shall not accept an assignment or perform any act in the capacity of an IPSIG involving an actual or potential conflict of interest.

Notes:

a. The IPSIG’s paramount duty is the diligent performance of the assignment as defined by its terms, without self-interest or concern for self-advancement. The IPSIG’s dual reporting responsibilities require the IPSIG to act equally in the interests of the host organization and the reporting entity. As stated in the previous paragraphs, this requires a dedication to integrity and the exercise of independent judgement.

b. The preservation of independence and the avoidance of conflicts of interest are interconnected. The examples given in the previous paragraph of circumstances in which the IPSIG’s independence would be compromised – including misusing a relationship with a host organization or a reporting entity for personal gain, and failing to perform IPSIG services with complete diligence and thoroughness for personal gain or professional advancement – are also conflicts of interest.

c. Other conflicts of interest not mentioned in the previous paragraph include:

i. directly or indirectly using information in the course of an assignment, where that information was acquired from a host organization in the course of another assignment, and where such use is potentially or in fact disadvantageous to that organization. In general, any use of proprietary information is considered to be a disadvantageous use. Use of non-proprietary information may or may not be, depending upon the circumstances and the proposed use. It is the responsibility of an IPSIG to be alert to the potential for conflicts of interest to arise in the use of information acquired in previous assignments, whatever its nature, and to make an objective judgement of that potential on a case by case basis. The use of the information with the consent of all relevant parties is not considered to be a disadvantageous use, provided that full disclosures have been made and the implications of the use of the information have been explained to the relevant parties.

ii. applying for or accepting an assignment during the currency of another assignment that is potentially or in fact disadvantageous to either or both host organizations. Applying for or accepting such an assignment with the consent of all relevant parties is not considered to be a disadvantageous use, provided that full disclosures have been made and the implications of the application for or acceptance of the assignment have been explained to the relevant parties.

The “relevant parties” in this paragraph may, depending upon the circumstances, include the host organizations and the reporting entities.

iii. accepting or continuing with an assignment for a host organization in which any IPSIG member has a direct or indirect financial or managerial interest. In special circumstances, such conduct may not constitute a conflict of interest if the informed consent of the reporting entity and the host organization is obtained.

4. Conflicts With Existing Professional Codes and Laws

This Code of Ethics recognizes that the key IPSIG members – lawyers, investigators and accountants – are also members of professions having their own ethical codes, concepts, rules, standards and/or governing legislation. IPSIG members shall be familiar with and responsive to the mandates of their respective professional codes, rules and/or legislation and shall act consistently with those codes, rules and law as required in the context of particular assignments.

If an IPSIG member believes that an act performed or to be performed during an IPSIG assignment may be in conflict with a relevant professional code, rule or law, the member should refer that potential conflict to the relevant professional association and/or to the IAIPSIG’s Ethics Committee for guidance.

Notes:

a. IPSIG members are subject to a variety of existing professional codes, rules and laws. The general ethical principles and concepts contained in these codes relating to competence, honesty, diligence and professionalism apply to IPSIG members when they are engaged in IPSIG work as much as when they are acting as independent professionals. This Code does not restate those general ethical principles and concepts.

b. Other rules and standards governing IPSIG professionals, however, may or may not apply according to the IPSIG member’s professional affiliations and jurisdiction and the needs of the particular assignment. For example, rules governing the conduct of lawyers vary between states and state legislation regulates the activities of private investigators. In addition, the needs and circumstances of particular assignments will determine whether relevant rules or law apply. For example, the existence of an attorney-client relationship is a question of fact and law; auditors are governed by rules and standards that may vary between assignments; and fee arrangements are also regulated in some cases.

c. This Code cannot anticipate every circumstance in which potential conflicts between individual professional rules and the work of IPSIGs might arise. IPSIG members are expected to be familiar with their governing rules and law and if, in the member’s judgement, a potential for conflict exists in particular circumstances, to refer that issue to a relevant professional association and/or the IAIPSIG Ethics Committee.

d. The “relevant professional association” means the association or body whose rules or standards the IPSIG member believes may be transgressed, or is otherwise most appropriate to resolve the conflict.

e. Material departures from existing professional codes and standards should be communicated to the host organization by the IPSIG prior to the commencement of the engagement. These should ideally be included in the IPSIG’s retainer agreement with the client, which should define the relationship between the IPSIG and the host organization. For example, it is appropriate to specify that an attorney-client relationship is not established by the retainer. The retainer should also state the purpose of the representation, e.g., “this retainer is entered into for the principal purpose of reporting on the financial affairs of the retaining party to [reporting entity].”

5. IPSIG Skills and Methodology

It is unethical for an IPSIG to accept or undertake to continue an assignment unless the IPSIG possesses the skills of an IPSIG (or has taken steps to ensure that those skills are reasonably available for the particular assignment) and can apply the IPSIG methodology. Generally, the IPSIG’s skills comprise accounting, investigative, legal, loss prevention and management skills. These skills are interdependent and interactive.

It is unethical for an IPSIG member with one of those skills to hold himself or herself out as having the ability to perform the functions of an IPSIG alone.

Notes:

a. The IPSIG concept builds upon existing models for the control and reform of organizations by external entities, such as court-appointed trustees, auditors and independent counsel. What the IPSIG brings to bear upon organizational issues is its unique expertise, which combines legal, investigative, auditing, loss prevention and management skills in a complementary and mutually supportive interrelationship.

b. The IPSIG’s skills and methodology are its distinguishing features. A member of the IAIPSIG need not possess all those skills but must have at least one of those skills, regularly practice in that profession, and demonstrate the ability to participate with other IPSIG professionals in an IPSIG team and/or to coordinate the work of an IPSIG.

c. While certification as an IPSIG by a government agency is not required for membership in the IAIPSIG, an IPSIG or IPSIG member who is not certified should communicate that fact to a potential host organization.

6. Confidentiality

An IPSIG may disclose confidential information it receives during an assignment only as required by law or as agreed among the parties to the assignment.

To that end, an IPSIG, unless otherwise agreed between the parties to a particular assignment, shall cooperate in efforts to resist attempts by third parties to obtain confidential information acquired by it in the performance of its work.

When the circumstances of the particular assignment preclude the operation of otherwise generally available privileges or other professional standards protecting the confidentiality of client information, an IPSIG shall ensure that its client is made aware of the non-availability of such privileges and standards, and is informed of the implications of such non-availability, prior to the commencement of the assignment.

Notes:

a. This paragraph covers the general duty of confidentiality with respect to client information. The general language in the first paragraph permits the disclosure of information for the purpose of fulfilling dual reporting responsibilities.

b. The second paragraph requires an IPSIG to cooperate in opposing attempts by third parties to obtain copies of documents produced by the IPSIG, such as investigative reports, for the purpose of litigation against the host organization or otherwise. Such opposition might include asserting the self-evaluative privilege, the “limited waiver” theory and the law enforcement privilege.

c. The third paragraph requires the IPSIG to ensure that the host organization is fully informed and understands the implications of the loss of any privileges (including the loss of any attorney-client and work product privileges) when an IPSIG report is communicated to the reporting entity. The non-applicability of any other standards relating to confidentiality, e.g., AICPA Professional Standards, AU §§ 316.29, 317.23 should likewise be communicated, depending upon the circumstances. Ideally, this should be included in the IPSIG’s retainer agreement with the client.

d. Under Federal and certain state laws, a private citizen with unique knowledge of fraud against the government can bring an action in the name of the government (known as a “qui tam” action) and, in return, receive a share of the proceeds. (31 U.S.C. § 3729 et seq. (Federal False Claims Act); e.g., Fla. Stat. Ann. § 68.081-092 (Supp. 1995) (Florida False Claims Act).) If an IPSIG or its members, in the course of an assignment, uncovers information indicating the commission of fraud against the government by the host organization, it would be improper, and would constitute a breach of confidentiality, for the IPSIG or any of its members to bring a qui tam action, or to provide that information to another for the purpose of bringing a qui tam action.

7. Withdrawal of Services

An IPSIG shall withdraw from an assignment if the reporting entity is not independent or does not maintain its independence or if the host organization or the reporting entity insists that the IPSIG engage in, support or conceal conduct that is illegal or, in the IPSIG’s judgement, unethical.

Notes:

a. As stated above, an IPSIG must act with integrity and independence. It is inconsistent with those principles for an IPSIG to continue to perform services for an organization that attempts to engage the IPSIG in a conspiracy to subvert the IPSIG’s purpose by committing or demanding that the IPSIG conceal illegal or unethical acts.

b. The host organization and the reporting entity should be informed at the outset that the IPSIG will withdraw if such attempts are made. Ideally, this provision should be included in the retainer agreement. This paragraph is intended to cover conduct of this nature by, or supported by, the senior management of the organization or reporting entity, and not by junior officers and employees, whose conduct should be reported in the usual course of the IPSIG’s assignment.

8. Cooperation With Colleagues and Professional Development

An IPSIG and its members shall make every effort to cooperate with research that is undertaken to enhance the effectiveness of IPSIGs and/or to study the work of IPSIGs.

An IPSIG and its members shall make every effort to cooperate in the development of, and to participate in, public education about the work of IPSIGs and the IPSIG profession.

The cooperation referred to in this paragraph is subject to the IPSIG’s duties of confidentiality as defined by this Code and by other codes, rules and laws.

Notes:

a. As a new profession, the importance of research and analysis focused on the effectiveness of IPSIGs cannot be too highly emphasized. The experience of IPSIGs is the most valuable resource available to that endeavor.

b. Public education is likewise critical to ensuring that the public receives accurate, reliable and timely information about the IPSIG concept and its application, the IPSIG profession, and the mission, purpose and function of the IAIPSIG.

c. IPSIG members are expected to be generous with their time and energy not only by cooperating with their colleagues and with outside researchers but also by taking their own initiatives to enhance and assist in the development of the IPSIG profession.

9. Reporting Violations of This Code

Members of the IAIPSIG have an obligation to report to the President of the IAIPSIG serious breaches of this Code by another member that raise a substantial question as to the ability of that member to perform the functions or fulfil the responsibilities of an IPSIG.

Notes:

a. Failure by a member to report conduct within this paragraph is not of itself a violation of the Code.

b. Reporting a breach of the Code by another member under this paragraph may be contrary to paragraph 6 of the Code (Confidentiality). Where the reporting would not involve communicating proprietary information or information relating to the substance of an assignment (rather than exclusively to the conduct of another member), the reporting member shall be deemed not to have breached paragraph 6. Where the reporting would involve communicating proprietary information or information relating to the substance of an assignment, a member should obtain the consent of the owner or owners of the information before providing it to the President. Where the circumstances, in the reporting member’s judgment, are exceptionally sensitive and the conduct is particularly egregious, the member may provide the information to the President without such consent.