Certified Internal Auditor (CIA) Practice Test

What can be inferred about Organization A, which has a formal code of ethics, compared to Organization B, which does not?

1. A exhibits a higher standard of ethical behavior than B

2. A has established objective criteria by which actions can be evaluated

3. The absence of a code of ethics in B prevents a successful review of ethical behavior

4. All of the above statements can be inferred

The correct answer is: A has established objective criteria by which actions can be evaluated

Choosing the statement that Organization A has established objective criteria by which actions can be evaluated provides insight into the role of a formal code of ethics. A formal code typically outlines specific ethical principles and standards that guide the behaviors of employees and management alike. This set of established guidelines allows for consistent evaluation of actions against a clear standard. The presence of these objective criteria means employees can refer to the code when making decisions or when assessing the ethical implications of their actions. In contrast, Organization B, lacking such a code, might struggle to provide a uniform framework for evaluating ethical behavior, leading to potential inconsistencies in decision-making. While the other statements suggest various implications that might be drawn from the comparison, they do not capture the essence of having established criteria as accurately as the chosen statement. The first statement posits a broader assumption about the standard of ethical behavior that may not be provable just from the existence of a code. The third statement implies that without a code, ethical reviews are impossible, which isn't necessarily true; reviews could still occur but would lack formal guidelines.