December 2015

It has become my habit to make the final blog of the year a look back at the top five stories that will likely have a lasting effect on the profession. In my mind, 2015 will be remembered primarily as the year of the corporate culture-induced scandals. Unlike prior years, the corporate scandals this year had a truly global feel. There was the Hertz scandal in North America, Toshiba in Asia, and Volkswagen in Europe. Then to drive home the point, there was the FIFA scandal that was truly global.

These and other headline-grabbing events will have a long-term effect on internal auditing, either directly or indirectly.…

The saga of Volkswagen’s auto emissions scandal has been well-chronicled in recent months. Company engineers installed software in the engines of 500,000 U.S. vehicles and 11 million vehicles worldwide designed to illegally circumvent strict emissions rules. The allegations and subsequent confirmation by company executives have severely damaged public confidence in the iconic company.

However, as despicable as the actions at VW were, company executives have made a number of notable efforts to acknowledge what happened in an effort to restore public confidence. The most recent effort was a December 10^th press conference where senior VW executives, including Chairman Hans-Dieter Pötsch and CEO Matthias Müller, made public the results of a recent internal audit report on the scandal.…

As I have often commented, the internal audit profession in its early years was focused extensively on the past. Strong internal auditors were the ones with 20/20 hindsight — they could go back in time through skillful use of records and interviews to uncover every mistake, then report each misstep in exacting detail. Back then, we thought we best added value when we helped our organizations recognize mistakes and avoid making them in the future. At most companies, our primary role was to be the hindsight experts.

Hindsight will always be important for internal auditors. Even in the 21^st century, we are brought in to assess what happened.…