2015

August 11, 2015

Bipartisanship Comes Naturally When Audit and Investigative Independence Are at Stake

There have been few victories of late for supporters of bipartisan governing in Washington, D.C. The often rancorous relationship between the two major parties has redefined congressional brinkmanship and brought us to the edge of government shutdowns numerous times.

Yet, last week saw a measure of nonpartisan cooperation in the U.S. Senate that should encourage even the most jaded observers of government. When the cause is right, Republicans and Democrats can cooperate for the greater good.

The Senate Judiciary Committee hosted a hearing titled, “All Means All: The Justice Department’s Failure to Comply with Its Legal Obligation to Ensure General Access to All Records Needed for Independent Oversight.”…

August 3, 2015

Hertz: Was the CEO the Only One at the Wheel?

Filings required by the U.S. Securities and Exchange Commission are always important documents for investors and analysts, but rarely are they must reads.  However, the recent 10-K filing by Hertz Global Holdings Inc. provides an intriguing exception. An explanatory note on the filing effectively makes its former CEO the scapegoat for a hoard of accounting and internal control problems at the multi-billion-dollar company.

The deficiencies described in the 10-K, which forced the restatement of the corporation’s 2012 and 2013 filings, are placed squarely at the feet of — or more precisely heaped on the back of — the former chief executive, whose management style somehow led to extensive material weaknesses and internal control failures at Hertz.…

July 27, 2015

Lessons From Toshiba: When Corporate Scandals Implicate Internal Audit

Last week’s high-profile resignations of CEO Hisao Tanaka and eight other Toshiba Corp. executives amid revelations of systemic and prolonged financial misstatements raise questions anew about Japan’s corporate governance culture.

The venerable conglomerate, which makes everything from consumer electronics to nuclear energy technology, was under fire over accounting irregularities and had established an Independent Investigation Committee. That committee’s report concluded that Toshiba overstated profits by 151.8 billion yen (US$1.2 billion) from 2008 to 2014.

The report’s findings and subsequent resignations could set back efforts to reform the Japanese corporate governance culture. Toshiba had been viewed as a pioneer in Japan in adopting an “audit committee” structure more commonly found in Western corporate governance.…

July 20, 2015

FIFA Needs Internal Audit Now

Since several key FIFA officials were indicted by the U.S. Justice Department in May, hardly a day has gone by without more bad news for the beleaguered organization. Last week, Coca-Cola became the first major FIFA sponsor to call for reforms at the sport’s governing body.

In a July 9 letter, the company urged FIFA to submit to an independent, third-party commission as the most credible way for it to approach its reform process. On July 17, McDonalds joined Coca-Cola and asserted, “We believe FIFA internal controls and compliance culture are inconsistent with expectations McDonald’s has for its business partners throughout the world.”…

July 6, 2015

Internal Audit’s Imperatives – Relevance, Reliability, and Reinvestment

This week The IIA will host its 74th International Conference in beautiful Vancouver, Canada. Over the next few days, The IIA will be unveiling several important research and thought-leadership pieces outlining opportunities and imperatives for the internal audit profession. As I have reviewed the three significant announcements we will unveil at the International Conference, it struck me that each speaks to different aspects of what amounts to a clarion call. At a time when the current risk landscape offers unprecedented opportunities for internal audit to demonstrate its value, we must show our willingness and ability to overcome all challenges.

Simply, we must step up to answer that call by reaffirming our relevance to stakeholders, proving our reliability by improving our management practices and reinvesting in ourselves as professionals.…

June 29, 2015

Internal Audit Should Never “Belong” to the CFO

One of the most revealing statistics to come out of a recent IIA Audit Executive Center survey is the fact that internal audit functions that work administratively for the chief financial officer (CFO) dedicate in excess of 60 percent more resources to U.S. Sarbanes-Oxley Act of 2002 compliance than their counterparts in the profession who report administratively to other executives. Are Sar​​banes-Oxley risks 60 percent greater in companies whose CFOs have oversight of internal audit? I don’t think so. Rather, I believe that many CFOs who have oversight of internal audit use it to address handiwork that otherwise would fall on other CFO functions.…

June 22, 2015

Internal Audit’s Role in the Too-big-to-fail Debate

The July 1 deadline for some of the United States’ largest banking institutions to submit “living wills” for review is looming, and there will be a lot of ink and internet space invested in predicting whether those banks will pass regulatory muster and what the fallout will be for those that do not.

The “living wills,” mandated by the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act, require the periodic submission of resolution plans to the Federal Reserve and the Federal Deposit Insurance Corporation. Each plan must describe the company’s strategy for rapid and orderly resolution in the event of material financial distress or failure of the company, and include both public and confidential sections.…

June 15, 2015

No Internal Audit Function? Investors Beware!

According to a recent Gallup Poll, about 55 percent of Americans report they invest in the stock market, which is consistent with historical trends. The statistics vary in other countries, but the fact is that hundreds of millions of individuals around the world, directly or indirectly, are risking their retirement income and financial well-being based on how well the companies they invest in are run.

As more investors seek to benefit from a growing marketplace, they should be cautious when deciding which companies are worthy of their hard-earned dollars. Not only should they understand an organization’s business model and the risks facing the economy, industry, and company, but they should also understand how well a company is managed.…

June 8, 2015

Everybody Loves a Watchdog … Until It Barks

It’s not clear when the label of watchdog was first attached to the U.S. federal Inspectors General, but it has become a welcomed term for these hard-working public servants and their sta​ffs over the nearly 37 years since the passage of the Inspector General Act of 1978.

It is commonly accepted that the IGs’ mission to ferret out waste, abuse, and corruption in government is important, and there is generally glowing praise for these watchdogs. The same is often expected of government audit organizations around the world. However, in far too many instances, when one of these watchdogs has to report that there is inefficiency, ineffectiveness, fraud, waste, or mismanagement, suddenly not everyone is happy to have them around.…

June 1, 2015

The FIFA Scandal: Five Lessons for Internal Audit

The global soccer community was rocked this past week when the U.S. Department of Justice (DOJ) announced charges and arrests for “rampant, systemic, and deep-rooted” corruption by high-ranking members of FIFA, the sport’s global governing body. Using the U.S. Foreign Corrupt Practices Act (FCPA) as its legal hammer, the DOJ outlined in its 47-count indictment a disturbing history of alleged bribes and racketeering by top FIFA officials dating back as far as two decades. It is evident that more troubles lie ahead for the global soccer body, as Swiss officials have announced that they are also investigating potential improprieties.

The relevance of the events of the past week are obvious to our profession, but it goes well beyond an acknowledgement of internal audit’s role in providing assurance on anti-bribery and anti-corruption programs and its role in detecting and deterring fraud and corruption.…