December 28, 2016

On the Shoulders of Giants

As The IIA’s 75th year comes to a close, a gathering of its former leaders reflects the strong foundation on which the association was built. ​

​Nearly two dozen former IIA chairmen had traveled to the 75th anniversary International Conference in New York. Now they all were gathered in one room ahead of the night’s gala to celebrate the milestone moment. The interaction among so many former IIA leaders, decked out in tuxedos and evening dresses, gave the room an energy that was palpable.

As I mingled among the crowd renewing old acquaintances, it dawned on me not just that the room held close to 1,000 years of collective internal audit experience, but also that The IIA was built by these very people and their predecessors.…

December 19, 2016

Five Headlines from 2016 With Implications for Internal Audit

​As has become my custom as the year comes to a close, I reflect on the top five headlines or developments that I believe will continue to impact the profession long after we’ve rung in the New Year. For internal auditors around the world, 2016 should be remembered for dramatic changes to the risk landscape brought about by seismic and unanticipated events in politics and leaks of private data. It also should be remembered for changes that helped elevate the internal audit profession.

1. Brexit, Trump Victories Signal Changing Risk Landscape

The outcomes of the Brexit and U.S. presidential elections reflected deep dissatisfaction with government and a profound desire for change by a significant part of the voting public.…

December 12, 2016

The IIA Establishes an Advocacy “Beachhead” in Washington, D.C.

Starting this month, The IIA will have a full-time presence in Washington, D.C., with the hiring of our first director of government relations. This marks the first time in almost 45 years that The IIA will have an office presence outside of Florida. While The IIA has had a D.C.-based government relations firm since 2012, putting a face on The IIA will be invaluable to getting our message across to those who craft laws and regulations that impact internal auditing and to promoting the value the profession provides to business and government.

However, for this important development to be fruitful, The IIA must have a clear and compelling message to share with legislators.…

December 5, 2016

Should Internal Auditors Throw a Flag on Company Ethics?

In my previous blog post, I commented on the dangers of assigning human characteristics to organizations. Specifically, I argued that assigning traits to the organization instead of the individuals who operate it provides an easy excuse for discounting immoral behavior as aberration.

Indeed, an organization’s reputation for honesty is often used to shield or overlook inappropriate actions, but as internal auditors, we must not allow for such missteps to go unchallenged. Once the precedent is set, there is an expectation that small slip ups will be tolerated or rationalized, and that is the beginning of a dangerous and slippery slope.…

November 28, 2016

Can Companies Act Immorally?

A recent Financial Times column asked an intriguing question: Can moral companies do immoral things? The writer cited two U.K. studies that examined, in part, how people rate their morality and how they rate that morality against others. The consistent finding in both studies was that individuals — even convicted prisoners in one study — tend to rate themselves morally superior.

The writer then made the case that this natural tendency for viewing ourselves as morally superior might help explain why moral companies do immoral things. I believe this kind of thinking, while making for interesting navel gazing, is dangerous.

We cannot afford to fall into the trap of assigning human characteristics to nonhuman subjects when it comes to how we act in business.…

November 21, 2016

Talent Management Is Critical to Internal Audit’s Success

​​The IIA recently released Global Perspective and Insights — a whitepaper that includes some sobering information regarding how the internal audit profession is addressing emerging risks globally. The paper is based on a survey of more than 2,200 internal auditors in more than 100 countries and territories around the world. The good news is that internal auditors recognize the degree to which culture, cybersecurity, and big data present risks in their organizations. Yet, the percentage of respondents who had not undertaken any internal audit work in each of those three areas was startling: 62 percent had not audited culture, 25 percent had not audited cybersecurity, and 26 percent had not audited big data.…

November 14, 2016

Corporate Mergers: Internal Audit’s Role in “Happily Ever After”

The challenges associated with mergers and acquisitions are myriad. Yet every year, hundreds of companies across the globe conclude the potential upsides of combining two successful organizations are worth the risks.

A number of technology companies currently are grabbing the merger spotlight — AT&T and Time Warner, Level 3 Communications and CenturyLink, and Yahoo! and Verizon. I find that corporate mergers such as these are like celebrity weddings — splashy, highly orchestrated, and sometimes doomed to failure before the participants reach the altar.

Mergers and acquisitions are notoriously difficult and often fail to live up to the hype. Yet, the lure of creating something greater than the sum of its parts often overshadows the risks and pitfalls.…

November 4, 2016

Presidential Election Outcome Not Likely to Lessen Risk Uncertainty

The 2016 U.S. presidential campaign will go down as one of the most volatile and strident in the nation’s 240-year history. Despite more than a year of bruising primary races, extravagant party conventions, three nationally televised debates, October surprises, and poll, poll, polls, many political pundits say the race for the White House still could go either way.

Whatever the outcome, you can be assured global economic forces will react strongly, and that reaction will be based on the one thing that drives markets crazy — uncertainty.

Internal auditors should be contemplating the risk effects on their organizations created by this uncertainty, both on the macro-economic level and closer to home.…

October 31, 2016

Whistleblowers Need Protection – Not Cash!

The Federal Reserve Bank of New York hosted a conference in October that looked at reforming culture and behavior in the financial services industry. In his opening remarks, New York Fed President William C. Dudley stated that culture is at the heart of industry problems that have eroded its trustworthiness.

“The evidence is pervasive that deep-seated cultural and ethical problems have plagued the financial services industry in recent years,” Dudley said. “Bad conduct has occurred in both investment banking and securities market activities, as well as retail banking.”

It’s hard to argue with history. From Barclay’s Libor scandal to Countrywide Financial’s discriminatory lending practices to Wells Fargo’s more recent woes, financial services has produced high-profile scandals on a seemingly routine basis.…

October 24, 2016

No Internal Audit? It Could Be Worse

Those who regularly read my blog posts will know that I have been an outspoken critic against publicly traded companies not having internal audit functions. In 2015, I shared the view that every publicly traded company be required to have an internal audit department; and in 2013, I called out Nasdaq for withdrawing its proposed listing requirement that would have mandated an internal audit function.

While my views on the importance of strong internal audit functions have certainly not changed, I do think it is important to put my views in perspective. Frankly, there are worse things than having no internal audit.…