July 2019

July 29, 2019

​Internal Audit Must Monitor Ethics in the Corner Office, Too

In a recent review of PwC’s annual Strategy & CEO Success Study, I was stunned by one revealing statistic. In 2018, more CEOs lost their jobs because of ethical lapses than for poor financial performance or battles with their boards. This has never happened before in the study’s 19-year history.

Frankly, I found the results of the PwC study to be very troubling. After all, I have echoed The IIA’s view for years that internal audit should report administratively to CEOs. If these same CEOs are now being fired for ethical misconduct in record numbers, what does that mean for internal audit’s prospects to carry out its important work free of interference?…

July 22, 2019

​When Culture Is the Culprit: Lessons From Toshiba, Hertz, and FIFA

Over the past four years, I have written and spoken extensively about corporate culture, its influence on good governance, and internal audit’s role in monitoring and understanding it. My experiences over four decades as an internal auditor taught me that corporate culture plays a significant role in an organization’s success or failure. In my latest book, The Speed of Risk: Lessons Learned on the Audit Trail, 2ndEdition, I lament that the lesson has been a long time coming for the profession.

When I launched my internal audit career, the idea of auditing the “softer” side of an organization’s culture was anathema to the profession.

July 15, 2019

​Internal Audit May Work for the Wrong Individuals — But Not the Wrong “People”

My role as the head of a global organization offers me the opportunity to interact with people who enjoy a certain amount of celebrity and fame. Serving as president and CEO of The IIA has afforded me the opportunity to meet the heads of states, members of the U.S. Congress, the secretary-general of the United Nations, and assorted diplomats, scholars, and actors.

While their knowledge of and excellence in their respective fields helped elevate them to the status of celebrity, their knowledge and appreciation for internal auditing is generally limited. One notable and refreshing exception is American Academy Award-winning actor Richard Dreyfuss, the keynote speaker at the recently completed 2019 IIA International Conference.…

July 9, 2019

​California’s Earthquakes and Europe’s Heat Wave: The Latest Gray Swans

Last week, I arrived in California early to prepare for The IIA’s 2019 International Conference. While relaxing a bit outside my hotel on July 4, I was jolted by a magnitude 6.4 earthquake centered more than 100 miles away. After the shaking stopped, I asked myself, “Why didn’t I think about an earthquake when I was considering all of the risks related to our upcoming conference?”

The next evening, an even stronger, magnitude 7.1 earthquake struck the region while I was dining with my family near our conference site. As all of us in the restaurant regained our composure following the quake, one of the restaurant employees confessed that the business used to undertake earthquake drills, but hadn’t done so in years.…

July 1, 2019

Exposing Internal Audit’s Work: Too Much of a Good Thing?

The CPA Journal recently published a provocative article, “The Benefits of Internal Audit Disclosures,” which examined research into what investors know about internal audit functions, how they might view disclosure of internal audit work, and how such disclosures might improve corporate governance transparency.

The initial research by Deborah S. Archambeault, F. Todd DeZoort, and Travis P. Holt presents a positive picture of the value of such disclosures. Indeed, according to the article, the researchers identified three benefits of public exposure of internal audit’s workings based on a review of internal audit research and a series of interviews with financial analysts, audit committee members, internal auditors, and policymakers.…