October 17, 2022
October 11, 2022
Calls for reform of external audits are nothing new. Proponents around the world are constantly advocating the need for greater independence of the individuals/firms who undertake external audits of publicly traded companies. Last week the U.S. “independent watchdog,” Project on Government Oversight (POGO), added its voice to the debate, and the report it published didn’t mince words. Even the title, “Accounting’s Big Lie – And How to Fix It,” is intensely provocative.
The report was authored by David S. Hilzenrath, and he makes his case right up front:
“Corporations, big accounting firms, and the federal government have been selling the public a lie.…
October 4, 2022
There’s a Better Way to Monitor Progress
During a recent seminar I was leading in Dubai, the topic of followup audits came up, the frustration in the room was palpable. Attendees were frustrated by often undertaking followup audits only to discover that nothing had been corrected!
I sympathized with my seminar students. As a young internal auditor, I was always proud of my reports, particularly the findings and recommendations. So, issuing a new audit report was cause for celebration. But nothing was more demoralizing than when I would invariably undertake the required follow-up audit only to discover that my carefully crafted recommendations or management action plans were never implemented.…
September 26, 2022
Internal auditors are ethical, right? After all, we see ourselves as “beacons of ethical behavior,” shining a light on the misdeeds of others in our organizations. If you can’t trust the internal auditor, who can you trust? Yet, at the end of the day, we are also human. We are subject to the same pressures (culturally, politically, and organizationally) as everyone else in the enterprise. So, maybe we are vulnerable, after all.
But can we so complacent? I think not.
History is littered with instances in which the ethical compass of internal auditors appeared to fail, and rather spectacularly. The recent arrest and conviction of a public sector auditor in Uganda, for example, might be easily dismissed as an isolated transgression in a remote part of the world.…
September 20, 2022
Each year, internal auditors can draw on a series of reports to augment their perspectives on the risks that are expected to confront their organizations in the months and years ahead. The first of these reports is the annual “Risk in Focus: Hot Topics for Internal Auditors,” compiled annually by the European Confederation of Institutes of Internal Auditors (ECIIA), and it never disappoints! The “2023 Risk in Focus” report was just released and, once again, it’s a must-read resource for internal auditors who are preparing to undertake their annual risk assessment and audit planning process.
While I strongly advocate a methodology for continuously monitoring risks and maintaining and refreshing a dynamic audit plan, I know that undertaking an annual risk assessment that fosters an initial calendar year audit plan is still the most common approach.…
September 15, 2022
Over the past couple of months, fears of a looming recession have percolated around the world, with politicians and pundits in the United States debating whether one’s already underway in the U.S. (defined as two consecutive quarters of negative GDP growth). Regardless of if or when we officially enter a recession, one thing is certain: A “recession watch” is already impacting internal audit.
I went into a recent CAE roundtable fully expecting more conversation about internal audit resource growth, shifting audit priorities, and the festering talent shortage. Instead, CAEs talked about budget cuts, hiring freezes and audit priorities that are shifting to address recessionary risks.…
September 9, 2022
I recently shared a blog that proved very popular with the profession. Internal Auditors Must Remember: Good People Can Do Bad Things resonated with readers around the world who are constantly seeking to reconcile a person’s character with potential misdeeds. While it is true that good people can do bad things, it is likewise true that smart/capable people can do dumb things.
We don’t have to look far to identify instances in which decisions destroyed shareholder value in a company or the hard-earned reputation of a government agency. Such blunders are often made by incredibly seasoned professionals who get careless or exercise poor judgement.…
August 29, 2022
In a recent blog post, I shared some statistics that confirmed an inconvenient truth: the typical internal audit department is small – averaging less than 5 internal auditors.
I wrote about internal audit engagements that make a “big impact.” However, as some who read the post pointed out: “impact must be sustained over time.” One or two big impact internal audits will not ensure the long-term success of an internal audit department – particularly a small one.
I often hear chief audit executives (CAEs) of small audit shops lament about the challenges of working with limited resources. In a way, I can sympathize.…
August 24, 2022
I recently saw an ad for an internal audit seminar on interview techniques, and it reminded me once again why this is such an important skill for our profession. Unlike good attorneys, who (as the cliche goes) are supposed to “know the answer before they ask the question,” internal auditors learn much by crafting and asking the right questions to the right people at the right time.
The best internal auditors know that there are times when we need to “break the rules” for conducting client interviews. Few skills are more essential for internal auditors than knowing how to ask the right questions.…
August 15, 2022
When internal auditors think of fraudulent acts, we tend to associate them with nefarious characters who intentionally set out to do something bad. However, as I have explored in my books and blogs over the years, frauds or other illegal acts are often committed by otherwise good and decent people whose personal circumstances or “blind spots” somehow caused them to lose their way. These are people who often are under extraordinary financial or personal pressures outside of the workplace. Many times, they rationalize their initial actions and don’t intend for the frauds to morph into something as big as they eventually do.…