re: The Auditors » Internal Audit

Whistleblowers Are Not Pretty

Francine — Thu, 03 Feb 2011 07:50:11 +0000

This article was originally published at GoingConcern.com on March 3, 2010.

Most don’t wear stilettos, although Cynthia Cooper is fairly attractive for a blond. Harry Markopolos, the Madoff “hero” whose new book is out is being called a whistleblower. I do not see him really warming up to that label or really warming up at all. He did admit that, early on, he was partially motivated in his quest to get the SEC to listen to his theories about Madoff’s fraud by the potential for whistleblower rewards.

From The Boston Globe in January 2009: Markopolos allows that at times he was motivated partly by the opportunity to receive a bounty that the government pays to whistleblowers in successful prosecutions, if the fraud falls within certain categories – the front running issue, for example… Over time, Markopolos concluded that he wasn’t likely to get a whistleblower payment, but he continued nonetheless, spurred on by the pure intellectual challenge of cracking a Wall Street legend…

Now Markopolos works to seek out other whistleblowers and shares in the bounty if they successfully file claims.

From a recent Fortune interview:

You were a whistleblower and you work with them now. What is the profile of the whistleblower’s personality? If you don’t have a strong belief system, you’re not going to be a whistleblower. You have to be crazy-brave. The risks are all weighted to the downside.

Crazy-brave? Yes. You cannot have self-doubt. You just have to go forward and say I believe in this country. I believe in these core values. I know if I get outed and get caught, I’ve committed economic suicide for myself and my family. I’m going to be on the industry blacklist.

Markopolos reminds me of many internal auditors I have known over the years. Many are introverted, not comfortable with the spotlight, anal-retentive but with a pit-bull, black-and-white, judgmental sense of right and wrong. It’s what it takes to do the job.

One of the biggest challenges for the internal audit profession after Sarbanes-Oxley was passed was to live up to the enormous expectations. Internal audit functions were mandated. Controls were front and center. I expected Internal Audit to gain more prominence as Chief Audit Executives began reporting directly to the Audit Committee and started making their own Board presentations instead of hiding behind the CFO.

Unfortunately, as my friend Chuck Eldridge from Korn Ferry told me back in 2003, very few internal auditors at the time were prepared to be “outside guys” instead of inside guys. In fact, it should be suspect if the internal auditor is too cozy with senior executives. We’ve seen internal audit come back again full circle to having to justify their existence via consulting and cost-savings initiatives.

It is hard out there for the internal auditors, external auditors, and accounting professionals, who want to expose fraud and illegalities and still live to work another day. Markopolos said he feared for his life. I know I’ve been more wary about my own safety since November. Cynthia Cooper of WorldCom fame received death threats.

“For me, this has been the most difficult thing I have gone through in my lifetime…There were times when I was scared to death,” Cooper told the audience, adding that she had to dig down to find her courage and push forward.

Few are prepared for the consequences or realize fully how bad they can be. Ideally you are either independently wealthy or so poor that you have nothing to lose. Sticks and stones can’t hurt you.

I know one real-life whistleblower personally. He’s actually a former Chief Audit Executive who is more of an outside guy than usual. He was always active in professional associations like the IIA, was comfortable presenting to outside counsel and the Board of Directors and has the chops to deal with tough issues. When asked to look the other way in a job that was supposed to be a repair and renewal assignment rather than all CYA, he balked. He’s currently working as the CFO of a startup while pursuing his claims.

In Support of the Bottom Line: A Guest Post From Steve Gierach

Francine — Mon, 17 May 2010 05:55:00 +0000

Auditor Independence: Will “Crisis” Cause Compromise?

Francine — Fri, 14 Aug 2009 01:24:25 +0000

Back in February, I reminded you of the good things about the Sarbanes-Oxley Act.

“When the Sarbanes-Oxley Act was passed in the summer of 2002, largely as a rushed reaction to Enron, it did get a few key things right. Notwithstanding the long debate we’ve had about cost/benefit or why it didn’t prevent the subprime crisis or large frauds such as Satyam and Madoff, both of which are derivative discussions for later, there were a few important changes that still make a difference.”

Section 201-209 had a significant impact on the audit firms because it prohibited auditors from providing certain other services to their audit clients. This change was the result of a long simmering debate about auditor independence but made possible, finally, by the ‘cornered-the-market” behavior of Arthur Andersen as auditor, internal auditor, and chief consultant for Enron.

From the Wall Street Journal in February of 2002:

“…The push to outsource oversight of Enron’s internal-audit function came out of discussions from Enron’s audit committee in the early 1990s, according to depositions. Robert K. Jaedicke, the audit committee’s longtime chairman and former dean of Stanford University’s Graduate School of Business, favored the idea of an “integrated audit,” Mr. Hooten said in his deposition.

Mr. Jaedicke’s attorney, W. Neil Eggleston, said in an interview that Mr. Jaedicke agreed that outsourcing oversight of Enron’s internal-audit function, where Andersen auditors reviewed checks and balances, was a good idea because Andersen’s expertise would provide more “real-time analysis” of whether Enron’s controls were effective.

Andersen had a clear leg up in winning the business. Since 1986, Andersen had been auditor of Enron and its predecessor company. Jack Tompkins, who had headed Andersen’s Houston office for years, was Enron’s chief information and accounting officer during the early 1990s when the contract was being pursued.

The Enron outsourcing business was a big prize. Andersen’s original proposal included a five-year guaranteed contract, $18 million in net fees for Andersen and “value-billing opportunities” of as many as 44,400 guaranteed consulting hours, as well as potential savings for Enron of $12 million over five years, according to a deposition by Michael L. Bennett, Andersen’s world-wide head of assurance and business advisory.

Once it won the contract, rather than physically separate internal and external auditors working at Enron to prevent conflicts of interest, Andersen encouraged a “culturization” of the work teams, bringing the auditors together on the same floor at Enron, Mr. Bennett said in the deposition.”

The US-based academics mentioned in my February post used the same arguments as were made to sell Andersen as an internal audit outsourcing vendor to Enron. They suggested that rolling back the prohibition on auditors also acting as internal auditors of their clients might be better for us:

1) More efficient and effective teams given the external auditors’ extensive knowledge of their clients. The study actually contends, “the knowledge of a company that an external auditor gains from internal auditing lowered the chances of publishing misleading or fraudulent financial results.”

2) Cost savings to client (via leverage over auditor re: fees) from combining the teams and gaining “synergies” from having same firm do both.

3) Promotion of a “consultative” approach that would benefit both client and vendor. In fact, I reported in February that the audit firms were rolling their internal audit practices back into the external audit/assurance practices. No more pretending to be true “strategic” consulting/advisory teams. This is certainly more efficient and cost effective for the firms, especially if they can use the same staff for both external and internal audit engagements.

If you thought the discussion was pure rhetoric, you were mistaken. KPMG (and PwC who also proposed on Rentokil but lost) has now rationalized, rhetoricized, and revisited the best practice based restrictions for their new client Rentokil. Rentokil is not listed on a US exchange and, therefore, not subject to the Sarbanes-Oxley restrictions. The UK, where Rentokil is listed, has a gentleman’s agreement with regard to auditor independence for non-audit services.

From a paper by Eleanor Dart of the Cardiff (UK) Business School:

“In 2004, the Auditing Practices Board issued ‘Ethical Standards for Auditors’ (updated in 2008). These standards are less permissive than previous guidelines and must be followed by all members of professional accounting bodies who engage in auditing activities. The standards include a 10% limit on audit firm income from any one listed company client, audit engagement partner rotation every 5 years and key audit personnel rotation every 7 years and compulsory withdrawal from the audit should any non-audit services supplied not be viewed as consistent with the objectives of the audit itself.

However, despite these developments, fundamental questions over auditors’ ability to live up to the service ideal of professional integrity still remain and there is much controversy over what can be done to ‘minimise the possibility of an Enron or WorldCom situation occurring’ (Reeves, 2002:4). Whilst it appears that ‘no single solution is a panacea’ (Reeves, 2002:4) for UK auditor independence concerns, interested parties have yet to agree upon important issues such as whether non-audit service provision should be prohibited or whether a system of mandatory audit firm rotation should be introduced. It is clear that further consideration may be needed to prevent future losses of confidence in auditor independence.”

The arguments for combining the external audit and internal audit activities under one provider repeat, not surprisingly, a familiar refrain. But they conveniently and completely ignore the lessons of the past. What’s different today is that journalists, corporate governance experts, and plaintiffs attorneys have longer memories:

From The Financial Times’ Jennifer Hughes:

Rentokil Initial has struck a cheaper, streamlined form of audit deal with KPMG that could be adopted by other companies but has raised eyebrows in the corporate governance world. Rentokil has shaved £1m, or almost a third, off its annual payments to its external and internal auditors, it disclosed in its interim statement on Friday…

KPMG said there was no conflict in its deal with Rentokil and that it was conscious of the rule.

“Conceptually, doing internal audit isn’t a conflict in itself, only if you get involved in the wider aspects such as management – which we are not,” said Oliver Tant, head of audit for KPMG UK.

“Companies are aware today of the importance of good assurance yet at the same time, they’ve got to look at costs. There are ways you can do it more efficiently and effectively.”

KPMG’s pitch was helped by the history the audit team had in working previously with Alan Brown, Rentokil’s chief executive, when he was finance director at ICI. It was Mr Brown who initiated the discussions that led to the new arrangement.

Given the pressures on costs and the longstanding ties some finance, audit, and accounting executives have with the accounting firms, it is not surprising that the weakening of the independence commitment may come from the companies themselves. What’s the downside for them? The potential for scrutiny by corporate governance experts and journalists? You can’t argue with a recession. And in the event of an accounting scandal or restatement, plaintiff’s lawyers will have an uphill battle to penetrate the impenetrable auditor liability shields and caps.

I would hate to think, as Dennis Howlett has suggested, that this could become another lame excuse for repealing SOx/general deregulation of audit firms under the threat of companies decamping to more hospitable climates?

What’s lost in all of this discussion of efficiency and cost cutting?

Independence protects shareholder’s interests.

Fortunately, at least one important voice, the Institute of Internal Auditors (IIA) President and CEO Richard Chambers, has issued a strong statement “in response to recent suggestions that it may be time to revisit existing prohibitions on provision of internal audit services by the same firm responsible for the external audit in the U.S., as well as a recent high-profile instance of the practice in Europe.”

“Internal audit services should not be provided by the same accounting firm that audits the organization’s financial statements, as it would impair the independence of the external auditor. We have expressed this numerous times over the past two decades and we feel it’s important to re-emphasize this at a time in which the practice is potentially being reconsidered,” said IIA President and CEO Richard Chambers, CIA, CGAP, CCSA. “The SEC prohibits this practice by public companies listed in the U.S., but The IIA believes that even if allowed by law or statute, this practice – at a minimum – creates a perceived impairment of independence and erodes public trust.”

I could not have said it better myself.

In addition, KPMG and Rentokil must realize that KPMG’s internal audit practice and Rentokil’s internal audit function will no longer be able to say they comply with IIA standards. May not seem like a big thing to you but, to internal auditors, it’s the heart and soul of being a “professional.”

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Compliance Week 2009 Day 1: What A Difference A Day Makes

Francine — Thu, 04 Jun 2009 20:25:14 +0000

It was a great first day yesterday. I’ve been telling Matt Kelly, Editor of Compliance Week, that this year is better than ever. One profound change is the Twitter presence this year. Last year I was the only one Twittering, Matt did not yet have blogs on the Compliance Week site, and fewer people knew or cared what I was doing or why. This year, I share the front row at every presentation (and the backchannel) with several bloggers/Twitterers. I’ve now met Doug Cornelius, Bruce Carton, Alex Howard, and Eric Cohen live. I also had a chance to talk with two out of three of my panelists for the Maryland Association of CPAs Business Expo panel, Colleen Cunningham and Susan Webster. (The third panelist on the 16th in Baltimore is Joanne O’Rourke of the PCAOB.) And I ran into Tony Chapelle from the FT’s Agenda publication, where I was quoted last year.

Follow the rest of the conference via Twitter hashtag #CW2009

As always, one can plan an agenda, but you have to be flexible. I woke up at 4:30 Chicago time yesterday and by late afternoon, even after lots of Starbucks espresso, I was cashed. Skipped the Oracle presentation after I got a late afternoon email that rescinded their Thursday dinner invitation from last week. I was a little peeved. It was written as if I had asked them to please ask me, pretty please, to come and eat their food. Which I did not. I can make my own fun. But to make an invitation and then rescind as if they found someone more interesting, more sexy, or less threatening was rude and unacceptable. Well, I guess I just go to the Tweet Up early.

BTW If you are at the conference or in Washington DC, please come out and meet me, and whomever else the cat drags in, at Busboys and Poets, a place recommended by my friend Max. It’s at 14th and V Street and anyone else will show up after 8:30. Hope to see you. Cash bar.

So who did I see yesterday?

The opener was an interesting presentation by SEC Commissioner Luis A. Aguilar on the Regulatory Agenda. It was newsworthy for his statement that he supports a combining of the CFTC with the SEC. Unlikely to happen, though. The CFTC says no. Legislators says no.

Next up Fannie Mae Chief Compliance Officer Bill Senhauser discussed the immense challenges his firm has encountered during the credit crisis, and how he is trying to restore trust both inside and outside the company. This guy is a superstar. Stay tuned for an in depth look at who he is, what he’s doing there, and why you need to keep an eye on him. Never thought I’d say this about Fannie Mae, but with guys like this in senior positions, I’m hopeful for the future.

Former SEC Deputy Chief Accountant and Compliance Week Columnist Scott Taub reprised his “top 10″ things you think you know about the SEC, and why you’re wrong. Scott is a Chicago guy and University of Michigan/Michigan native. We’ve had some long talks and longer lunches. After his presentation we had some lunch together and I saw him in action at a table full of folks who had no idea who he was. He’s a smart, savvy former-SEC A-Lister who’s also just a “regular guy.” A separate post will go in depth on his presentation and my very informal interview. Takeaway for now? You just might see Scott Taub, talker extraordinaire, on Twitter, under my tutelage.

Finally, I attended KPMG Partners John Farrell and Rocco deGrasse ’s presentation with Office Depot’s Chief Compliance Officer Bob Brewer that discussed how effective enterprise risk management program/GRC program can help to mitigate risks. The bonus part was, thanks to Rocco, a discussion of FCPA-related pre-acquisition/merger activities.

These Tweets pretty much sum up that presentation. Here. Here. Here.

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So You Want to Be A Government Auditor…

Francine — Tue, 14 Apr 2009 16:51:08 +0000

I’ve been talking a lot about the opportunities for accountants and auditors in the public sector. There’s the potential for a shift to direct monitoring of investments by government auditors in previously public companies such as AIG, Fannie Mae, Freddie Mac and Citigroup. There’s also the increased hiring by regulatory agencies such as the SEC, PCAOB, FDIC, FED, TARP Oversight, Congressional Oversight, and CFTC. And finally the need for more internal auditors and GAAP/SEC reporting specialists in both consulting firms and industry.

I had the opportunity a while back to join the Office of the Inspector General for the City of Chicago. It’s a long story but, in the end, after being offered the position, I decided against it. I wouldn’t have been choosing the job and the increased scrutiny that goes along with it only for myself, but for my entire family. Everyone would have been subject to potential media attention of who we know, who we socialize with, and who we support politically. Given where I came from and how I grew up, that was potentially a heck of a lot of scrutiny.

My parents have followed the activities of David Hoffman, Chicago’s Inspector General much more closely since. And they often say, “Aren’t you glad you didn’t take that job? What would we have done? He’s going after everyone!” Yes, he is. I’m not in a position to judge the merits of each case, but let’s just say he has more to worry about than I do. My parents’ greatest fear is that one of the accounting partners I’ve offended may stab me in the neck with a mechanical pencil in a dark alley in NYC…

My friend and former colleague, Richard Chambers, is now the President of the Institute of Internal Auditors. Richard has a lifetime of internal audit experience and is my go-to-guy when it comes to the fine points of the internal auditing career. He’s now writing a blog for the IIA and his latest post touches on the challenges of being a government auditor.

“…with an alarming frequency, it seems that some of our colleagues who audit local government operations are waging an uphill battle against formidable political forces.

Government has always been a challenging place to audit. It is often argued that government can only be effective if it “maintains the public trust.” If that is true, internal auditors in government play a pivotal role in reinforcing that trust. Their work provides assurance to taxpayers and citizens that resources are deployed effectively and that public officials are good stewards of taxpayer dollars…Although most elected officials welcome the insight that comes from an effective internal audit program, an increasing number appear threatened by the scrutiny that accompanies critical audit results. When they do feel threatened, they lash out at the messenger!”

Go here for more.

And don’t forget internal audit as an option if you want to do right, do good, and perform a critical corporate/governmental governance role.

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Update (2) – More FAS 5 – More Transparency or More Shilling

Francine — Mon, 11 Aug 2008 14:00:00 +0000

And the US Chamber of Commerce also pipes in. As expected, they are on the side of their corporate management constituency. Although I agree with their position about erosion of attorney client privilege , I do not agree with their position regarding this privilege when it comes to information requested by auditors.

Auditors (internal and external) must have access to all information, including free and open access to Board Minutes and to all management and directors.

Perhaps the change that needs to be made is to strengthen the protections over information auditors need to protect shareholders (that is their role, no?) without having it be needlessly discoverable?

Just a thought.

Dear Francine,

On August 8, the Chamber voiced strong opposition to proposed accounting rule changes that it says would and open the door to lawsuit abuse by trial lawyers and would not provide clear or useful new information to investors.

In a letter to the Financial Accounting Standards Board (FASB), the Chamber outlined its objections to proposed amendments to Statement of Financial Accounting Standard No. 5 (FAS 5), “Accounting for Contingencies,” which would significantly increase the amount of information publicly traded companies are required to disclose regarding pending or threatened litigation. According to the Chamber, these additional requirements would force companies to release immaterial or confidential information—likely resulting in excessive or harassing lawsuits filed by plaintiffs’ trial attorneys.

Under the current standard, companies are required to disclose loss contingencies for “probable losses.” The proposed rule would substantially raise that standard, in some cases requiring companies to disclose all contingencies regardless of how “remote” the losses. The Chamber added that the proposed changes would lead to the erosion of attorney-client and work product privileges by requiring companies to reveal analysis and strategy regarding pending or potential future litigation.

Broc Romanek also chimes in. He points directly at the auditor-lawyer issue. Interesting times coming. Are those lawyers who play both sides of the fence like Mike Young, ready?

One of the hot topics at this weekend’s ABA Annual Meeting was the early June proposal by the FASB that would require companies to disclosure more about their litigation risks (here is Dave’s blog outlining the proposal). Here is the ABA’s comment letter that was just submitted; comments are due now.

One member called the proposal a “Summertime Submarine” as many lawyers feel that the accountants are mounting a major attack on the attorney-client privilege and a disturbance on the ABA’s Accord regarding lawyers’ responses to auditor inquiries adopted back in 1975. Many lawyers also see that the proposal’s change in FAS 5’s disclosure requirements as inevitably increasing auditor demands for information and that auditors also will seek greater justification for what is disclosed.

For the uninitiated, here’s a quick summary of how disclosure of legal contingencies currently works.

Now, I usually like lawyers. I’ve even complimented the ones that defend the partners and the Big 4 firms.

When they’re very, very good.

And I admire the ones that really know their stuff, guys like Jim, Jake, Broc, and Tom.

Ok, I like guys with really big brains and a bad-ass attitude. I’m busted.

Edith Orenstein has a very extensive summary on the FEI Blog of the latest in potential changes to FAS 5 disclosures. The proposal is causing a significant amount of consternation and wrinkled brows for the corporate lawyers.

But in this case, the corporate lawyers are going all out to defend their corporate clients and their bias shows like a tattered slip under a cheap floozy’s summer wrapper.

Consider one of the most vocal ones. Mike Young is always good for a good quote about how any and all disclosure is bad for his clients’ (company management, certainly he’s not thinking about shareholders) position vis a vis their defense and negotiation with those that sue them.

He’s a (big) talking head for the audit firms, too. But he’s also afraid of the auditors.

Which side are you on, Mike?

From Mr. Young’s comment letter:

…It is to the Board’s credit that it seeks to mitigate these concerns through the possibility of aggregation. While that attempt is commendable, however, it doesn’t really solve the problem. The prominence of large litigation often cannot be disguised by aggregation, and both large and small litigation would presumably be the subject of robust discussion with the outside auditor in disaggregated form, thereby making highly prejudicial information potentially available to adversaries through loss of the attorney-client privilege…

Yeah. He makes a great case for me to agree with squelching disclosure.

Not.

Let’s take a look at a recent case of lack of disclosure: Nokia-Qualcomm.

As I wrote in a blog post back in October, 2007, Nokia and Qualcomm had some significant litigation going on and there was nary a mention of it in their most recent annual reports at the time, per FAS 5 current rules. PwC was on all sides of this conflict. Hmmmmmm.

The litigation was recently settled.

A reader who had been following that case much more closely wrote:

…I speculated [back in October when I wrote the original post] that it may have something to do with the ever-boastful Nokia’s true status with regards to their pending litigation with Qualcomm. At the time I predicted that Nokia would cave and settle within 12 months, for terms that perhaps would be less favorable to Nokia than they might have led their shareholders to expect.

Well, the above played out true to form this past Wednesday, as Nokia raised the white flag on the courthouse steps, just as the trial was to commence. While there have been quite a number of prominent articles the past 48 hours stating that Nokia “got the best of Qualcomm”, I would submit to you that the share price action the past 2 days indicates otherwise.

A “short” Nokia/”long” Qualcomm strategy has worked rather well the past 6 months, and I suspect this will continue to be the case going forward.

As for poor Carl……………………I suspect he and/or his employer saw this day coming all too well.

Without sufficient disclosure, how could either side’s shareholders been able to gauge the impact of pending litigation accurately in order to make proper investment decisions?

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Read more here about the corporate defense lawyers who are afraid of the external auditors (or internal auditors) having access to any real strategic business information.

Countrywide Needs Some Help – Duh!

Francine — Wed, 30 Apr 2008 15:22:00 +0000

A faithful reader and friend brought these two ads to my attention this morning.

Looks like they’re looking for both the #1 and #2 people. What happened to their primo position as risk management leaders per the IIA?

Anyone know what happened to the incumbents? I would take the job. If they gave me a very hefty signing bonus. And relocation to California, first class airfare, bounce back clause, a cheap mortgage with no doc and no money down… And two years severance for every month served if they change their mind, are bought out, go bankrupt, decide they don’t like me, can’t take the heat, won’t let me wear stilettos or cheer for the White Sox…No job is too risky if they pay you enough under a good contract.

VP, Internal Audit – 10065928
Apply Online
Making dreams come true every day. It’s our focus at Countrywide. Explore mortgage lending, insurance and banking with a national presence, global scope and a mission you’ll be proud to share in with the country’s number one home lending source.* There are many options for talented financial professionals. Discover the leading team dedicated to helping more Americans achieve their dreams.
* As ranked for 2006 by Inside Mortgage Finance (Feb. 2, 2007)© 2007.

Vice President, Internal Audit

Primary Responsibilities Include:

· Identifying and developing best practices
· Supervising and effectively managing (i.e. coaching, evaluating, training, etc.) Audit staff and seniors in order to meet Audit schedule-completion objectives
· Managing multiple projects and coordinating staff assignments
· Participating in the Audit planning-process
· Risk-rating auditable activities, identifying new auditable activities, determining staffing requirements and establishing an appropriate time-budget for each
· Writing risk assessments and audit programs
· Acting as auditor-in-charge of complex and high-risk audits and special projects
· Executing audit program-steps
· Writing process-flow documents, performing detailed test-work and summarizing results in work papers
· Reviewing work papers and providing guidance and feedback (as required)
· Participating in exit conferences and discussing issues with Senior Management
· Drafting audit reports for the Group Manager

A Successful Candidate Will Have:

· CPA, CIA, CISA and CIDA designations
· Bachelor’s and/or advanced degree in Accounting, Finance, Economics or Business-related discipline
· 10+ years of auditing experience
· Comprehensive understanding of financial and mortgage industries
· Ability to understand (from breadth of experience) macro corporate-structure and the impact of audit issues on other areas of a company
· Excellent written and verbal communication skills
· Proven management skills

Countrywide is committed to leveraging the talent of a diverse workforce to create great opportunities for our business and our people. EOE. M/F/D/V.

From Yahoo Jobs

AVP, Internal Audit: Countrywide Financial Corp.
Job ID 10064680
Company Name Countrywide Financial Corp.
Job Category Accounting/Finance; Banking/Mortgage
Location Westlake Village, CA
Position Type Full-Time, Employee
Experience 5-10 Years Experience
Desired Education Level Other
Date Posted April 8, 2008

Big 4 Blind Items – Spring Edition

Francine — Mon, 31 Mar 2008 14:50:00 +0000

For your commenting pleasure, a variety pack of ponder-ables…

Which multi billion dollar global government contractor was one of the few, if only, public companies of its size to be cited for a material weakness due to an ineffective internal audit function? This is not the typical “completely missing” internal audit function but one that existed in name only and completely missed the mark in serving as part of the internal control structure. After hiring and now firing a new VP of Internal Audit, they’ve thrown up their hands and turned the whole thing over to Ernst and Young.

Who can name all of the Fortune 500 public companies with material weaknesses in information technology controls, especially over systems development, change controls and access controls? How many more financial services companies are going to get away with blaming “rogue traders” instead of admitting they took their eye of the ball on IT and so did their auditors due to lack of competent staff to do the work and to audit it? How much longer are companies going to get away with ignoring the strategic role of IT ?

Which NY-based Big 4 Managing Partner sent out a nationwide mass email warning staff that with a softening economy, employees may be asked to retool and work in some unfamiliar areas? At least this firm is admitting they have a structural problem and not lots of personnel problems. However, this “communication” caused enough stress for at least one person that they wrote me. Let’s hope, although I’m not optimistic, that this isn’t the first tumble down the slippery slope towards mass layoffs at this professional services provider.

Which Big 4 firm has a Code of Conduct that doesn’t require its vendors, clients, and business partners to comply with the same lofty standards as they insist on for their staff? They’re about to be hit from all sides by those that want them to practice what they preach and make sure one particular vendor and its investor, who’s also a very large client of the firm, doesn’t embarrass the firm any more than they already have.

Which New York-based Big 4 partner likes his extracurricular activities to be hosted by the same kind of girls that his former governor preferred – very young and very dirty? How long can he get away with charging the events to his firm credit card and billing his clients for these ”meals” ?