Partially responsible.
I am responding to certain observations voiced in the article "Crash, Burn, and Learn" (February 2008). No auditor, public or private, external or internal, can get away with the customary "I told you so."Some time ago, I suggested that audits performed by the comptroller and auditor general of India (CAG.) be concurrent and not post mortem. I also contested the audit view that policies should not be scrutinized and that the CAG should question policy decisions. While internal auditors are more constrained because their function is part of the organization, I believe that both internal and external auditors have to be independent and assertive. They also must make senior executives and audit committees heed their recommendations and implement corrections before any serious damage can be done.
I am afraid the author merely quoted some internal auditors without doing any substantive research and failed to deal with basic audit issues. Hence, I believe the article should have been entrusted to an expert.
K.S. RAMACHANDRAN
Professor and Head
Research and Publications Department
JK Business School
Gurgaon, India
[email protected]
"Crash, Burn, and Learn" is a fantastic article that gives interesting and thought-provoking insight about the U.S. mortgage meltdown. Although internal auditors are currently not in the line of fire for this "by chance," as more losses are booked and disclosures take place, internal auditors and their risk management and framework theories will be questioned.
The article states that "if investors didn't have questions about loans with no documentation or mortgages for more than the value of the house, what were the auditors worried about?" I think that not worrying is against the fundamentals of internal auditing and the whole idea of the internal audit framework. We, as a profession, have moved from basic vouching to risk management and ensuring the ethical thread is maintained and nurtured in our organizations. If our approach is to audit only what has been done by management, then we will not ensure the achievement of the standards we have set for ourselves, and there will be more of these meltdowns.
In our organization, internal auditors review all business models at the time of their implementation and during operational reviews. In addition, internal auditors do not limit their work to financial reviews, vouching, and verification, but evaluate the impact business strategies have on the organization's risk environment and whether the business clearly understands this impact. Internal controls are evaluated for risks as well. If we, as internal auditors, restrict ourselves to checking only the basics and fail to challenge the risk framework in today's global business environment, then we cannot justify our existence.
GAURAV GUPTA, CPA, CISA, CFE, CISM
Assistant Manager-Nestle Market Audit
Nestle India Ltd.
Gurgaon, India
[email protected]
I am not surprised that U.S. banking regulators' and internal auditors' red flags about the housing market were ignored. And, despite the pioneering work done by The IIA over the last seven decades, many firms consider internal auditors a necessary evil. In these firms, many internal auditors remain isolated or simply ignored.
I was the head of internal auditing at Unilever in India. I reported to the chairman in India and the chief of internal auditing in London, who, in turn, reported to a special committee led by Unilever's chairman of the board. This ensured the company's full attention to audit findings.
With the existence of audit committees, internal auditors now have someone to listen to their concerns. However, a lot depends on the composition of the audit committee. Many family-owned companies converted to big corporations are still controlled by their original owners, who have a major say in running these companies.
Also, it is not enough for senior management to approve risk management guidelines. If risk management guidelines are based on incomplete data or are not sound, internal auditors should be able to identify and report them to senior managers or the board for correction.
SARDARI L. AGARWAL, CIA, FCA
Partner
Sabni Natarajan & Bahl
Chartered Accountants
New Delhi, India
[email protected]
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| |
| Publication: | Internal Auditor |
|---|---|
| Article Type: | Letter to the editor |
| Date: | Jun 1, 2008 |
| Words: | 735 |
| Previous Article: | Analyzing financial statements. |