Response to Comments from the “Dumb Auditor” Article
To all the readers who left comments regarding the “Dumb Auditor” article. Thank you for visiting the blog and taking time to share your excellent ideas with the group. The “Dumb Auditor” article has been read by thousands of interested people from around the world, indicating that the issues discussed are of serious importance to our profession. Most of your comments clearly show “battle scars” resulting from real life work situations, making them more valuable than I ever expected.
It is also clear from your comments that auditors would like some resolution to these problems. Or, at least some structural changes in the industry that lead to diminishing auditor exposures, while they do their jobs protecting shareholder interests. Although, many in the business world share similar situations, risks and moral dilemmas, it is the auditor who is expected to uncover fraud and other illegalities with few or no legal and financial protections for themselves. And, few are similarly bound to maintain confidentiality about their work and the very things that often get them fired. It is not unusual to hear Internal Auditors tell of stories where they “uncovered to much” and got fired for it, but can’t talk about it! What does this tell us from a legal, societal and ethical perspective, and where does it put the professional organizations that are supposed to provide guidance and protections for the profession?
From the more than 30 comments left in the blog by readers to date, I am particularly impressed and grateful for the following:
1) From Felix, on November 30th.
Excellent proposals with excellent potential. Felix discusses four items that should be considered at the highest levels. Item # 4 on his list is something I had thought about in the past (and, I suspect other auditors have as well), dealing with Professional Liability Insurance “provided by the PCAOB (or other body holding CFO’s/auditors to ethical/moral standards) for auditors and CFO’s. If a CFO or auditor is fired due to claimed unethical reasons, they are eligible to receive 100% of what they were making.”
There are countless types of liability insurance for professionals, such as errors and omissions for attorneys and accountants and medical malpractice. Why not develop one that insures against wrongful dismissal of auditors, specially when the dismissal involves a dispute with management due to the normal performance of the auditor’s duties, ethical or fraud related matters?
2) From Mark Pennington, on November 30th.
I was impressed with the brevity, the directness and the underlying picturesque quality of Mark’s comments.
Disregarding his tone…. I think he is correct in that there is a very large segment in management that does not care. Why should they? They do not perceive to be negatively affected, and their personal bank accounts keep increasing instead of decreasing with the status-quo.
3) From Rodney Kocot, on December 2nd.
I think Rodney’s comment is the most eloquent posted in terms of describing a situation where auditors get fired for trying to do the right thing. I think that everyone who has been an auditor for several years recognizes this type of story, either from first hand experience or because it has happened to a peer. Unfortunately, because of confidentiality agreements and fears of being black listed, these stories rarely get out to the public or beyond auditor circles.
4) From Adis Vila, on December 5th.
The need for “Ethics Training” is clear and I am glad someone with a strong background in this area brought it up. However, my sense is that ethics training yields future results and it’s something that impacts entrants to the business world, with limited impact on the “old dogs” running lose right now in positions of authority. Training someone like a Bernie Madoff in “Values” and “Ethics” would be an interesting effort probably yielding few good results. We auditors are in the trenches dealing with societal and organizational challenges as they are now, not as they should be. Most auditors I know view compliance training as something that goes hand in hand with ethics.
I agree with Adis that we should concentrate more on a “Values-Based” ethical culture, because I believe that as a society we dropped the ball on this one a long time ago. I will refer to a few comments posted by Felix on November 30th which reflect my views on this issue:
“What is for sure is also that some crooks would not be crooks if society would not accept as “good” many things that are NOT good. The unfortunate relativism that we live in now a days is contrary to how the United States was founded. It was founded on deep moral principles and as a result there was a key ingredient that was not there in many other countries or societies throughout history: trust. Trust can only exist when the society is a morally correct society that has not transformed values. In other words when a bad act is considered OK by many and vice versa. The problem we are facing in the United States of today runs deeper than audits and rules.
The problem goes to the core of the humanity of our country.”
5) From Ben, on December 8th.
Ben’s comments are well thought out and clearly come from experience. His suggestion that auditors take a more careful and inquisitive approach during their job interviews in order to improve their chances of accepting jobs in organizations that more closely reflect their ethical values, is excellent.
I also agree with Ben regarding the approach with mid-level management and the need to invest time educating folks in Risk Management. His humorous call for prayers, relaxation and meditation techniques during audits of sales functions is also unique and worth considering!
Prior to the popularity of “Social Media,” blogs, Twitter and the web, most controversial issues impacting an industry or profession remained in a semi-secret state. Today, they can be known to thousands of people instantly. The power of knowledge or as they used to call it, “The Pen” is stronger than the “Sword,” and in most cases it is also stronger than the “Dollar.” Because of this, I believe that the “Dumb” auditor article will make a positive contribution to the efforts being made to resolve the issues cited in the article. At minimum, there will be more awareness of the problems from the perspective of the auditor.
Thank you again for visiting, reading and leaving your comments.
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