Weekly Wrap – 12th June 2014

 

Hi I am Tom McLeod, Co-Founder of McLeod Governance.

This is what I would be thinking about this week.

Lehman Brothers Whistleblower Complaint 

In the research for a recent speech, I came across a quote relating to internal audit in Lehman Brothers prior to its collapse in 2008.

If you will allow me, I wanted to read directly the quote.  The quote said and it was in a whistleblower complaint that was sent to the CFO of Lehman Brothers in May 2008:

certain senior level internal audit personnel do not have the professional expertise to properly execute the audit functions they are entrusted to manage

The reason why I raise this today as an issue is two fold.

Firstly I am someone that considers myself well read in the area of internal audit yet six years after that event it is the first time that I have ever seen that quote.  And secondly it raises what are the competencies we expect in an internal auditor.

Challenging the Audit Profession

So lets address the first issue first about why someone like myself is only reading that quote now for the first time.

It confused me and concerned me.  Confused me in the sense – where are the deficiencies in the research that I am undertaking that I can’t come across those quotes or information.

And concerned me – as to why as we as a profession haven’t addressed this issue more directly.

One would have thought that we would given the seismic importance of the collapse of Lehman Brothers.

Perceptions of Quality

Secondly it raises the issue around competency.

Now the list of what makes a competent auditor is very long – perhaps too long to go through here now.

But it does raise for our consideration and for future organisations benefits that we not only need to be competent but we  be seen to be competent.

It wasn’t as if Lehman Brothers wasn’t warned – and nor were the internal auditors in that instance.

And that’s a lesson for all of us.

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