Weekly Wrap – 9th October 2014


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

This is what I would be thinking about this week.

A very simple question.

A very easy question.

Should auditors receive bonuses?

That question moved from the theoretical to the real for a very good friend of ours recently when he was told that he was not to receive his short term bonus – not because he hadn’t met the goals but because it could impact on his independence.

Two Sides to Every Debate

This is an issue that has, no doubt, impacted on internal audit since the day that internal audit was conceived. So let’s briefly explore the two sides.

Obviously there is the independence issue. And lets not hide or run away from that.

But equally on the other side of the things is that if you start treating one area of the organisation differently just because of their role where does that stop?

For me it comes down to three issues.

What Are The Goals?

One – what are the goals? It is that you will blindly agree to everything that management says.  Of course that is impacting on your independence.  But if your goals are the delivery of audit reports or the coverage that you seek to apply to the organisation then those goals are not goals that are going to impact upon your independence.

Don’t Take Away on One Hand and Not Give on the Other

The second thing for me is the remuneration structures if you are not going to be allow for short term incentive payments then you have to remunerate the person in another way on a fixed basis.  So don’t take away on the one hand and not give on the other.

Why Not Everyone In Assurance?

And on the third side is the more extreme argument. In some respects everyone is involved in assurance.  It is just that auditors are doing independent assurance.  For those that seek to provide management assurance perhaps the argument should apply to them as well.



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