Internal Auditors: Detecting Bribery

Internal auditors are the compliance super heroes.  But they are also the villains.  Perhaps that is why they are frequently isolated or labeled as schizophrenics in any organization.

The government wants to focus its investigations on internal auditors and hold them accountable as the gatekeepers, the people in a company that are supposed to detect bribery.  Underlying the books and records provision of the FCPA is the assumption that internal auditors would be the first to catch any bribery scheme in a company.  

Are internal auditors up to the task?  In most organizations, internal auditors are limited by their mission.  They are asked to review, verify and report on “material” transactions.  That is the same as asking someone to detect bribery while wearing blinders.  They are only able to review a limited category of transactions – those which are “material.”  They are not allowed to conduct a “forensic” audit of all transactions which may indicate a bribery risk.  By limiting internal auditors to the “material” standard, compliance officers know that auditors are only one piece of a compliance puzzle.  Until the auditor’s mission is redefined to include a “forensic” audit, it is unfair to hold them accountable for any undetected bribery.

Within a company, turf battles among auditing, legal and compliance staff are regular occurrences.  Provincial thinking often results in stovepipe strategies.  Such problems can undermine a company’s compliance program.  Everyone fears losing influence and these three critical players need to be on the same page.    

It is hard to initiate and implement change in any organization.  To expand the responsibilities of auditors means to bring about change.  But that is the responsibility of the Audit or Compliance Committee and senior management.  The mission of the internal auditor has to be expanded to include forensic audits.  New accounting software products have been developed to link financial and forensic audits.  The auditing profession needs to embrace change and prepare for a new role.

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