Who Can You Trust With Corporate Funds?
This week, disturbing news came from Avon Products regarding their investigation into suspected bribery of foreign officials in violation of the U.S. Foreign Corrupt Practices Act (FCPA). Here are a few links:
- Wall Street Journal (blogs)
- China.org (with more general information into FCPA issues in China)
- Saudi News Today
Apparently, the investigation (which was initiated by a whistleblower report of inappropriate travel and entertainment expenses in China) has not only spread to other regions, including Latin America, but has resulted in action being taken against the former head of internal audit. (According to the reports, he was on a special assignment working directly for the CFO since mid-2009).
I have no special knowledge of the situation and my only comment is that it is disturbing to see the internal auditor named in an investigation.
But, it reminds me of an unfortunate situation from a few years ago. As the fairly new head of internal audit, I was notified when a controller in the Asia region requested approval for a payment to an individual that appeared to be a ‘facilitating payment’. In other words, he proposed making a small payment to an individual employee of a customer; in return, the employee would process payment of the amounts due us.
I conducted the interview myself. Part of the problem was that the controller was a former senior auditor; he had left internal audit to take this position not much more than a year earlier.
It was a very difficult conversation. The controller defended his actions (this was not the only instance) as being required to do business in the region. The payments were small, which he felt was OK. Even though he had been an internal auditor for several years, he simply didn’t understand that he was behaving in a way that was totally inconsistent with the values and expectations of the company — let alone the code of conduct. He had influenced others in the accounting function.
I concurred with the management decision to let him go. I especially agreed with the need to ensure that the company’s expectations and values were properly reinforced.
It’s always a shame to see people you like, and would even trust with your money, go wrong. Often, they do it with the best of intentions — furthering the interests of the company. But, there are limits and those limits have to be respected and enforced.
Now, we can’t go around being suspicious about everybody. I have sometimes used the expression that I am a “professional paranoid”. But, in practice you have to be reasonable. Skeptical is one thing, but you can go too far and you will be unable to perform valuable assurance and consulting services if you don’t trust people to some reasonable level.
Just don’t be shocked when good people go wrong — even former auditors.
Posted on May 5, 2011 by Norman Marks
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