Saturday, February 11, 2017
Conflict of interest in business
The other day I was with someone talking about how the auditors needs to be audited and it got me thing that the guy was right in one sense that the internal auditors that the company has can help with the audit but the external auditors need their client base to consider when auditing the books of the company. They are supposedly independent but they have to satisfy their client from whom they are getting paid and if the audit is more adverse than internal auditors, then the external auditors may not be retained the next time and the company may go for audit shopping to find an auditor who is more favorable to them. And herein lies the conflict of interest, the external auditors are supposed to be independent and should strictly follow all the audit and accounting rules and laws to audit the books but as seen by the heavy fines given to the banks lately and ongoing, it seems that that internal and external auditors are not doing as much of a great job in protecting their clients from government fines. When such a thing happen, the regulators, be it with the state one or the federal regulators should step in and impose external auditors to audit the books of the company whose auditors may have intentionally or unintentionally overlooked some of the compliance issues related with the audit. I don’t mean to sound suspicious of all audits but the constant barrage of fines and penalties imposed on corporations and especially on banks means that the internal auditors are ignoring some of the aspects of audit or even overlooking them and thus creating perception that there are lax controls in the way banks handle compliance. In this case, I would rather have outside independent auditors sent with federal or state mandates and conduct their own audit as to make sure that banks and corporations are complying with all the laws of the state and Federal government.