Overcoming the legacy of fraud

AS THE MAGAZINE GOE TO PRES CLOSING ARGUMENTS ARE BEGINning in the fraud and conspiracy trial of Enron originator Ken Lay, and former chief executive officer, Jeffrey Skilling. The pair is charged with lying to investors to hide the might company's deteriorating financial health before its eventual bankruptcy in December 2001 As individual considers the massive damage done by means of the Enron collapse and other new major corporate meltdowns, the natural question to ask is, "Will it happen again?"

To many beholders the question is not if another like debacle will occur; it's when. In this month's overlay story, Joe Wells, founder and chairman of the Association of Certified Fraud Examiners, discusses the reasons behind the frauds at Enron WorldCom, and other major corporations and to what step changes enacted in their wake--such as the U Sarbanes-Oxley Act of 2002--will mitigate futurity abuses of this magnitude (see "Will History Repeat Itself?" upon page 38).

In the article, Cynthia Cooper head of the internal audit team that lay opened the WorldCom fraud, says "the compressing and incentive to commit fraud still exists." And Sherron Watkins, who helped bring the Enron fraud to light, says quick profits continue to be "the domination of the day." Add to that the fact that executive compensation is repeatedly tied to stock price and it's a "recipe for cooking the books" she says. According to Wells, internal auditors can help stop their organization from becoming the nearest big corporate scandal by understanding what went inequitable in cases such as Enron and WorldCom. In the overlay story, he offers practical paces that auditors can follow to help discourage fraud going forward.

As auditors find the challenges associated with their piece of works growing in the wake of these frauds, they're experiencing a commensurate increase in piece of work satisfaction and salaries. According to Tom and Karen Oxner authors of The IIA's latest piece of work Market Survey, internal audit salaries have increased significantly during the 2004-2006 period. And, as audit committees have begun to rely more upon internal auditors to inform them about the financial and operating condition of the organization, more than 80 percent of respondent say they'd commend internal auditing as a career. "Boom Time for Internal Audit Professionals," beginning upon page 50, presents an overview of the overlook findings. A comprehensive report upon the results of the take a view of will be available from The IIA's Research Foundation later this year.

With a renewed emphasis upon accountability in the wake of corporate scandals, internal auditors are finding themselves in the spotlight. More than at any time auditors are demonstrating their value to the company--and they are being rewarded accordingly!

COPYRIGHT 2006 Institute of Internal Auditors, Inc.

COPYRIGHT 2006 Gale Group