EXPEDIENCY MANIPULATES RHETORIC, NOT PRINCIPLES!

A word to the wise: Read on only if principles intrigue you, both personally and professionally!

If you’ve always believed in the widely held and archaic belief that corporates trade off principles for increase in revenue and profitability, behold, you’re in for a rude awakening. The tradeoff has several other elusive objectives than those ages old adages that were taught as theory to auditors for inspiring professional skepticism in them. 

The world has moved on you see; the objects that could be procured after trading in principles now include personal profile, authority, compliance, control and many more. Let’s see how that works out:

• When an executive sidetracks a decision on keeping or removing a relative from employment after a proven forgery of records instance, to other executives reporting to him, he is buying objectivity.
• When a new role is created for a person who has fabricated evidence in support of his performance targets, the executive is buying and asserting authority.
• When an incompetent person is appointed to a role of regulatory significance, the executive is buying compliance.
• When reporting of wrongdoing is maimed and muted on account of materiality, the executive is buying control.

So on and so forth! But for each of this situation, what’s being traded in is of course, Principles.

For those who might be scratching their heads on what is it with the principles; please reflect on the renewed emphasis and significance our professional associations and bodies have placed on ethics. The accountants, for instance, are now needed to complete certain hours of training in ethics every year as part of their continuing professional development/education.

But that’s theory. How do we, the auditors, navigate situations like the ones listed above? First let’s look at some practical advice based on my experience and then I will share the philosophy behind.

1. Maintain the momentum!
2. Keep the regular audit strategies and planning intact; avoid the envy of drifting towards the same person(s) to find more on them.
3. Objectively evaluate your audit methodologies to ensure you remain dispassionate.
4. Fortify your findings so that these speak for themselves; are irrefutable.
5. Keep a slew of reporting on every new finding you come across, naturally.
6. Maintain tangible records/working papers in support of the findings.
7. Ensure communication is documented and distinctly preserved for future reference.
8. Keep the pressure on management for adhering to the organizational code of conduct/ethics.
9. Identify other channels for reporting / escalating the findings, (Board for instance) and decide whether it would be worth escalating and the aftershocks of this escalation!
10. If it is worth escalating, and aftershocks could be absorbed, prepare an executive summary and report.
11. Keep a professional profile; neither be downcast nor aggressive!

Remember what the auditor’s stakes here are; you do your part; conduct the engagement and report the findings. The action or inaction is beyond our scope and control. An approach whereby you pursue such findings relentlessly for action, will earn you a “being personal” tag and that’s certainly what the auditors need to avoid at all costs. Even the optics of losing objectivity is not a spot for the auditors to be!

Finally, my last piece of advice in this respect; if a culture labels the auditors who report findings on lack of integrity as being personal and not the executives who shield and protect perpetrators; it’s time to update your CV and exit; the organization is dying out through a slow release but sure to kill venom!

 And now for the Philosophy!

•  A code of conduct that fulfills the requirement for necessary content in annual financial statements is for exhibition purposes only.
• An organizational culture that prides itself on “no significant finding reported” and not on “no significant finding found” is rotten.
• A control environment that comprises of individuals who lack integrity and competence is on a treasure hunt.
• A control system that makes committees on reviewing findings of integrity with the objective of delaying action is non-existent.
• A management system that’s always on the look out for scapegoats to pin blame for everything significant is anything but responsible or accountable.
• A governance body who’s not providing governance and oversight is for and on behalf of management.

Principles that could be traded in are only rhetoric!

Only rhetoric can be manipulated when management finds it expedient to do so. It’s a farce to call what could be manipulated as principles. That’s rhetoric at best and was always meant to be that way. Rhetoric sells, principles don’t!

Principles are never a matter of choice or convenience. They are the identical distinction of a true professional. They could never be compromised, except for when the Organization has made an unconscious decision to wind up. And when that’s the mood on the ground, auditors’ job there is done.

So once, you’re able to grasp the stage when principles become rhetoric, that’s the point, fizzling out sets in motion. You can now sit back and have some fun…. while keeping yourself market ready of course!