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Examples where a personal relationship in the IA
Team has been questioned or has been sighted in
reports (in brief):
• IA Reports indicate that the ‘romantic
relationship’between a consultant and another
member was not reported which was against the
Code of Ethics of the organisation. The other side of
the story is that the relationship could also help solve
some tricky issues, thanks to better understanding
and rapport between two people who understand is no longer his junior but another professional.
each other in another space. Hence, the way in
whichthese relationships would eventually impact Past relationships could also impact possible
the organisation cannot be predicted. behavioural patterns. We need to look at
changing the behaviour pattern and look at
things more maturely.
• Personal relationships between Management and
Auditors: SEC announced its enforcement actions
against auditors who violated the independence Possible Implications on the Role of IA
rules by developing close personal relationships,
both platonic and romantic, with their audit 1. Quality of Governance can be questioned:
clients.A partner of the audit firm was involved in Governance is the pillar of any organisation.
a romantic relationship with an audit client’s chief Conflict of relationship could impact the
accounting officer, while she performed audit and decision-making process, and governance
review services. The audit firm had to pay a penalty could be diluted and impact both strategic and
of nearly USD 1 million with other costs. operational decisions.In case of a conflict of
relationship in the internal audit team, it could
• Investigation of alleged misconduct by former lead to a similar situation wherein questions on
CEO: The Audit Committee of the Board of independence and objectivity can be raised.
Directors of Best Buy investigated the misconduct
by a former CEO. The CEO had a relationship with 2. Overriding controls/policies/practices
a subordinate, and there were reports of the CEO (abuse of power?) under the influence of a
misusing the office and possibly not havingacted relationship could set a bad example for others,
professionally, in addition to non-compliance with and further,there could be other operational,
the company’s policies.The Audit Committee found financial or reputational risks the organisation
that the CEO violated company policies concerning needs to face. In the case of an internal audit,
inappropriate conduct, conflicts of interest, and where there is conflict in a relationship, there is
vendor gifts but did not find evidence of misuse risk of the internal auditor becoming emotional
of company resources. Here, the CEO developed or sentimental and not being able to carry out
a close personal relationship with a subordinate duties as expected without bias.
that negatively impacted the work environment.
Such behaviour was disruptive and reflected poorly 3. Breach of Confidentiality where the other
on the CEO’s judgment. The internal audit staff party may come to have access to a confidential
performed an in-depth analysis of expense reports, relationship through casual conversations,
records reflecting corporate use of aircraft, and sharing of equipment like laptop, workspace,
records of the CEO’s use of a company credit card etc., which has the potential risk of being
over a three-year period. misused later.
Some of the above are just examples of how personal 4. Relationships could turn sour for various
relationships could impact the professional life of reasons, including economic, personal attributes
an individual and the business as well. We have and other circumstances, which could lead to the
also seen situations where a person trained under risk of legal action under various laws, including
a Chartered Accountant later holds a key company Prevention of Sexual Harassment and other civil
position but does not come out of the shell that he laws/rules which could damage the reputation
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