First, I would like to announce that Chris Cheesman, chief audit officer at AllianceBernstein, has joined your Financial Services Advisory Board. We are very happy to have Chris join us.

Many thanks to all of you who continue to support The IIA and the Financial Services Auditors Group during these difficult times in our industry. It looks like the economy has begun to rebound more strongly as we begin the fourth quarter. The market is picking up momentum, job losses have leveled off, and consumer confidence seems to be increasing. The health-care debate also rages on. I’m not sure about you, but I don’t know whom to believe. However, I know something has to be done about the issue. Let’s hope that the politicians in Washington finally put aside partisan politics and do something to solve the problem.

As you’ve no doubt read, the economic downturn has forced The IIA to cut more than 40 staff positions during the past year. As a result, The Institute has had to rethink many of its conference offerings going forward. The Institute asked us to reconsider our Financial Services Conference for 2010. After much thought and deliberation, the Financial Services Auditors Board has accepted a generous offer from the Atlanta International Conference Committee to join forces in 2010 and offer our Financial Services Group members a program as part of the 2010 International Conference to be held in Atlanta on June 6-9.

Joining forces solves the problem of a date conflict between our conference, which usually is held in June, and the 2010 International Conference, and helps the financial situation at The Institute. The preliminary plan is for a financial services virtual track to be created within the International Conference line-up. This means that a financial services session will be offered during every concurrent session at the conference. Conference attendees can attend all of the financial services sessions or any other sessions they choose, including any general session. We are also tentatively planning a special free pre-conference event for financial services auditors on Sunday afternoon. Stay tuned to future FSA Times issues for more information about that event. More information on the Atlanta International Conference is currently available at www.iia2010atl.org.

As always, your feedback and comments are always welcomed.

Warm regards,
Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

Chairman’s Message, July 22, 2009

As summer approached, there were signs that the economy is heading in the right direction. The Dow was up for the year, consumer confidence was showing signs of returning, and, although the economy was shedding jobs, the rate of job losses had slowed. From the feedback we received at our Financial Services Conference in June, the demand for skilled and experienced internal auditors remains strong. Internal auditors, it appears, have weathered the storm well and — in some cases — have even thrived.

Many thanks to those of you who attended the Financial Services Conference held at the Renaissance Orlando Resort at SeaWorld. Thanks also to the speakers and presenters for their time, efforts, and great presentations. As expected, the number of attendees was down from previous years, but we did well relative to some other conferences. For those of you who missed the conference, we had outstanding general sessions starting off with author Ed Robinson, who reminded us to keep being “rainmakers” in our industry. We had two outstanding panel discussions regarding the current state of internal auditing and what the future might hold for us. The primary message I took away from those discussions was that internal auditing’s stock continues to rise in our organizations as more and more emphasis is placed on sound governance and controls. Internal auditing needs to be ready to step up to the plate to assist the audit committee in its increasingly important work and, of course, a theme that never seems to go away is that we need to do more with less! Also, internal auditing is going to be subject to much more scrutiny in the future as the audit committee and regulators place increasing reliance on internal auditing’s work as a major component of the governance of the organization. As someone who has been an internal auditor for more years than I care to admit, I couldn’t help but think how far we have come since I started my career in the profession. It’s great to see such progress!

Our conference closed with an entertaining presentation by well-known columnist, TV personality, and financial planner Terry Savage. Terry concentrated her remarks on our personal finances and the effects the recent economic events have had on them. I found Terry’s presentation informational, humorous, and thought-provoking all at the same time.

Stay tuned to FSA Times for information regarding the next Financial Services Conference in 2010. Your Board will be working with The IIA to consider some changes to the conference that have become necessary due to the economics and logistics of organizing an event with increased costs and smaller audiences. I will keep you posted on our deliberations. As always, your feedback and comments are welcomed.

Warm regards,
Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

What an interesting and amazing time to be an internal auditor in the financial services industry! The Bernard Madoff and AIG scandals, the Troubled Asset Relief Program, and the worst economic downturn since the depression continue to plague the news. And just when you think you have heard everything, Manhattan attorney Marc Dreier appears on the scene with an even more brazen scam. At about US $700 million, allegedly, this scandal is not a large as Madoff’s, but it is much more interesting. According to prosecutors, Dreier sold hundreds of millions of dollars’ worth of bogus debt obligations to nearly 40 investment funds run by 13 of the nation’s most sophisticated asset managers. Dreier’s scam has been overshadowed by the Madoff scandal, but there is a lot of information out there if you care to look it up.

If you want to hear more about frauds like these and how to fight them, you will want to check out the 2009 Financial Services Conference, June 1–3, at the Renaissance Sea World Hotel in Orlando, Fla. The Financial Services Board and IIA staff have been working diligently to put together another top-notch program. This year’s conference will feature four learning tracks: critical issues, strategies for success, technology solutions, and auditing resources. The popular coffee talk sessions and roundtables have been scheduled, and you won’t want to miss our great lineup of keynote speakers including CNN, CNBC, PBS, and NBC commentator Terry Savage. We have made an extra effort to recruit internal auditors as speakers for our concurrent sessions this year so that you get to hear directly from your peers. Finally, we have a couple of outstanding panel discussions planned, both centered around the financial industry and the recent events that we have heard so much about and their effects on internal auditing. If you have not received a copy of the conference brochure in the mail, it is available on The IIA’s Web site.

I recognize that these are difficult financial times for everyone, but there has never been a better time to make sure you are up to date on the latest information that you need to do your job. I think you will find that the 2009 Financial Services Conference is well worth the investment. As always, please feel free to contact me or any of the board members with your questions or concerns.

Warm regards,

Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

Just when I thought I had seen and heard everything during the current financial crisis, along comes Bernie Madoff and friends to liven things up. It is almost impossible to pick up a Wall Street Journal from the last few weeks and not read something about Madoff allegedly pulling off the largest Ponzi scheme in history. What amazes me — even more than the number of wealthy investors that were blind followers of Madoff — is the fact that several individuals tried to blow the whistle on him at various times during the last decade and were completely ignored. How many times have you, as an internal auditor, been in that situation? It also appears that the regulators may have missed some signs that the returns Madoff promised investors actually were too good to be true. If you have any thoughts on Madoff, his investors, or those who tried to blow the whistle, I encourage you to share them with other Financial Services members via this blog’s comments section.

The Madoff investigation is still unfolding, as are the latest events in the crisis that has consumed the financial world for several months now. We will have a chance to analyze these issues during The IIA’s annual Financial Services Conference in June. Complete details regarding the conference will be available soon, but I promise that the event will be well worth attending. Included on the agenda will be several chief audit executives and presenters from the regulatory world who will share their insight about the financial crisis. You will also be able to attend sessions on critical issues to financial services auditors, strategies for success, and technology solutions. We also have great general session speakers and panelists lined up, including Michael Marchesani, the chief audit executive of Zurich Insurance, and Terry Savage, a nationally known finance expert, writer, and television commentator. You also won’t want to miss our motivational speaker Ed Robinson at the opening general session. We are going to continue our successful “coffee talk” sessions as well as our Tuesday afternoon roundtables, and our CFSA review course is back by popular demand the day before the conference begins. What better time to add the CFSA credential to your résumé than during the annual conference?

I hope you will plan to attend the 2009 IIA Financial Services Conference June 1–3 at the Renaissance Orlando Resort, across the street from SeaWorld. As always, if you have any questions or comments, please contact me or a member of the Financial Services Advisory Board.

Warm regards,

Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

As I write this, the Dow Jones Industrial Average is at a nine-year low and the collective retirement savings of Americans has shrunk by about US $2 trillion — yes, trillion. My own IRA is about 35 percent lower than its all-time high, which was not that long ago. Like many people, I’m beginning to wonder when I’ll actually be able to retire. What a time to be in the financial services industry! Some of us old-timers can remember the early 1980s with 17 percent interest rates, the crash of October 1987, and the Savings and Loan scandal of the late 1980s and early 1990s, but those events were nothing compared to what’s happening now.

My thoughts are with fellow internal auditors at Washington Mutual, Bear Stearns, Lehman Brothers, Merrill Lynch, Wachovia, and AIG, among others. Luckily for internal auditors, the U.S. Sarbanes-Oxley Act of 2002 and other regulatory requirements have made it somewhat more difficult to cut into our ranks to reduce staff. However, internal auditors in many organizations are no doubt facing some tough times ahead. It’s a good time for all of us to step back and assess our overall performance before someone else does it for us. Whenever the pressure is on — as it is now — in most organizations, management might look for others to blame and places to cut. Sometimes internal auditing gets caught in the crosshairs whether deserving or not. I know from personal experience.

My advice to those in internal audit management positions is to know what’s happening in your organization by building a trusted network of associates in other business lines. Reach out to compliance, risk management, and other risk functions if you haven’t already. Be aware of the warning signs from management that may be an indicator that they are dissatisfied with the way things are going and are looking for scapegoats for negative events happening in the organization (e.g., poor earnings reports, a bad regulators report, unexpected losses, and operational problems). How many times have we heard “Where were the auditors?” Be proactive in discussing internal auditing’s role in any of these events. Make sure you continue to demonstrate your value to your organization and tell others about your successes, as well as looking at areas where you can continue to improve. My point is that in difficult times, internal auditors need to be even more alert and vigilant than usual to head off problems and issues before they arise.

These are extraordinary times, and we should all be prepared for what may happen in our organizations. Perhaps by the time The IIA’s annual Financial Services Conference takes place next June, things will be looking up. Your Financial Services Advisory Board members are working diligently to design a great program for the conference, and there certainly will be a lot more to talk about by then. So please make plans now to be in Orlando, Fla., next June for the conference.

As always, please feel free to contact me or any of the Financial Services Advisory Board members with questions or concerns.

Warm regards,
Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

Welcome to the third quarter issue of FSA Times. This issue’s feature articles include evaluating SAP controls for Sarbanes-Oxley compliance, dealing with employee fraud, and using GAIT for PCI compliance. Topics like these were highlighted at last month’s Financial Services Conference, which also included informative and entertaining general sessions by fraudster Sam E. Antar, former CPA and chief financial officer of Crazy Eddie Inc., Richard St. John, the award-winning success analyst, and Kevin McCabe, executive vice president and chief auditor of Wells Fargo.

If you did not attend the annual conference, you missed an excellent training opportunity. However, plans are in the works to offer some of the most highly rated presentations as part of The IIA’s webinar training. These webinars will be offered for a fee at dates and times to be announced, so please stay tuned. Attending these virtual presentations is a great way to learn about hot industry topics while earning CPE credits.

I also encourage you to spend a few minutes on the Financial Services Auditor Group section of The IIA’s Web site where we offer information on the CFSA examination, a resource center listing Web sites used by financial services auditors, audit programs, and much more. The Financial Services Auditor Group site and FSA Times will continue to evolve as The IIA rolls out its updated communications technology, so please visit often.

Let’s keep our fingers crossed that this economy has bottomed and that we are heading in the right direction. As always, your questions and comments to me or any of the board members are welcomed and appreciated.

Warm regards,
Scott White, CIA, CFSA
Financial Services Advisory Board Chairman

As we move into 2008, the speculation is that the economy will slip into recession fueled by the decline in the housing market. A closely related issue has been the collapse of the sub-prime mortgage market, increasing foreclosures, and tightening credit. An excellent article in the upcoming February 2008 issue of The Internal Auditor discusses the reaction of internal auditors in the banking/mortgage industries and their roles in identifying risks around declining credit standards, introduction of new products, and credit monitoring. Fortunately, for most of the auditors interviewed for the article, it appears that they either worked for very conservative organizations or were pro-active in bringing these issues to management’s attention before they became problems.

Although the article indicates that internal auditors generally have avoided “the blame game” I wonder how many audit groups have suffered in one way or another as a result of the mortgage industry meltdown. In my view, for every audit department that has an impact on their organization helping them to avoid a potentially disastrous situation like this one, there are two or three others that lack the expertise, the resources, the focus, or the status to help their organizations avoid potentially serious problems.  

Usually, this is not the auditors fault. Many audit departments, despite their best efforts, are denied access to information that they need to be able to effectively and efficiently do their jobs. This isn’t a blatant denial of information on management’s part, it’s a game where the auditors do not have the status within the organization to be part of the inner workings of the management group and they are told only what management wants them to know. This situation forces internal auditors into a reactive mode rather than being able to identify and head off problems before they occur. Also, Sarbanes-Oxley has caused some groups to lose their focus since management sees the value of internal audit as control testers rather than risk managers and risk consultants.

How many of you have experienced this and what have you done to overcome lack of access to information or redirection of your focus to other less significant areas?  How do you position yourself to avoid the “blame game” under these circumstances?

Scott White
FSA Board Chairman