Whistleblowing and Internal Audit Awareness

Posted by Amanda Nieweler

on May 8, 2015

It’s International Internal Audit Awareness Month

Recently we wrote about how internal audit and whistleblowing should be in a mutual relationship. Yes, because compliance and audit professionals are becoming tipsters.

With the SEC awarding an ‘audit and compliance’ whistleblower more than $300,000 for reporting wrongdoing after the company failed to take action when the wrongdoing was reported internally, these individuals may now be eligible for an SEC whistleblower award if their companies fail to take appropriate, timely action on information they first reported internally.

In short: if an employee is in internal audit and internally reports on wrongdoing that gets swept under the rug, they can report to the SEC and get an award. Along with that award comes fines for the company!

The SEC states that compliance or internal audit professionals should report internally first and then wait 120 days before going external. One hundred and twenty days is quite a long time for a company to take note of an internal complaint and investigate it… or ignore it. illustration text international internal audit awareness month

Here’s some statistics about financial professionals I found here that I thought were interesting:

  • 23% have seen misconduct firsthand
  • 29% believe they may have to engage in illegal or unethical conduct to be successful
  • 24% would engage in insider trading if they could earn $10 million and get away with it

Wow, that’s sobering don’t you think? Also from the same source was a list of whistleblower awards:

  • $875,000 to two individuals for “tips and assistance” relating to fraud in the securities market
  • $400,000 to a whistleblower who reported fraud to the SEC after the employee’s company failed to address internally certain securities law violations
  • $300,000 to an employee who reported wrongdoing to the SEC after the company failed to take action when the employee reported it internally first

Management and boards should be looking at their internal compliance programs and ensure that their reporting mechanisms allow for reports from outside counsel and auditors, as well as all other employees.

Confidential Reporting and Internal Investigation:
It’s more than just installing a hotline. Anonymous reporting should be in place for employees to report allegations of fraud, corruption or securities violations. It is just as important what a company does after an allegation is made. Once an allegation is made, organizations should have an efficient, reliable, and properly funded process in place for investigating allegations and documenting responses, including disciplinary or remediation measures taken.

How strong is your compliance program? Will it buckle under pressure? There’s no one-size-fits-all compliance program. Depending on a variety of factors such as size, type of business, industry and risk profile, an organization should determine what is appropriate for its own needs regarding compliance program best practices.

It might be international internal audit awareness month, but it doesn’t stop there – it’s also awareness of compliance programs, fraud prevention, securities violations, internal controls, etc. It’s just another reason to implement an ethics reporting system, and why internal audit should be promoting it to their organizations. Here are a few more reasons – get the free eBook now. Stop wrongdoing from getting out of hand.

eBook: 7 Reasons to Implement a Whistleblower Hotline