A is for Audit

Copyright © 2018 by Barney Rosenberg
President, Ethics Line, LLC™

This is as good a place as any to begin our scan of the ethics alphabet.  Audit and awareness.  Unless we look closely at the impact of our ethics programs, policies and procedures, we are flying blind.

There are two basic kinds of audit: internal and external.  Think about how your organization approaches each one.

A global company I know very well has a robust set of policies and procedures for its domestic and international operations.  High on the list of ethics priorities is how they manage the shark-infested waters of international intermediaries – sales representatives and distributors.  They can’t be everywhere so why not get some sales help with the selection and management of intermediaries?  Key is to understand the law in the foreign jurisdiction and the corruption risk in that territory.  Document the full terms and conditions of the written agreement.  Make sure you can disengage when necessary.  I wrote the policies for that company.  It’s a challenge, as you know.  Some agreements had been in place for 20 years and no one had looked at them since they were executed!

We developed a robust audit protocol to make sure each business understood the serious risks before proceeding; that they documented each step in the process; that they engaged in a cross-functional, step-by-step cautious approach; and that the Legal team was involved along the way.  Checklists were designed and used.  Senior level review was a must.  And performance by the intermediary was carefully considered before renewal.  Keep in mind that in some jurisdictions you must pay substantial fees to disengage from an intermediary.  You may quote me on this:  “Team in haste and repent in leisure!”

We engaged outside legal to audit our businesses.  Together, we sent surveys to local company leaders, testing their Awareness of the company’s policies and procedures.  Those surveys were the basis for on-site interviews and helped form a picture of the audit report.  All elements of the report require follow up to completion.  And internal audit helps with the follow-up.  Good teamwork all around.

Someone in your organization will ask the obvious question.  Outside counsel are so expensive and their hourly rates are through the roof.  Can’t we do this ourselves?  The answer is you can.  You shouldn’t because the outside expertise gives you a measure of insulation when the regulators/prosecutors come knocking.  It’s not an insurance policy but it can’t hurt and it can be a big help.  I started my career as a white-collar criminal defense lawyer/barrister.  Here’s a little secret:  most law firms will work with you on the fees.  They will negotiate fixed rates for discreet projects. And the deals can be even better if you can commit to repeat business for their firm.

In one case, the intermediary was found to be forging company invoices in order to pass on costs to the country national customer!  The aftermath was not pretty.  One thing is certain, they never worked on behalf of the company again!

Where will you draw the line?


  1. Thank you for your post about auditing. Over the years I have been very open and the super majority of folks agree that of the activities that are undertaken to promote an effective compliance program (ECP)…auditing may be the one that is the weakest of them all…if it exists on any significant level at all.

    From a compare and contrast perspective, I share a different view when it comes to doing audits internally versus exercising the use of an external option. However, that’s a point I am happy to concede if it means that there is ANY auditing going on.

    Many thanks for your posting and your sharing of your views and comments!

    • Thanks Frank. The cost of audit may be high. The cost of fail to audit adequately can be astronomical!

  2. Great post on such an important topic! I look forward to reading the rest of the Ethics Alphabet series.

  3. Thanks Lucas. It helps me a lot in my researches about efective compliance programs in Brazil.

Comments are closed.