The importance of reporting and monitoring the results of internal audits is illustrated by this cautionary tale.
On October 25, 2012, the day Apple planned to report its third-quarter results, David Miller, a Rochdale Securities trader, made an unauthorized purchase of around 1.625 million shares of Apple in the hope of making a profit if Apple's share price rose.
But Miller had falsely told Rochdale that the trade was being made for a customer that had in fact ordered just 1,625 shares. When Miller’s bet backfired, Rochdale was responsible for losses of $5.3 million on the extra 1,623,375 shares that he had purchased, which left Rochdale Securities undercapitalized.
Perhaps a greater rigor in both reporting the results of internal audits and monitoring the corrective actions recommended by internal auditors would have helped Rochdale Securities to reduce the risks posed by the actions of an employee such as David Miller.
Obviously, Rochdale’s internal controls were weak, or perhaps the internal audit report was not taken seriously. It is also possible that nobody reacted to the audit findings and proposed monitoring of internal audit results. If Rochdale considered all of these, it could have prevented this incident from happening.
The lack of internal audit reports can lead to numerous deviations in an organization’s business operations or even fraud. High-quality internal audit reporting and results monitoring can minimize an organization’s risk and maximize its success.
It is important to conduct a quality reporting process from the beginning to the end. The internal auditor should know how to write and present the final internal audit report. Various types of reports can help the organization detect any fraudulent schemes or deviations within their operations in a timely manner. After the distribution of a report, it is necessary to monitor whether the actions based on the auditors’ opinions and recommendations are being taken.
Does your internal audit department produce all the necessary reports? Do your internal auditors know how to properly write and present internal audit reports? The Accenture Academy course Reporting Internal Audit Results
details the reporting process, different report types, report components, and monitoring based on internal audit results. This information will give you all the needed skills for quality internal audit reporting.
Stempel, Jonathan. “Trader Admits Fraud in $1 Billion Apple Stock Scheme.” Reuters. April 15, 2013. www.reuters.com
(accessed October 3, 2013).