(PHOTO: Commonwealth Bank Branch office, by Maksym Kozlenko, used under CC BY-SA 4.0, Wikimedia Commons)
Still reeling from a series of scandals and failures, Australian internal auditors are demanding some changes that would give them more power to obtain information and more independence from management.
According to a report in the Australia Financial Review, internal auditors, “want the same power to obtain information as external auditors, and a guaranteed reporting line to the head of audit committees, after claims they have lost their authority in large corporations.”
The demands were made by the Australian chapter of the Institute of Internal Auditors to the country’s Banking Royal Commission. According to the report, the Institute recommended to the Commission that internal auditors be given the same legal power to obtain information as external auditors have under Australia’s Corporations Act. It has also recommended that the standing of internal auditors should be increased, and that some access to, and oversight by, the audit committee is provided to increase independence from management.
Audit Findings Ignored
The recommendations come in the wake of an investigation by Australian regulators into multiple failures at Commonwealth Bank of Australia and other banks. Regulators found that problems and weaknesses were routinely identified by internal audit, but often went ignored. On some occasions, according to the investigation, audit findings may have been diluted or changed. Commonwealth Bank is still working to get past a money laundering scandal, allegations that it improperly changed fees to customers, and other accusations of wrongdoing.
It also follows some allegations that internal auditor recommendations in Australia went routinely ignored or changed. In May, Elizabeth Johnstone, the chairman of the ASX Corporate Governance Council in Australia, had a frank message for internal auditors: stop being intimidated by company executives and board members. She said that internal auditors had lost their authority within large corporations, were too timid to “speak truth to power,” and too readily intimidated into watering down their own audit reports.
In many ways, the demands to the Banking Royal Commission are the profession’s response to that message. 