Why Auditors Need to be Audited

It is deeply disturbing when those we rely upon to be watchdogs for the rest of us succumb to lying and corruption. It’s even worse when we need them to police our finances—something that too often seems arcane and impenetrable by the average person and requires the expertise only a trained professional can provide.

Wednesday,  the New York Times reported that accounting giant KPMG had fired six employees, including its head of audit practice in the U.S., for getting tipped off about audit inspections. This inappropriate warning gave the accountants time to polish the portion that they learned would be inspected until it was free of errors. According to an editorial in the New York Times, KPMG had failed at earlier inspections. Its 2014 deficiency rate was 54 percent and its 2015 rate was 38 percent. Perhaps the firm had reason to be afraid.  

The organization seems to have handled things properly. KPMG had been tipped off by a whistleblower and had engaged an outside law firm to investigate, then took firm and appropriate action—a series of events that I commend. However, good practices when dealing with a whistleblower doesn’t get KPMG off the hook.

The company has long been under scrutiny for giving the scandal-ridden Wells Fargo and the deeply troubled world governing body for soccer, FIFA, clean bills of health. Whenever I see a company’s employees act out in egregious ways, such as I described yesterday about United, or in my previous coverage of Wells Fargo, I have to wonder what is going on at the top and how bad things are for employees. I can’t state too strongly that people who are employed in psychologically healthy, safe and fair workplaces aren’t given to appalling behavior.

When the head of audits for the entire country is part of this conspiracy, I also have to wonder if he went rogue or if he was just passing on the unethical behaviors of his superiors—or of the industry in general. There have been warnings. Last year U.S. Sen. Elizabeth Warren (D-MA) sent a powerful letter to KPMG bluntly calling into question the quality of their audits of Wells Fargo. If our auditors aren’t minding the store, what are they up to?

In this disinformation era, we need solid accounting—both figurative and literal—to keep us on track. Numbers are in too many cases that only metric we have to measure performance in business. Auditors are supposed to be on the lookout for errors, not facilitating mendacity. It’s true at any time, but particularly now during the Trump administration that auditors need to be audited. Given the role they play in our capitalist system, not doing so could have dire consequences.

Photo credit: Reuters/Mike Blake

A License to Exploit

The Trump administration seems to be taking a page out of the illusionist’s handbook as the president sends outrageous middle-of-the-night tweets about his predecessor to distract us from dismantling protections for American workers. The latest don’t-blink-or-you’ll-miss-it tactic was Congress lifting President Barack Obama’s executive order called the Fair Play and Safe Workplaces rule that kept companies with poor safety records from competing for government contracts if they didn’t agree to fix their problems first. This may seem like a sane provision to ensure the kind of psychologically healthy, safe and fair workplaces I wrote about in From Bully to Bull’s-Eye: Move Your Organization Out of the Line of Fire. However, most Republicans in Congress didn’t agree—the executive order was overturned 49 to 48. It seems fairly certain that Trump will sign the repeal.

It’s additionally unsettling that Congress used the rarely invoked 1996 Congressional Review Act to eliminate it, meaning that it can be revoked with a simple majority vote and can’t be reinstated by executive order by another president—to be reinstated it would have to be passed by Congress as a law.

There’s no doubt why the Fair Play and Safe Workplaces rule was necessary. According to a staff report from the office of Sen. Elizabeth Warren (D-MA), 66 of the government’s 100 largest contractors have violated federal wage and hour laws. In addition, a third of the largest OSHA penalties have been imposed on federal contractors. This affects a huge number of employees: The Washington Post estimates that companies with federal contracts employ 1 in 5 American workers. Clearly by fulfilling the wish list of private interests Congress has granted an open license to exploit working Americans—the very people Trump promised to champion while on the campaign trail.

And all of this is being done at breakneck speed and deflected by sleight of hand. What’s the rush? I suspect Trump and the Republicans are hurrying to fulfill their agenda before the American people rise up and put them out of power. We can only hope that happens before truly serious damage is done.

Photo credit: BIGSTOCK