Trust, but Verify (from an independent source)

Auditors love the quote “Trust, but verify” from former US President Ronald Reagan. Unfortunately, we sometimes put too much trust in the people we audit. In 2020, the Wirecard fraud came to light, in which a company had falsified $1 billion in cash. A simple verification test with the bank supposedly holding the funds would have caught the fraud years earlier. The auditors put too much trust in their company contacts who provided falsified bank statements.

As auditors, we should display objectivity, but few of us can describe what this means. Why is it so difficult? We have too much trust in our coworkers. As internal auditors, we are supposed to be independent and yet still part of an organization. We ride the elevators, have lunch, and volunteer in the community together. Surely you can trust Pam from Accounting, you were just at her birthday party in the 17th floor break room. The fact that we all work together is a constant strain on our objectivity.  

Remember the lesson from Wirecard as you go into your next audit. Question the source of the supporting documentation the auditee provided, and if possible, get outside verification. Maybe show a little more skepticism.