Why Do We Need Auditors?

The need for auditors may be the same reason as to why we need law enforcement.  We need auditors to police the activities of business!

It appears that if people have the opportunity to prosper from illegal activities, they will.  It doesn't matter who they are cheating.  You hear about white collar crimes constantly.  "White-collar criminals are opportunists, who over time learn they can take advantage of their circumstances to accumulate financial gain."  Just recently a "white collar student-in-training,” was arrested for getting paid to take the SAT  for high school students.  A fellow student eventually informed officials and confirmed the report with an analysis of the handwriting on the exam; an arrest was made.

You would think that by now procedures would be in place that would entail two picture ID’s.  When I sat for the exam we were required to bring one picture ID- which was never even checked by the proctors.  Once again, you have policies to deter fraudulent behavior, but they are not being followed.  We need constant review and policing of company policies; we need to detect that procedures are followed.  How was one student able to sit for the exam of several other students? Doesn't CollegeBoard realize that this undermines ttheir reputation?

How about the recent activity from the New York City Department of Education?  The DOE was paying out an average of $13 million a year on a contract that was supposed to be about $3.6 million.  After an investigation, it showed that a high level employee of the DOE was romantically involved with the owner of the company they were paying.  Again, what procedures were in place that would detect over-budget disbursements at this level?  Who was responsible for monitoring and enforcing the procedures?  Why it was not detected sooner?

What about Medicare fraud- how many cases do we hear about that each year?  Last year, in Miami two companies were set up to provide mental health services.  These services were unnecessary or never provided.  The companies were set up for the purpose of scheming to bill the Medicare system.   The fraud operation netted about $83 million. The investigation showed that fake symptoms were documented, physician signatures were forged and treatments were never given. Employees who suspected fraudulent activities were terminated if they did not cooperate.  Obviously, if they needed the job they just cooperated.  What about the procedures and policies in the Medicare system?   Were their policies followed?  There needs to be a system in place that can detect bogus claims and those procedures need to be enforced.  There needs to be reports and reviews on the adherence of these procedures.

I can go on and on about exposure of illegal activity, but how many fraudulent schemes go on undetected? Obviously, recommendations for the necessary controls to keep a company operating efficiently and deterring fraudulent activities are time consuming and costly.  All businesses including governmental agencies need to know the importance of detecting non-compliance and enforcing the controls.  Governmental agencies,  have an obligation to the taxpayers and  they need to be held accountable.  Governmental Audits are a necessity and not a waste of our tax dollars.  Effective audits actually can save millions of dollars.  We need auditors just like we need any other law enforcement agency!