Who's to blame?(LETTERS)(Letter to the editor)

I'd like to share two observations about internal auditing from inside the mortgage crisis after reading Tom Palczewski's article, "A Collective Failure" ("In My Opinion," June 2009). I was an internal auditor for a small bank that failed due to massive mortgage losses. First, management does not have to agree with auditing's risk assessment, or make any recommended policy or procedure changes. After all, it is their business to run, not ours. Bank management replied with "we accept these risks" and "this is the industry standard" to our questioning. At that point, we had to agree to disagree. Second, smaller audit shops tend to rely on generalists rather than specialists. When I was in a large bank, we had audit specialists for all of the bank's major functions so we could add tremendous value to those areas. In the smaller audit shop, we had to rely on our overall banking knowledge and good old-fashioned internal audit knowledge of internal control processes to do our jobs. I'm sure many banks did not have mortgage loan experts in the audit department that could have had intelligent dialogue with management about the risks pertaining to industry practices. The larger institutions should have had those specialists in the audit department, so what's their excuse?

I don't think it's fair to place sweeping blame on internal auditing for management's failures, especially when we don't know what went on between internal auditing and management at each institution.

TODD NORRIS, CIA

Internal Auditor

Altier Credit Union

Tempe, Ariz.

todd.norris@altiercu.org

Tom Palczewszki's article, "A Collective Failure," is thought-provoking; however, it failed to comment on the history of failures of both internal and external auditors over recent decades. From the inception of The IIA to the present, we have failed to learn from past events and appear collectively to have abandoned our responsibilities to shareholders in the private sector and to taxpayers in the public sector. If we took our responsibilities seriously, we would have detected the problems and "blown the whistle" on many more that to date have not seen the light of day, and probably never will unless we dramatically change our philosophy and rewrite our standards.

The IIA needs to seek input from members and explore how we can elevate our profession's credibility. Palczewszki's closing paragraph alludes to such an approach by suggesting we "step up to the plate" and determine what went wrong. After that, we need solutions.

MICHAEL PONGRAY, CIA, CD

Vice President

White Knight Champions Inc.

Ottawa, Ontario

wkci@rogers.com

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