A brief look at this week's news insights that impact internal auditors
January 27, 2017
A CFA Institute study examines the trade-offs in non-GAAP financial measures, Western Union admits to having a flawed corporate culture, and a trio of whistleblowers is awarded more than $7 million by the SEC.
CFA Institute Study Examines Non-GAAP Financial Measures
A new report by the CFA Institute, the investor group that offers the Chartered Financial Analyst credential, explores the trade-offs in non-Generally Accepted Accounting Principles financial measures. In the study, the group recommends ways to strengthen the overall reporting framework with the inclusion of non-GAAP financial measures only as a supplement to regular GAAP. The group surveyed financial analysts to get their thoughts on the use of non-GAAP measures, in addition to getting a better sense of what securities regulators need to do to promote discipline around non-GAAP reporting.
Western Union Forfeits $586 Million for Fraud Violations
Global money services business Western Union has agreed to forfeit $586 million for aiding in scams. The Department of Justice says the company’s own agents processed payments for swindlers and benefitted by getting a share of the proceeds. In the agreement made with the Justice Department, the company admitted to the criminal activity, “including willfully failing to maintain an effective anti-money laundering (AML) program and aiding and abetting wire fraud,” according to a DOJ release. U.S. Attorney Wilfredo Ferrer said Western Union has admitted to having a flawed corporate culture that failed to provide checks and balances.
Accountants Unite in Response to Cyber Rules for Banks
The proposed new federal cybersecurity rules are facing pushback from organizations representing accounts and auditors. The Center for Audit Quality, Institute of Internal Auditors, and the Association of International Certified Professional Accountants have all submitted public comments on the planned rulemaking spearheaded by three of the top U.S. financial services’ regulators. The Board of Governors of the Federal Reserve System, Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation jointly issued an advanced notice of proposed rulemaking, and asked for industry input on a plan surrounding the implementation of cybersecurity risk management requirements on the nation’s largest financial institutions.
AICPA CEO Expecting Major Tax Reform Legislation
The American Institute of CPAs CEO Barry Melancon is anticipating the Trump administration to pass major tax reforms. Melancon shared his predictions on the issue Tuesday in New York during an Accountants Club of America meeting, believing enough Democrats would help Republican lawmakers enact the changes. By leveraging the budget reconciliation process, he believes Democrats will provide the needed support to ultimately enact long overdue reforms.“There are some pretty interesting provisions that are being debated, and I think they will have huge ramifications to anybody that’s in the planning area and the tax area,” he said.
SEC Awards $7 Million to Whistleblowers
Three whistleblowers who helped the SEC prosecute an investment scheme have been awarded more than $7 million by the regulator. One whistleblower will receive more than $4 million for providing the agency with information that led to the start of the investigation, while the other two jointly shared new information with the SEC that contributed to the investigation’s success. They will split more than $3 million, according to a SEC release. Since the whistleblower program began, the SEC has awarded nearly $150 million to 41 individuals who have shared information that have resulted in financial remedies.
Internal Audit Sheds Light on Corruption Within Philippine's Transportation Regulator
An internal audit investigation within the Land Transportation Franchising and Regulatory Board, the Philippine transportation watchdog, has resulted in more than 50 employees leaving their posts. A total of 8 regional directors and 53 employees of the agency across the country have either resigned, retired, or were suspended following the internal audit according to ABS-CBS News. LTFRB board member Atty. Aileen Lizada alleges that the regional directors conducted fraudulent activity that resulted in a slew of unauthorized franchises issued to bus and taxi operators. “We had to do internal cleansing of the LTFRB,” Lizada said.
How Internal Auditors Can Spot Potentially Fraudulent Shell Companies
Within a company’s accounts payable file, shell companies are being used to steal millions of dollars from companies or to conceal bribery payments which violate anti-bribery and corruption laws. In this how-to Internal Audit Insights article, MISTI instructor Leonard Vona, who specializes in fraud and FCPA compliance seminars, shares his methodology for using data analytics and other techniques to detect shell companies. From discovering red flags to highlighting his fraud data analytics strategy, Vona pinpoints what internal auditors should be focused on as it relates to compiling intelligence on shell companies.