Conflict of interest 2945

  • I just discovered that one of our internal auditors is romantically involved with some one in the accounting department of one of our business units. The person involved in the relationship with the auditor has direct responsibility for SOX controls. What should I do? I don’t know if the external auditors know about this relationship. The external auditors place high reliance on the work of the internal audit department.

  • Hi and welcome to the forums 🙂
    I don’t believe there is anything in the SOX guidelines that would prohibit a situation issue like this. As long as there are no documented issues of collusion or wrong doing, I don’t believe the company has a strong position in this area.
    I remember many years ago, companies had guidelines prohibiting professionals in key positions in the same companies from being married. This has changed and become more acceptable in many larger companies. Also, family members (e.g., brothers/sisters, father/son, etc) may commonly work together in business.
    Many professionals are able to separate work and home life effectively (but certainly there can be issues or increased potential risks). For example, if the one spouse must approve or disapprove of the work of another, would they treat that person the same way they would any other employee?
    A good control for this situation is to ensure that both individuals function in a capacity where they don’t have approve work. They should not have a management/employee relationship in the same group . With one being in Accounting and the other being in Internal Audit, this control may be somewhat in place. Still, it’s a better design to ensure that married individuals don’t have the potential to impact functional business controls as well (e.g., if both are heavily involved in SOX controls).
    As for folks who are dating or unmarried, I’m not certain a company has governace in this area? In fact, there may be legal issues if a situation like this is not handled carefully. The key point I wanted to share is that there are no strict SOX related language related to this.

  • Going forward, this particular internal auditor could simply be assigned to other audits outside of this person’s business unit. If your company is like most, the internal audit department does plenty of other work in addition to SOX audits.

  • Hi all
    is that enough Harrywaldron??
    i mean to just separate the approval position and function position?
    don’t forget that the most issue within familiar company of employees with personal relationship is just a trust. sometimes, an internal auditor may just don’t notify some deficiency just because he ’ know’ x and trust him/her to think that such deficiency is just forget or too much overloaded so didn’t be aware of it
    don’t you think so ??

  • I agree with the additional comments by both Selena and NC Sox …
    My original comments were more related to what someone could legally do in situations described in original post. Certainly, reassigning these individuals into non-related tasks is always a good safeguard.
    However, I’ve also seen these types of situations in the past (e.g., not with SOX). If both performed in a highly professional manner and kept non-work related dating interests outside the office, there’s nothing in SOX laws that I know of preventing this.
    If both wanted to maintain privacy and this wasn’t handled well, issues outside of SOX could surface as well (e.g., law suit)

  • Hello there,
    Most auditors will perform an ‘integrated’ audit to consider the controls for financial statement reporting purposes and those for SOX. As part of discussions with the auditor keep this in mind to ensure the audit strategy is as efficient as possible. This helps the auditor and you, since a good approach cuts down on testing time and your own efforts. external auditors’ bill base on number of hours. It’s possible that the external auditors would go on to rely a lot of the work of internal auditors (based on past experience) thereby not spend as much time on testing some procedures. This adds to efficiency and company might end up saving some USDUSDUSD.

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