My first day on the job turned out to be quite eventful. Just how eventful – pivotal even – unfolded over time. I was a rookie auditor at a client doing an audit test that wasn’t working out. Did I misunderstand the test or is there a problem here? I wasn’t quite sure. I did my job by completing my work, documenting lengthy client explanations and submitting it to my supervisor.
By day’s end, I had to explain my work to my supervisor, his manager and two partners. Afterwards, they instructed me to stay in the office rather than go to the client the next day. Several days passed, and I learned that I would not be returning to this client – ever. Ugh … bad start to a career.
There was a lot of activity in the office surrounding this client, but I was in the dark and dreading the consequences of whatever I had discovered. Finally, on day four, my supervisor called me into his office where he closed the door before he started to speak. He said that he was probably going to lose his job and his manager might too. You see, I had found fraud at this long standing client, and heads were on the block. Why wasn’t it discovered previously? The firm had completed the same audit test for years, however, in my inexperience, I had misinterpreted the audit procedures and asked for information that had not been requested before. When the audit test didn’t work out and the client was pressed for details, the explanation revealed the fraud.
Having found fraud where no one had found it before, I could have been considered the star rookie auditor of the year, but that was not the reaction I received from my colleagues. Instead, I was associated with causing a huge office upheaval that resulted in firings and significant cost.
What lesson did I learn? At the time, I wasn’t clear, but I sure hoped I never found fraud again. Then I did.
A few more years into my career after working my way up to manager, I started to detect a whiff of fraud from another long standing client. There were important gaps in documentation, like minutes and contracts. The client was just “slow” to get them to us. Why was it taking so long?
I was feeling the heat of the budget and deadlines for this audit. Just wrap it up was my boss’s message –loud and clear. These documents probably weren’t that important anyway, right? Do I just sign off on audit steps indicating completion? Do we sign off now and follow-up later? As I pushed for documents I started to notice that the language in the documents produced by the client bore an uncanny resemblance to the language used in my request. Were these papers being typed up in the back room? I started to question the integrity of the client.
Now what? Do I share these concerns with my boss? After all, this was a long time client and the relationship with my firm was well cemented. Questioning the integrity of management has grave consequences in the audit world.
What would you do? I can tell you that it was not an easy decision for me.
I raised my concerns with the engagement partner and he disagreed with me. Another partner was brought in who agreed with him. In the end, a clean audit opinion was issued with my dissent in the work papers. I knew my career at this firm was probably limited now, but I couldn’t ignore the red flags, my experience or my gut instincts.
Several months later, the partner came to me to say that our work papers were being subpoenaed because there was a problem after all. Shortly, thereafter the client filed bankruptcy. The work papers held up in court. Boy was I glad I stood my ground.
All of this occurred well before the Enron scandal, Sarbanes-Oxley and the financial meltdown. I have long since left the audit industry, but the lessons learned about doing your job to the best of your abilities, staying rooted in the facts, trusting your experience, standing firm in the face of authority and doing what’s right are always with me.
Sheila P Padden CPA/PFS, CFP®, ‘78
Owner, Padden Financial Planning LLC
Where Do You Stand?
Originally published in myNotreDame.
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