Topics:   Business Ethics,Corporate Governance,Director Education,Risk Management

Topics:   Business Ethics,Corporate Governance,Director Education,Risk Management

October 4, 2012

Skepticism Lessons Learned

October 4, 2012

I’ve always been a trusting soul. One of my earliest lessons involved me diligently removing debris from a stream for someone in exchange for the official deed to the stream. The problem was, he didn’t own it.

I did not possess the skill of skepticism—defined in Audit Standard (AU) 316 as “an attitude that includes a questioning mind and a critical assessment of … evidence.” If I had, I would have observed that the shiny gold seal I was given was the kind you can buy at Woolworth’s 5 &10, and that the stream ran not only behind the deedor’s property but contiguous ones as well.

Yet there’s hope for us all. On October 1, NACD launched a unique new webinar series on Skepticism as part of an ongoing Anti-Fraud Collaboration with the Center for Audit Quality (CAQ), Financial Executives International (FEI), and The Institute for Internal Auditors (IIA). Along with many at NACD, I was involved in this exciting project, and had a chance to review the upcoming episodes.

“Skepticism” relates to a search for the truth. The term comes from the Greek skeptikos used some 2,300 years ago by disciples of the philosopher Pyrrhos. The verb skeptesthai means “to reflect, look, view.” The earliest self-declared skeptics emphasized the importance of the senses in confirming reality. Over time, the word’s meaning expanded to include the notion of reasonable doubt. Today, the “skeptic” is perceived as a doubter—someone who may trust, but must always verify.

It’s an attitude we all need. And perhaps no one knows this better than series moderator Michele J. Hooper, president and CEO of The Directors’ Council, and board member of NACD and CAQ’s governing board. Through questions and comments based on her considerable experience on a variety of public company boards she brings out the best in the six-part series, outlined as follows:

  1. A brief introduction.
  2. The Etiquette and Ethics of Skepticism with Mary M. Mitchell, president, The Mitchell Group, and Bill White, professor at Northwestern University and experienced director.
  3. Professional Skepticism and the External Auditor with Cindy Fornelli, executive director, CAQ; and Greg Weaver, CEO and chairman, Deloitte & Touche.
  4. Skepticism and the Audit Committee with Marty Coyne, lead director and audit committee member, Akamai Technologies; and Ken Daly, president and CEO, NACD.
  5. Skepticism and the Financial Executive with Marie Hollein, president and CEO, FEI; and Greg Kabureck, chief accounting officer, Xerox Corporation.
  6. Skepticism and the Internal Auditor with Richard Chambers, president and CEO, The IIA; and Paul Sobel, vice president and chief audit executive, Georgia Pacific.

In addition to these webinars, NACD will release a white paper with in-depth background and additional resources on skepticism in December.

Why skepticism? It’s a great way to break the fraud triangle—composed of incentive, opportunity, and rationalization—which can cost businesses so dearly. Financial reporting fraud, the focus of this series, is responsible for a significant percentage of the $3.5 trillion that businesses lose to fraud every year, according to a recent study by the Association for Certified Fraud Examiners.

The value of the labor I devoted to cleaning out that stream for a fake deed may not be worth much in dollars, but whenever trust is violated the cost is too high.

Fraud is unfortunately a fact of life; therefore skepticism is a skill we all need.

Comments

Alexandra LajouxOctober 22, 2012

We have extended the survey by 10 days – to October 26. Please give us your views by clicking on the link above.

Alex LajouxOctober 22, 2012

We have extended the survey by 10 days – to October 26. Please give us your views by clicking on the link above.

Alex LajouxOctober 22, 2012

We have extended the survey by 10 days – to October 26. Please give us your views.
http://iiasurvey.theiia.org/flashsurvey/se.ashx?s=0B87D78414CB4F7A

Alex LajouxOctober 04, 2012

October 3, 2012
Hi Friends! Forgot to mention….the four organizations in the Anti-Fraud Collaboration are seeking to identify ***expectation gaps*** among internal and external auditors, executive management, and board members as to their respective duties and efforts in this regard.
Your feedback through this survey will enhance our understanding of those expectation gaps, if any, and will serve as a platform to generate ideas to close those gaps. The results of this survey will serve as input to a whitepaper scheduled for release in the first quarter of 2013.
The following survey will take between five and 10 minutes to complete and closes Tuesday, Oct. 16.
Closing the Expectation Gap in Deterring and Detecting Financial Statement Fraud Survey:
http://iiasurvey.theiia.org/flashsurvey/se.ashx?s=0B87D78414CB4F7A