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What can internal audit learn from the Fifa scandal?

16 / 06 / 2015
What can internal audit learn from the Fifa...Shockwaves were sent through the world of professional sport in recent weeks when several high-ranking members of Fifa were arrested for what the US Department of Justice described as "rampant, systemic and deep-rooted" corruption.

The charges, which date back two decades, include allegations of alleged bribery and racketeering involving some of the most powerful figures in world football. As FBI director James Comey said: "If you touch our shores with your corrupt enterprise, whether that is through meetings or through using our world-class financial system, you will be held accountable for that corruption."

With Swiss officials subsequently announcing their own investigation into alleged Fifa misdeeds, it appears the organisation's troubles are far from over.

The incident highlights the importance of a strong and effective internal audit team when it comes to stamping down on such corruption and deterring fraudulent activity. But it also teaches a number of lessons that members of the profession would do well to heed.

For instance, it demonstrates how internal audit has a significant role to play in crisis planning and execution - and there is little doubt that the current issues affecting Fifa qualify as a full-blown crisis. It is simply not enough for auditors to assess the effectiveness of crisis plans after the events have played out; they must offer insight on the development of these plans and give feedback even as the crisis unfolds. Risks to reputation and other factors posed by a crisis can be mitigated - at least to some extent - through effective communication protocols, but properly executing plans is also vital to minimising the potential impact.

Fifa's current strife also highlights the necessity of internal audit keeping abreast of changes in anti-corruption legislation. While the strength of the US Foreign Corrupt Practices Act played a major role in the recent arrests, auditors must also recognise the growing effort from countries around the world to clamp down on corruption - particularly if they work for multinational organisations. Failure to remain up to date with the latest legislation could develop into risks for a business operating across multiple international markets.

Once they have identified a risk, internal audit teams must act swiftly to address it. In the case of Fifa, arguably the biggest risk is the significant damage to the organisation's reputation. Numerous media reports refer to long-held suspicions of the body's corruption, yet it appears that little was done to address these issues or dampen the flames. The risk to reputation should have been flagged up to management and directors as soon as possible so measures could be taken to mitigate it.

Perhaps most importantly, the crisis demonstrates that auditors must have the confidence and courage to effectively deal with corruption or other allegations, no matter how sensitive they may be. One of the key qualities any head of audit must possess is the strength of character to take the necessary actions, whatever the consequences and whoever the people involved.

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