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PARTNERSHIPS FOR THE FUTURE
and the United Nations to pursue its agenda for anticorruption legislation.11
The idea of partnering may, even at its most basic level, be seen as a cost-effective way of improving the effectiveness of the forensic function within the organization. Carpenter and Mahoney have addressed this issue in an article on organizational fraud when they recount their understanding of the results of the Institute of Management and Administration/Institute of Internal Auditors 1999 Business Fraud Survey:
[I]improvement in communications would tend to make organizations more proactive in their fraud detection efforts. This need to move toward a more proactive stance is consistent with the general observations of the respondents who cited a reactive mode of response to fraud detection. Sixty percent of the respondents characterize their departments’ fraud risk analysis as being reactive in nature.12
Larry E. Rittenberg, the Ernst & Young Professor of Accounting at the University of Wisconsin—Madison and the President of the Institute of Internal Auditors Research Foundation, has also offered some guidelines for better partnerships between internal auditors and their most natural (if not always frequent) partner, the audit committee:13
• Lesson 1—Corporate governance is important.
• Lesson 2—Reporting structure does matter.
• Lesson 3—Accounting issues and controls are important.
• Lesson 4—Risk is the dominant framework for internal audit work.
• Lesson 5—The audit committee needs an effective information system.
• Lesson 6—Auditors Must Understand The Business.... What is the company’s business? Answers to that question will significantly affect both revenue recognition and risks.
• Lesson 7—Auditors can assist in educating board and audit committee members.
• Lesson 8—Related party transactions and complex financial instruments present substantial risks.
• Lesson 9—Reporting is a process, not an event.
• Lesson 10—Commit to continuous improvement.
Were we to substitute the term forensic professional for auditor in the previous list, I believe we would see, as we did with Campbell, some suggestions for activities that are more likely to broaden our partnership opportunities and otherwise improve our organizational effectiveness.
Diane Sears Campbell, in discussing the new threats forms of cyberfraud represent to the organization, counsels the need for internal auditors to form partnership alliances with information technology professionals if truly effective controls are to be developed in these areas. To do this effectively, however, she warns that fears about compromise of audit independence will have to be set aside.14 Partnerships, like marriages, carry an element of risk as well as reward. One can be judicious in limiting the amount of risk, but some element of it will always be present.
While they are separated by a fair amount of the alphabet, advertising and partnerships are, in many ways, quite close. Authors Brandenburger and Nalebuff provide a sense of this reciprocity when they discuss the merits of complements —finding firms or entities that are complementary to an organization’s objectives or interests. Referring to the automobile industry at the beginning of the century, they observe:
Having built a better mousetrap, the fledging auto industry didn’t leave it to others.... While it couldn’t pave all the roads itself, it got many started. In 1913 General Motors, Hudson, Packard, and Willys-Overland, together with Goodyear tires and Prest-O-Lite headlights, set up the Lincoln Highway Association.... The association built “seedling miles” along the proposed transcontinental route. People saw the feasibility and value of paved roads and lobbied the government to fill in the gaps....by 1922 the first five transcontinental highways, including the Lincoln, had been completed.15
Likewise, they note, the Michelin company got into the tour guide and restaurant rating business, often pointing out the scenic beauty to be enjoyed on less-than-direct routes. In so doing, they sought to make the trip, and not just the destination, part of the fun. And, being in the tire business, longer trips meant people buying more tires.16
They also comment on the phenomenon of grouped stores. In New York City, for example, it is common to see many competing firms and companies operating literally side by side. West 47th Street has a mass of jewelry stores; West 48th Street has music stores; the lower east side contains many establishments selling lighting fixtures; and, perhaps most famous of all, Broadway is home to much of the theatrical industry. While each establishment competes vigorously with all the others in its line of endeavor, the fact of their grouping also helps create the market that sustains them all. Being close, potential buyers are drawn to the convenience of having multiple choices literally next door to each other. Suppliers likewise, find it easier, and therefore cheaper, to deliver when they can make several calls at one location.17