external auditor

What Is an External Auditor? (And Do Boards Need One?)

When it comes to reviewing a company’s financial status, every organization needs a good external auditor. Auditors look through in-depth accounting information in order to ensure that the reporting is a true representation of an organization’s financial position.

Auditors also assess things such as risk in order to help guide organizations to a healthier and more prosperous financial future.

Internal audits happen frequently within an organization. Companies utilize their own hired talent to review the work of others or the overall validity of the company’s financial reporting. As the Association of Certified Fraud Examiners explains it, “The internal audit function helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.

The scope of internal auditing is broad and may involve the efficiency of operations, IT controls, the reliability of financial reporting, deterring and detecting fraud, and compliance with laws and regulations.”
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fintech risk management

FinTech Risk Management: Directorpoint CEO Shares Insights on Risk at FinXTech 2018

Directorpoint’s CEO, John Peinhardt, shared professional insights during a fintech risk management panel discussion at BankDirector’s 2018 FinXTech conference in Phoenix, Arizona. The panel was moderated by BankDirector CEO Al Dominick.

What should businesses do if they start growing too quickly?

The first question dealt with the risk that a business may be growing too quickly. Mr. Peinhardt quipped: “If your business is growing too fast, rule number one is raise your prices.”
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Managing Board Room Risk in 2018

Risk is a word that board members have been familiar with for a very long time. As part of their duties, boards must identify, measure, and ascertain what levels of board room risk their organization could encounter. In 2018, that has become an exponentially more difficult job than it was thirty years ago.

As Susan C. Keating, CEO of WomenCorporateDirectors (WCD) writes, “The risks around innovation, company culture, and geopolitical changes will continue to make shareholders and regulators press for more accountability on boards—blame is getting pushed upstream, not down, in today’s organizations.”

In recent years, the issue of risk has moved increasingly into the realm of cybersecurity and cloud data protection. Every year, hackers find new ways to breach systems. As a result, companies are scrambling to ensure that they stay ahead of the curve. MHA Consulting believes that 2018 could be the year that AI enters the realm of risk management by making phishing attacks more sophisticated than ever before.

MHA adds, “It can also be used to learn users’ computer behavior in order to improve the hackers’ field position as they go on to mount the familiar brute-force attacks to try to crack insiders’ network passwords.”
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Is Your Team Ready to Handle a Board Crisis?

Vector illustration of stick figure stopping the domino effect with falling white dominoes

According to corporate governance expert, Paula Loop, companies experience at least one board crisis every four or five years. That means every board should be prepared to step in and make important decisions in the event of an unforeseen issue.

Additionally, the public’s perception of corporate director responsibility has grown substantially. Whether it’s a public relations, technological, or financial crisis, shareholders and the public expect boards to not only be held accountable, but also to successfully navigate the company out of the crisis.

Is your board ready to fulfill that tall order? Here are some suggestions for being prepared.
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Boardroom Information Security Questions

More than ever before, boards are faced with the daunting task to ensure their company is protected in the event of an online attack. Just a decade or so ago, boardroom information security questions of digital risk rarely made it into the agenda.

System Security Specialist Working at System Control Center. Room is Full of Screens Displaying Various Information.

Instead, companies instructed c-suite leaders to deal with the duty of establishing and maintaining cybersecurity standards.

As larger data breaches have wreaked havoc on major organizations, however, board members have begun to recognize their important role in risk management for board information security.

In order to maintain a proactive approach, we recommend that directors ask a lot of questions—these included:
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What Is Directors and Officers Insurance?

Insurance is pivotal to the existence of any private organization. Companies often have to purchase a variety of coverage options to ensure their business is completely safeguarded: property insurance, liability protection, loss control assurance, and more. Directors and Officers Insurance (D&O) is one more type of specialty coverage that companies with boards of directors should consider purchasing.

Directors and Officers Insurance

According to Investopedia, “Directors and officers (D&O) liability insurance is insurance coverage intended to protect individuals from personal losses if they are sued as a result of serving as a director or an officer of a business or other type of organization.

It can also cover the legal fees and other costs the organization may incur as a result of such a suit.”
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5 Questions Boards Should Ask After an Audit

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External audits usually provide companies with a fresh perspective on their financial health and reporting practices.

It’s important that your board, or more specifically, that your Audit Committee asks the right questions in order to make the most out of the findings you receive.

Here are some of our suggestions for queries we think you should address with your auditor or auditing firm:

1. Did you have any difficulty interacting with employees or accessing information while collecting data?

It’s important that companies establish a culture of forthcoming reporting. If a member of your internal team was not cooperative with the auditor, or if records were extremely hard to locate, you may have some internal issues to address. Additionally, if auditors are unable to obtain thorough records, it could lead to an incomplete report.
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Navigating Corporate Bankruptcy on a Board of Directors

corporate bankruptcy

Because board members have a financial duty to their shareholders, the time may come when an insolvent organization must consider the option of bankruptcy in order to protect those investors’ interests.

In many states, creditors are also designated as stakeholders and must be considered, too. Depending on the type of corporate bankruptcy that is filed, board members may continue to operate in their directorial positions.

As an organization approaches the position of insolvency, board members must consider the options in front of them. According to the Houston Chronicle, “Conducting a thorough financial review and seeking professional help are now the primary concerns.

Directors should avoid resigning because those who quit rather than engage themselves in the bankruptcy proceedings are generally viewed as being in derogation of duty.” In other words, board members shouldn’t jump ship during the company’s moment of greatest need.
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The Rise of the Chief Audit Executive

The rise of the chief audit executive - compliance

The recent Wells Fargo disaster reminds us that for companies, the best kind of watchdog is the internal kind. For some reason, Wells Fargo’s internal watchdog (or Chief Audit Executive) didn’t suffice in this instance, though.

Whether that means they overlooked unethical sales practices or whether their reports to management went unheard is unknown. What we do know, though, is that Wells Fargo probably wishes they had dealt with these concerns internally before it became the debacle playing out in our daily news headlines.

Chief Audit Executives play a vital role in a large corporation’s system of checks and balances. Simply put, they exist in order to operate as a fully independent audit assessor, who also often supervises other aspects of risk and compliance. These executives, who typically report to the board’s audit committee, are becoming more sought after with each passing day.

In fact, “Chief audit executives hired by large companies now command total pay packages approaching $1 million—about 30% more than a decade ago,’’ said Scott Simmons, a managing director at Crist|Kolder Associates, which recruited nearly 15 current CAEs.
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What Corporate Directors Can Learn From Wells Fargo

Wells Fargo has certainly had better years than 2016. If you’ve somehow missed the flood of news headlines, check out this summary article by The Week writer, Jeff Spross. The title alone—“The Mind-Blowing Stupidity of Wells Fargo”—should be enough to give any board member a shudder.
What Corporate Directors Can Learn From the Wells Fargo Fiasco

No director wants their organization to be the topic of a headline like that. The Wells Fargo PR disaster began with aggressive cross-selling tactics and the creation of hundreds of thousands of fraudulent bank accounts and credit lines.

These practices were implemented when lower level employees were met with impossible sales expectations and quotas.

When scandals like this occur, it’s important that leaders of the affected organization (as well as leaders of other major companies) take note of the failures and analyze ways they can be either confronted or avoided in the future. Here are some examples of learning opportunities for corporate directors who want to glean something from this downward spiraling situation.
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