The article I read is Red Flag Risks: For many corporate mishaps, there
were plenty of warning signs writing by Lal Balkaran and Jamie Mark.
This article talks about the importance of internal auditors being
aware of red flags that are associated with different levels within the
organization. Internal auditors can provide early warning to the
organization to correct any issues before they have a serious impact
on the organization. Internal auditors have a responsibility to use
their deep knowledge of the organization to identify key red flags. It
also lists common red flags that are associated with stakeholders, the
board, top management, culture, etc.
I learned that it is very important that internal auditors need to have
a thorough understanding of red flags and which type of behavior
correlates to different areas of the organization. I also learned that
have a casual conversation with senior management or middle
management and supervisors can help identify issues related to
culture and tone at the top.
The difference between internal auditors and external auditors in this
article is the internal auditor would be an expert in the organization,
however external auditors are experts in the industry the
organization is a part of. External auditors also look for red flags, but
again their knowledge is within a certain industry. Internal auditors
can look in depth in each department to determine if there is any
fraud that may be occurring. External auditors will look for material
misstatement on the financial statements, they do not necessarily
look for fraud.
Reference
Balkaran, L., & Mark, J. E. (2022, April). RED FLAG RISKS: For many
corporate mishaps, there were plenty of warning signs. Internal
Auditor, 79(2),
58+. https://link.gale.com/apps/doc/A713173223/AONE?
u=nhc_main&sid=bookmark-AONE&xid=ce99c6d5
