Internal auditors are currently very exposed in cases of corporate failure, says corporate governance expert Professor Mervyn King.
King addressed members of the Institute for Internal Auditors of South Africa (IIA SA) on Wednesday at the 21st Annual Southern African Internal Audit Conference held in Sandton.
He says the question “Where were the auditors?” often arises, with reference to external auditors – and that liquidators go after these auditors “because they have the deepest pockets”.
Claims against external auditors internationally amount to billions of dollars and have in fact become a threat to the profession, says King. Such claims are based on non-compliance with statutory provisions.
However, he maintains that in cases of corporate failure internal auditors are also very exposed to claims on the basis of their employment contract or damages caused by their conduct in relation to third parties.
This is the case especially in the context of large internal audit teams, which can be held jointly and severally liable for wrongful acts committed by one of the team members.
He suggests that the IIA SA draft a standard employment contract that provides contractually for the apportionment of blame in such cases.
Moneyweb asked him about the liability of internal auditors in the recent cases of state capture. Here is his response: