. . . John Alan James, professor at Pace University’s Lubin School of Business, said the failure of Barclays’ compliance department and its internal audit function could explain why the wrongdoing was never escalated to senior management. He said ongoing monitoring and testing of the firm’s policies was a key element of an effective compliance program.
“Somebody wasn’t monitoring. If internal audit had come in and looked at the failure they would say this is not adequate,” James said. “Internal audit is supposed to be monitoring compliance and asking compliance: Are you monitoring one level down?”
James noted the similarities between the Barclays scandal and Lehman Brothers’ use of an accounting gimmick called Repo 105 to hide the debt on its books. Having an employee in internal audit reporting to the board would have protected the organization against fraudulent actions, he said.
Read the article on the Reuters blog.