Talking CCM Turkey
Posted on November 25th, 2009 by Katina »Permalink
Long-time visitors to the Audit Trail know that we’ve been talking for some time about Continuous Controls Monitoring and the business benefits that come from the visibility it provides into business operations. It’s practically old hat by now, right?
But elsewhere, CCM is just taking hold as a concept (and hey, better late than never, we say).
Over at Project Management + Business Extras, Ken Budd does a rather nice job summing up how CCM brings internal audit together with business managers and executives to improve business performance – sort of a CCM life-cycle, from designing effective controls to testing them to verifying audit quality. It’s a nice little primer for folks just now joining the CCM band-wagon.
Meanwhile, the folks at BearMarketNews have an interesting little tidbit on the importance of closely monitoring internal business operations and testing controls – not just for business reasons (which we can tell you all about), but for their larger effect on the economy. As William K. Black explains, the financial sector’s fixation on accounting earnings can lead to some, er, funny business without rigorous, tested internal controls.
“The financial sector is particularly prone to providing exceptional amounts of funds to what I call accounting “control frauds”. Control frauds are seemingly-legitimate entities used by the people that control them as a fraud “weapons.” In the financial sector, accounting frauds are the weapons of choice. Accounting control frauds are so attractive to lenders and investors because they produce record, guaranteed short-term accounting “profits.” They optimize by growing rapidly like other Ponzi schemes, making loans to borrowers unlikely to be able to repay them (once the bubble bursts), and engaging in extreme leverage. Unless there is effective regulation and prosecution, this misallocation creates an epidemic of accounting control fraud that hyper-inflates financial bubbles.”
Something to keep in mind as Congress continues to debate financial regulation overhauls . . .
February 12th, 2010 at 1:38 pm
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