February 25, 2005
To Whom It May Concern,
After many years as an accountant and internal auditor for large industrial corporations it has been my observation that over the years heightened M&A activities, which in many ways destroys or at least dismantles existing mature corporate control systems, in combination with ever-more creative financing structures, a rapid acceleration of ‘deals’ between legal entities, distributed computing power enabling an astronomical increase in transaction processing, and detail adverse executives subject to the agency affect have all contributed significantly to a deplorable state of mind when it comes to accepting the necessity of internal controls.
Because I have worked for some of the best and worst run company’s in the world these observations are backed by direct, fact based experience. And, it’s my experience that corporate leadership has evolved from viewing systems of internal controls as a necessity to achieving their business objectives to viewing them as an unnecessary, wasteful cost. Executives, and their immediate charges, have developed a ‘group-think’ language which validates assessments of their company as healthy, going-concerns with effective management of risky activities. This state of mind encourages them to dismiss issues brought forth and seen as interfering with their constructed reality. This is a prerogative of leadership, to ignore certain evidence, but in combination with deplorable control systems executive analysis has evolved into picking and choosing the evidence of personal choice which in many cases takes the path of least resistance to success and immediate reward. This is beyond dangerous particularly because it suppresses communications from middle and lower management, those organizational layers responsible for reviewing and speaking up.
It’s sad that you have been forced to legislate corporate systems of internal controls. Of course up-front compliance cost has been high, particularly higher for those company’s in worse shape. But it has been observed by professionals like myself for a long time now that these internal systems have been gyrating out of control and communications at the top did not accurately reflect the true, and in many cases, material conditions. Thus, in addition to other benefits, I sincerely hope compliance initiates a reeducation from the top down, and equally important, from the bottom up.
Thank you for your time,
Leigh Anne Dear