Highlighted problems with audit report by no means unique to Star
Statement from Peter Jones, CEO, IIA-Australia
14 September 2022: At IIA-Australia, we have been closely following the inquiry into Star Casino, given the very clear link between internal audit and the failings within the company.
The Bell Report, made public yesterday, highlights a number of problems as to how the internal audit process was handled within the organisation.
According to the Report, the in-house internal audit team engaged KPMG to carry out an independent review of the Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) program, as part of its licence obligations.
This is in line with our best practice recommendations and we believe was an appropriate step by the internal audit team.
The failure came with how this report was then handled by senior management.
Specifically (according to the Bell Report):
- The report was not given to the Audit Committee until the day before their meeting in late May 2018.
- The message from the CEO was that there were a number of problems and inaccuracies within the report. As the Audit Committee did not have the time to thoroughly review the report at that time, management was given time to address the issues with KPMG.
- KPMG was pressured by senior management to change a number of findings within the report. The internal audit team (and other management) was given a clear message “that bad news was unwelcome.”
- The report was erroneously treated as ‘legally privileged’ and was subsequently held back from the regulators (AUSTRAC) for around two years.
It is important to note that KPMG reviewed their report and came back stating they stood by the original findings. Additionally, the recommendations from the report were all subsequently accepted by Star. However, as it was some time before this occurred, much damage had already been done.
The main issue we would like to raise is that these problems are by no means unique to this particular organisation. Similar failings were recognised by the Hayne Royal Commission (2018) and the Crown Inquiry (2021). In a recent survey, we found 45% members believe their recommendations within Internal Audit reports are not always acted upon in a timely way. Additionally, around one in ten internal auditors report that they have been sanctioned in some way after submitting an unfavourable report to management or an audit committee.
In any organisation, the first line of assurance is line management; the second compliance and risk; and the third and final is internal audit. A commitment to robust internal audit practices is essential for any organisation that holds a position of responsibility and privilege, such as a casino.
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IIA-Australia is affiliated with The Institute of Internal Auditors which is the leading body representing internal auditors.
Globally, the Institute represents more than 200,000 members in 190 countries. In Australia, the IIA-Australia has a connection of nearly 7,000 assurance professionals inclusive of 3,000 members.