I have spent many years in Internal Audit in various organisations, managing some of their financial risks. I have often studied and tested the controls they had in place, with often worrying results. This was sometimes wrongly interpreted as overzealousness or even malice, but my concern was to find out how the control measures were supposed to work and whether they actually did.
I often remember a story told to me by an old auditor whose enquiring mind did not shut down when he was away from the office. It merely found different subjects to enquire into.
He said he had once been on holiday somewhere in the South West of England and noticed that every day at noon they used to fire a cannon, or something similar, from a castle above the harbour. He was told it was “so reliable you could set your clocks by it!” and apparently people did. He could not help wondering how it could be so reliable, so when he went on a tour of the castle he asked how they always knew the correct time. This was before the digital age, although I do not know why they did not use the Talking Clock which was created for that purpose. Anyway, they said, there was a particular official there whose watch was always right and he supervised the firing of the gun. My colleague’s curiosity was not quite satisfied. He was as bad as me, you see. He asked the official in question, how he knew his watch was correct, and was told there was a jeweller’s shop in the town where they always ensured all the clocks and watches in the shop were showing the exact time. Of course, this inquisitor could not refrain from visiting the shop and asking the, by then, obvious question. He was told, “That’s easy. Every day at exactly twelve noon they fire a gun from up at the castle!”
Well, that was just like some of the financial controls I have come across. Everything relied on everything else. There was no real independent check on anything. So if anyone had managed to fiddle one set of figures, all the rest would have ageed with them, by definition.
What are you relying on to check something? How independently is it verified? Do you need some real financial advice?