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Casino bosses played a high-stakes game but they are hardly alone, says professional body.
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Star report ‘shines light on hostility to internal audits’
15 September 2022
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Damning findings against Star casino shine a light on the widespread problem of management hostility to unfavourable reports by internal auditors, their professional body said.
But the hostile reaction by Star executives to a negative assessment by KPMG was a high-stakes game, the Institute of Internal Auditors said in the wake of the Bell report into the casino’s failings released on Wednesday (14 September).
“The main issue we would like to raise is that these problems are by no means unique to this particular organisation,” the chief executive of IIA, Peter Jones, said. “Similar failings were recognised by the Hayne Royal Commission (2018) and the Crown Inquiry (2021).”
He said a recent survey by the body showed 45 per cent of members believed companies failed to act “in a timely way” on their internal audit recommendations.
It also found as many as one in 10 internal auditors had been sanctioned after submitting an unfavourable report in ways that included bullying and even dismissal.
“In any organisation, the first line of assurance is line management; the second compliance and risk; and the third and final is internal audit,” Mr Jones said.
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“A commitment to robust internal audit practices is essential for any organisation that holds a position of responsibility and privilege, such as a casino.”
He said the Bell report highlighted a number of clear failings into how the internal audit process was handled within the organisation.
He said: “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 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.”
However, the failures came in senior management’s reaction.
He said: “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.”
One of the KPMG auditors, quoted in the Bell report, said Star chief executive at the time Matt Bekier was “hostile” and failed to greet the auditors or make eye contact shortly after the Audit Committee was given their findings.
“Mr Bekier was sat down, turning the pages of the report, essentially berating us for the whole entire time of that meeting,” he said.
Mr Jones said it was important to note that KPMG reviewed its report and stood by its original findings and in addition, its recommendations were all subsequently accepted by Star.
“However, as it was some time before this occurred, much damage had already been done,” Mr Jones said.
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