The Hindu Business Line : When auditors turned `cooks'

AUDITING begins when accounting ends is what one is taught in college. The sequence is no different from a game of hide-and-seek, or cop-and-thief. The accountant does a neat job and then the auditor goes about searching. A recent report, however, from the Associated Press, talks of how auditors were busy hiding.

In brief, the report is about how Pentagon auditors, of the Defense Contract Audit Agency (DCAA) in the US, altered their own internal files to ensure they would pass a review. The site www.dcaa.mil would explain that the DCAA "is responsible for performing all contract audits for the Department of Defense, and providing accounting and financial advisory services regarding contracts and subcontracts to all DoD Components responsible for procurement and contract administration."

One of its most popular and sensational discoveries was that the US Vice- President Cheney's former company, Halliburton, "possibly overcharged the army as much as $61 million for gasoline in Iraq." The company, however, has strongly denied allegations of "price gouging" and said it bought the fuel at the best possible price and transported it under extremely hazardous conditions.

Details about the auditors turning `cooks' have been trickling through the media, and they talk of how the doctoring effort required 1,139 hours and that "auditors were brought in from other offices to help", using taxpayers' money for travel. Ironically, the Agency's staff "engaged in just the kind of wasteful activity they are supposed to expose." And the matter came to light when somebody picked up the hotline and blew the whistle.

The modus operandi was simple: The auditors who played the game would find out in advance what files would be checked by reviewers; then they would alter the files to ensure the results were favourable. Very much similar to the civic authorities cleaning up the roads that a VIP would drive through.

All this audit fabrication was uncovered in 2001, though the report thereon was released only a few days ago. Yet, there are interesting revelations: That those who were busy with the `revisions' did not interrupt their work "even after the review team arrived" to inspect their files. That they deleted electronic backup files of original documents. That the Agency employees believed that `upgrading' the working papers was "a normal and acceptable practice" and so they did not try to hide what they were doing. A smart move, actually, because stopping abruptly would have invited attention.

What is the antidote to stop such fabrications in the future? The Agency has decided that review teams would only give "48 hours advance notice" about forthcoming inspections, instead of the "much longer" notice earlier.

Which means that faster methods may have to be deployed to achieve similar doctoring to records.

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