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SNC-Lavalin last week announced the results of its internal investigation into roughly $56 million in potentially improper payments, immediately followed by the resignation of its CEO. Was the resignation necessary? Absolutely. The investigation results revealed that the CEO used his position to override SNC’s internal controls and policies to approve payments to agents, payments which were then improperly accounted for in the company’s books.
We need to remember that “Tone at the Top” is essential for an internal control and compliance environment is to function the way it should, and protect an organization against wrongdoing which may cause it financial and reputational damage, or worse, land it on the wrong side of the law. If senior management is found to be involved in such wrongdoing, the only answer is for them to depart in order for the organization to move on. Otherwise, the organization is left with a case of “do as I say, not as I do” and employees can hardly be expected to adhere to the letter of its policies and procedures, no matter how well intended those might be.
The CEO’s resignation and the limited disclosure of the investigation results were a positive step for the company which shows that it is attempting to properly deal with the situation it is facing. But while the investigation findings published this week shed limited light on the issues faced by the company, many unanswered questions remain.
One such question is whether the findings published last week are the extent of the problem, or whether other questionable payments may remain undiscovered. The Executive Summary of Independent Review, Findings and Recommendations Delivered on March 23, 2012 reported that “No agency agreement other than the Agreements came to light in the context of the Independent Review as being improperly documented in respect of a project to which it did not effectively relate”. While this is positive, it is highly unlikely that the investigation team had the time or the mandate to perform a comprehensive review of all of the company’s major projects costs for an extended period of time. Given the findings, the company is hopefully continuing to investigate whether there are other contracts and/or payments lurking which could cause it further problems down the line, and more surprises for investors.
Another burning question is whether the agency payments reported on last week are in any way related to the RCMP investigation of alleged corruption related to a failed bid on a World Bank project in Bangladesh which was announced last September. The independent review findings have shed little light on the nature or ultimate recipients of the payments, since the investigators were unable to interview some key players, and as is typical in these cases, business intelligence conducted on the entities did not identify the true principals of the entities who received payments.
This story should be an eye opener for companies doing business overseas without having the proper checks and balances in place, such as an anti-corruption compliance program having the support of top management or the conduct of thorough due diligence on agents and other business partners.
Learn about how MNP's Investigative and Forensic services can help if your organization has experienced workplace fraud or theft.
Related Topics:Fraud; Internal Audit
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