NAF Case Studies

Plan Your Financial Life (National Academy Foundation)

Chapter 18: Give the Auditors the Ax

The Board of Directors of the One Horse National Bank was looking for ways to cut costs. One director suggested that since the bank’s audit department did not produce revenue for the bank, it should be eliminated and replaced by a regular employee in each department who could keep an eye on things. The director said, "All the auditors ever do is to check on other people’s work. They never do anything themselves. They sometimes ask to see records that are none of their business." He ended with the statement, "Let’s give the auditors the ax."

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Do you agree with the director who suggested cutting the audit department? Why or why not? What are some other ways that the bank could cut costs?