National Australia Bank was well known for tolerating one of the worst examples of audit conflict with the saga of Homeside and a certain Christopher Lewis. This is the man who former NAB CEO Don Argus dispatched to Florida to head a KPMG due diligence team to advise whether the bank should buy Homeside. He recommended the purchase and NAB shareholders duly paid $1.7 billion in July 1997.

Lewis then became the KPMG auditor who signed the 2000 accounts and claimed they were “free of material mis-statement” when in fact the bank was about to drop $3.6 billion from something called mortgage servicing risk (MSR) at Homeside which wasn’t even mentioned in the annual report.

Adding insult to injury, Lewis then joined NAB as global head of risk management in July 2001 and two months later NAB announced the Homeside loss. Amazingly, he survived until 2004 but was then shafted after the $360 million foreign exchange loss.

The story from yesterday’s Crikey about Anne Jackson, who lead internal audit teams at both AWB and NAB, is almost as interesting but there are a couple of important points to make at the outset. Firstly, Anne Jackson was not mentioned in either the PwC report or the APRA report into NAB’s $360 million in forex losses, although she was head of internal audit at the time.

Secondly, whilst Arthur Andersen documents are emerging at the Cole inquiry, Anne Jackson has not been mentioned although she was the partner in charge of internal audit for the first two years of the Alia kick-back program.

Here is as complete a picture of the CV as we can establish:

Late 1990s: Anne Jackson was Arthur Andersen’s engagement partner on internal audit at Victorian WorkCover Authority reporting directly to CEO Andrew Lindberg and then the board audit committee. Arthur Andersen first won this role in the late 1980s.

1999: AWB kickback payments to Alia start.

1999: Arthur Andersen wins the internal audit work at AWB with Anne Jackson as the engagement partner.

November 1999: former AWB CEO Andrew Lindberg removed as WorkCover CEO after new Bracks government announces $176m operating loss for 1998-99 in what many regarded as a political stitch-up.

March 2, 2000: Lindberg appointed CEO of AWB with Anne Jackson already in place as the out-sourced internal audit partner from Arthur Andersen. She reported to the CFO and head of risk management

August 2001: Anne Jackson joined NAB as head of operations of internal risk

Sept 1, 2001: NAB board first alerted to Homeside disaster, so Anne Jackson clearly can’t be blamed for this.

April 2002: Arthur Andersen collapses and Australian business taken over by Ernst & Young, but writing was on the wall after Enron filed for bankruptcy in December 2001.

2002-2004: Anne Jackson in charge of internal audit at NAB

January 13, 2004: market first alerted to NAB’s $360 million in foreign exchange losses

2004: appointed head of Sarbanes Oxley program dealing with audit independence and compliance

2005: appointed project director of BASLE II accounting integration project

NAB seems to think this is an unfair character assassination. We’re happy to point out that internal auditors usually only go in once a year and the NAB forex losses spiked up quickly over a few months and would have been very difficult to detect.

However, surely it’s a point of interest that the two biggest scandals to hit Melbourne in recent years – AWB’s $300 million for Saddam and NAB’s $360 million forex loss – both featured the same person involved in internal audit, albeit one on an out-sourced basis and for just two of the five year duration.

Peter Fray

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