Internal Audit Derivative Checklist

Monday May 14, 2012

Today's WSJ is an absolute must read,I will keep it, for students of derivatives and internal auditing.

Here is a short checklist for the need for further substantive procedures with a nod to Jeff Foxworthy's You Might be a Redneck

You might need more substantive procedures in the trading department if

You have a trader with the first name 'Bruno'

You have a trader whose 'bets' are so large he has earned the nickname 'Whale'

Your top Execs are lobbying for loophole exclusions to current regulations (note, Jon Corzine did the same)

Your Board is meeting every day to 'monitor' risks

Your trading department attempts to take the other side of the trade after establishing an hedge

Your CEO and Chairman of the Board are the same person

After losing $2 B, you lose another $150 M in one day

All this applies to JP Morgan

Professor Elam