When did you last review your audit program?

Christine is leading the internal audit organization of a major global company. She is in this role for seven years and is passionate about the job. Her team comprises twenty-three full-time professionals who audit the internal and external manufacturing plants against the company’s quality standards. The audit processes get only a minimal revision every year.

The stakeholders of the audit organization are overall satisfied. However, some share concerns that the value provided is not anymore up to their expectations.  The company’s quality performance indicators do not show the positive trend the board of directors would like to see. Auditors do not stay very long in the role as they feel that their job is repetitive and stressful.

Time for Christine to review the audit program? The last revision took place the year she started in the position. Meanwhile, the company grew, changed the product portfolio, launched many new products, and made increasing use of external manufacturers to cope with more innovation.

Let’s look at the steps Christine took to revise the audit program and align it to the stakeholders’ needs. Her efforts paid as the results achieved through the revision were impressive.

Understanding the context

Christine put lots of effort into understanding the context in which her audit organization was currently operating. She decided to focus on three key factors: the stakeholders, the external issues, and the internal ones.

She started by identifying which stakeholders were relevant to her organization. She focused on those that could be a risk if their needs and expectations were not met and those who could provide improvement opportunities. She organized a round of meetings and interviews with them to identify what needs and expectations they had. With this input, she defined the key ones that they should address. These interviews proved to be extremely valuable not only because they provided a lot of actionable information but also because it was the start of establishing an ongoing relationship with these stakeholders, like never before.

Christine then took a look at the external and internal issues that exist and which could affect her audit organization’s ability to achieve its goals. She looked first outside her organization to things such as the evolving trends, the advances in technology that they could leverage, and how peers were doing by participating actively in a cross-industry collaboration community of audit professionals. Christine then turned the focus internally by analyzing topics such as the evolution of the business in terms of complexity, the company’s strategy, and the type of processes and products. Very importantly, she also analyzed the current levels of competence and knowledge of her team members.

Having analyzed and understood the context, she determined which issues could result in risks and opportunities, and decided which should be addressed with priority and how.

The audit organization’s identity and objectives

Christine then focused on the audit organization itself. She took her audit team members through an exciting exercise. They looked together at the mission of their audit organization and at what they were aspiring to become.  They did it for the first time. When all aligned on the vision and mission, they communicated the outcomes to their stakeholders. None of this was rocket science, but it helped the team go back to its values and why they were all together, putting so many efforts into supporting the company through auditing.

It also helped the stakeholders to understand better what the audit organization was and was aspiring to become. Christine ensured that all this was consolidated in the form of an audit organization’s strategy that included a clear commitment to satisfy the stakeholders and promote improvement.

Based on the policy and the strategy, clear objectives were defined and quantified for the audit organization so that all could be communicated and deployed for various audit functions and processes.

Processes, resources, and evaluation of performance

Audit processes were established already for a long time, so Christine and her leadership team decided to review them to ensure that everything was in place to satisfy the stakeholders’ needs. They agreed after this in-depth review to assign a person responsible for each process. This person was tasked to manage, control, and improve his or her process as needed. For the first time, they defined checkpoints and performance indicators to ensure that the audit processes would deliver as planned.

Resources are critical to support all processes in the audit organization. The management team focused on identifying and reviewing all essential resources, including people, the audit organization’s knowledge, and the infrastructure.  On the people side, they worked together to develop specific processes to attract, develop, and retain audit professionals who can contribute fully to the audit organization.

Thanks to the exercise performed on all processes, the management team selected performance indicators and monitoring methods. They started soon to measure, analyze, and evaluate their performance so that improvements could take place.

Interestingly, they decided to initiate internal audits for their own processes. Doing it not only proved to be a key component for continuous improvement. It also was an example for the entire company. For the first time, the internal audit organization performed internal audits on their management system and processes. By doing so, they were leading by example.

The management team established a review process at regular intervals to evaluate the audit organization’s progress towards achieving its strategy and objectives and the need to adapt them.

Understanding the context, focusing on the organization itself, reviewing the audit processes and resources, and evaluating the performance regularly to take actions had a significant investment return. These actions taken by Christine and her team were vital to realign the audit program with the needs and expectations of stakeholders and to ensure that the audit organization would deliver to its best.

This review exercise resulted in having stakeholders much more satisfied with the value delivered by the audit function and in audit professionals proud to serve the company’s goals through auditing.

The simple steps taken proved to have a considerable impact.

By Marc Cwikowski
September 17, 2020

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