Auditing : the good, the bad and the ugly A. Feinberg 14 Sep 2017 - PowerPoint PPT Presentation

Auditing : the good, the bad and the ugly A. Feinberg 14 Sep 2017 1

 I must pay a debt of gratitude to DeWitt Beeler, who in an article published in the 1999 May Issue of Quality Progress provided me with a fresh look at auditing and infused me with the motivation to improve my auditing skills. 2 14 Sep 2017

 While I may tonight be looking critically at aspects of how audits are traditionally conducted, I have the utmost respect for the conscientious people who perform the audit function. I do not mean in any way to denigrate their efforts. 3 14 Sep 2017

 So much of what we do in our work lives today is mandated.  We have a doctor friend who is absolutely inundated with paperwork. She works as a family physician during the day and then spends hours pretty much every evening doing the required paperwork. 4 14 Sep 2017

 For all the effort we expend on mandated tasks such as audits, I think it absolutely imperative to take a hard look at the assumptions, methods, and output of activities in which we engage.  If I can stimulate thinking on these as regarding the audit process I will judge tonight’s talk a success. 5

 Territory to Cover –  Purpose - What is the purpose of an audit?  Process - How effective are our audits?  Pitfalls - What are some of the obstacles that prevent us from achieving our audit goals? 6 14 Sep 2017

 We hunger for relevance and purpose in our lives.  When we know we are making a positive impact due to the results of our efforts we are motivated to perform at the top of our game. 7

 Life in a corporate environment of which we are only play a seemingly minor role can at times appear to devolve into a series of meaningless exercises.  Scott Adams’ Dilbert cartoon series explored these feelings and gave expression to them. 8

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 But that’s not the ‘Dream Job’ is it?  It is more likely the “Nightmare Job” … you work for a month and at the end it doesn’t matter if from day 1 you had just made up the results. 10

 How many of you have either conducted an audit or been involved in an audit?  What have been your impressions of the audit function? 14 Sep 2017 11

 Obviously I don’t take the pointy haired boss’ approach to the audit work we do: I believe that there are benefits that can be derived from the audit function when its’ objectives and limitations are kept in mind. 14 Sep 2017 12

 A well conceived and executed audit can yield information that is important to the healthy operation of an organization; whether that organization exists for the purpose of manufacturing a product or providing a service. 14 Sep 2017 13

 If we are going to take a fresh look at the audit function we’ve first got to clear the land a bit.  You might even say we need to “Drain the Swamp ” not of people, but of assumptions that can’t endure the light of day.  Let’s look at some common misconceptions about audits. Beeler calls them the “Big Lies” about audits. 14

 Audits are about “Compliance” or the extent to which procedures incorporate requirements.  Audits should focus exclusively on “Facts”  Auditors should not make “Judgments” 15

 Audits are a verification activity.  Audits are the primary tool to drive Continuous Improvement.  Internal Audits should emulate their Registrar’s Audit. 16

Companies / Organizations exist to provide a product or service for their customers. In order to do that there are four essentials that must be met. 14 Sep 2017 17

Customer Expectations - the organization must be able to satisfy and exceed. Compliance - meet any and all requirements as imposed by regulatory bodies. Consistency - must be able to deliver the same product or service reliably day to day, week to week and year to year. Cost control - All the above has to be accomplished at a cost the market will bear. 14 Sep 2017 18

 Although human error is all around us, in an organization it is usually not actually the root cause of problems.  It is instead only one of multiple causes that must be dealt with.  Unfortunately, organizations try to change human behavior rather than the system within which the individual is working, then are frustrated when problems recur.  However, industries can significantly reduce the rate of human error by focusing on business process design while better considering human factors. 14 Sep 2017 19

• Quality Systems are designed and implemented in order to provide the apparatus that will accomplish the 4 musts of a successful organization. • It is the job of managers to maintain and improve their systems, but in order to do so they need information. 14 Sep 2017 20

• Just as a doctor runs a battery of tests during a typical physical to gain information on the health of your organization, i.e. your body, in order to determine the health of the myriad of systems which comprise you so can a manager gain needed information from the audit process. 14 Sep 2017 21

 In order to produce their product in a consistent, cost effective manner that doesn’t destroy the environment or unnecessarily place their employees lives at risk management establishes systems and appoint managers over those systems to ensure all is running as intended.  Managers and their teams rely on information to fine tune and keep the engine running with a minimum of delays, disruptions and hopefully zero disasters. 14 Sep 2017 22

 Therefore audits in order to be successful must focus not on compliance, nor on verification activities, nor simply on facts, but on the entire universe of the system or systems they are auditing.  Whatever is critical to the manager should be to the auditor as well. The auditor should be the manager’s eyes, ears, and to a certain extent brain. 23

 Not that the auditor thinks for the manager, but instead interprets and presents the information collected from the audit to reach measured conclusions concerning the systems being audited. 24

 So the assumption that Auditors should not make judgments is entirely in error.  As a society we shrink from the word “judgment”. It conjures up someone who is intolerant of other people’s views.  But as auditors we must employ the highest form of judgment, i.e ‘the ability to make considered decisions or come to sensible conclusions about the systems we are charged with evaluating.’ 25

 The cardinal truth about auditing is that it should be a process of inferential reasoning.  The inputs are the observations we make during an audit.  We compare those observations with established standards of quality organizations, goals established by internal documentation, and our own knowledge base to come up with conclusions about the system(s) we are auditing.  These conclusion(s) are then relayed to the management team as actionable intelligence. 26

 Often though the final audit report is a list of “findings” that can be perceived by management as simple lapses in their process that can easily be corrected by retraining a particular operator, making a process work instruction clearer, etc. but which do not address the underlying causes for the lapse, nor provide information that will direct management where and how to spend their resources. 27

 Imagine a football team that consistently has a losing record.  The coach and general manager of the team has a lot of work to do.  But where to start? Where to expend precious resources?  Let’s imagine an audit of our team we’ll call the 'Spiritless Warriors is commissioned. 28

 The final audit report goes something like this: 1. Finding - left tackle missed Tuesday’s practice. 2. Finding - projector is not being maintained according to team’s maintenance records. 3. Finding - Trainer failed to record weight lifting sessions for the entire defensive backfield. 4. Finding- three members of the offensive line were late for Sunday’s pre -game meeting. 29

 All the findings are “facts” observed by our intrepid auditor. But they are facts bereft of meaningful conclusions.  They are the skeletal bones of the team’s systems without the throbbing beat of the heart. 30

 What if the final audit report looked more like this: 1. Team practices are poorly organized and players’ time is not well utilized. This results in low team morale and inconsistent attendance. 2. Assistant coach seemed unprepared for the team’s film session. He was unfamiliar with the projection device and also how to operate it. Film session concluded early and players expressed consternation about not getting enough opponent information to be properly prepared. 3. Team Trainer has not kept up with recording individual weight training workouts. Players have picked up on this attitude and show little desire to improve. 31