Keep Your Audit Department Viable

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Keep Your Audit Department Viable
Cost Savings - Changing it From Concept to Reality
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Objectives

• Why Audit Departments need to focus on cost
  savings audits
• Learn proven cost savings techniques that will
  dramatically impact your audit results
• Discover how to foster a can do attitude in
  order to achieve cost savings
• Expand your auditors skills on how to obtain
  tangible cost savings results
• Examine case studies with real cost savings
  results

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• Modern internal auditing, to be successful,
• must be grounded on management support
• and acceptance and on imaginative service to
• management . . . . . The auditor must mount
• continuing campaign to sell his product to
• executive management and the products he
• sells must be of the quality that will capture
• and keep managements interest
• Larry Sawyer . . . . . .
  . 1973

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Assurance
Consultative
Cost Savings
Efficiency
Effectiveness
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Top Audit Skills being Recruited

• Analytical Critical Thinking
• Communication
• IT General Controls
• Risk Management
• Business Acumen
• Effectiveness of Financial Controls is a thing of
  the past
• Balance between Operational/Financial/Compliance

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• CEOs say What I really need is
• an impact player, someone who understands the
  business and the risks it faces.
• A person, who can both delve into detail and yet
  see and explain the big picture.
• Someone who understands auditing and yet doesnt
  talk audit speak, but communicates like a
  business manager.
• someone who is a self-starter, but someone who
  is a finisher or better yet, a strong closer.

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• Find a way to take part in executive- and
  board-level discussions of strategic risks and
  strategic risk management.
• As risk management experts, auditors can help not
  only identify areas of strategic risks, but also
  recommend how to keep these risks at bay,
  mitigate them, and take advantage of the
  opportunities they present.

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The Past Decade An Extraordinary Journey for
Internal Audit

• 1999 Bull Market and Y2K
• 2001 Terrorism, BCP, and disaster recovery
• 2002 Enron, WorldCom, and Cynthia Cooper
• 2002-2003 Sarbanes-Oxley and PCAOB
• 2004-2007 SOX, SOX, and SOX
• 2008 Implosion of the economy
• 2013 Economic crisis realignmentof coverage

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Cost Savings Triangle
Financial Pressure
Opportunity
Good Skills
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Training and Guidance
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Financial Pressure Audit Department Reaction
Participants from the Gain Fortune 100 survey
reported increased audit activity in Cost/Expense
Reduction/Containment of 60.6
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Areas Where Internal Audit Activities Have
Uncovered Cost Savings and Expense Reductions
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The Evolution of Internal Audit
Prevention Assist the division in enhancing internal controls Actively promoting compliance with internal controls Solution Reduce risk while identifying Revenue Streams Cost Savings Facilitator of Positive Change and Internal Best Practices
Detection Report problems/ Recommend solutions Compliance checking against established policy Prevention Benchmark performance of operating processes against best practices
Active
Strategic Business Partner
Operational Process Reviews
Approach
Internal Control Process Reviews
Passive
Compliance Auditing
Business Performance
Internal Control
Scope
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Cost Saving Skills

• Strong Oral Written Communication
• Broad Industry Experience
• Creativity Attitude
• Benchmarking Resources
• Quantitative Analytical Tools
• Research
• Brainstorming
• Treat It Like Your Own Business
• Common Sense

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Auditors Fears

• How can I find money on every audit?
• I dont have time to find money
• I didnt have to do it in my last job
• If management cant find it, what makes you
  think I can
• I dont want to make the auditee mad
• Why wasnt it important until now
• Will I get a percentage of the savings?
• Its not my job to have cost savings
• They didnt teach it to me in school
• We audited in the area before and we didnt find
  any money.
• Give me cost saving audits

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Managements excuses

• We always did it this way
• Why fix it if it isnt broken
• Now is not the time, wait until I retire
• What do I do with the extra people?
• It will be your responsibility if it doesnt
  work
• You tell the President when we have no parts
• I have been here 30 years I dont need you to
  tell me what to do after you did a review in a
  month
• We will always have money
• We will do it but dont report the savings
• That is the way my boss wants it
• We cant do it the system has too many bugs
• It didnt work elsewhere why should it work
  here?

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Cost Savings Techniques that will Dramatically
Impact Your Audit Results

• Audit Charter
• Training and Guidance
• Audit Plan
• Audit Objectives
• Audit Approach
• Reporting Results
• Auditor Recognition

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CHALLENGE KEEPING THE BALANCE
Cost Saving Projects - Operational
Reviews -Management Support -Facilitated Services
Traditional Audits - Assurance -Compliance -Inte
rnal Control
Flexible Audit Plan
Optimal Balance
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Audit Objectives

• Improve Quality, working conditions, procedures
• Increase Revenue, production
• Devise - New equipment, new fixtures, new methods
• Combine - Operations, work processes
• Reduce - Costs, waste, hazards, unnecessary
  maintenance
• Eliminate - Duplication, Waste
• Substitute - Less costly labor, materials and
  tools
• Conserve - Time, materials

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Smart Spending A New Approach that Can Help You
Optimize Your Procurement Spending
Category Savings Percentages
8-12 Computer/ hardware
5-11 Advertising media brokerage
4-8 Travel and entertainment
8-15 Office Supplies
7-11 Packaging/ containers
3-12 Fuel, lubes and gases
6-9 Utilities
9-13 Computer/ software
5-15 Creative agencies
6-8 Office Equipment
6-14 Paper
4-10 Construction supplies
5-15 Maintenance, Repair and overhaul
5-10 Professional services
8-12 Logistics
6-13 Telecoms
3-8 Metals
6-10 Facilities/ equipment maintenance
8-12 Other marketing
4-12 Chemicals
5-12 Temporary labor
3-10 Plastics and Resins
2-12 Rubber products
8-15 Commercial Print
3-7 Capital equipment
Source IBM Institute for Business Value and IBM
Global Business Services analysis.
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• Look for cost savings
• They are there.
• Emphasize in department
• Be realistic
• Dialogue with management
• Monitor
• Report
• Recognize