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Thinking Like an Auditor

  • 10 Steps to Solving Market Problems in Internal Audit

    May 19, 2017 | By Colleen Knuff, CPA, CIA, CISA, CRMA

    I recently spoke with an auditor who was lamenting about his organization hiring a team of consultants to evaluate how well a business unit was addressing process changes needed to better solve a set of client problems. He thought internal audit should have been tasked with this work. Audit has the competency and it would have cost the organization a lot less. However, he believes his organization doesn’t value internal audit as a relevant partner. As auditors strive to become relevant partners to our organizations, we can increase our value by focusing on solving market problems.

    TeamMate Product Management follows a methodology based on solving market problems. This means that we need to understand how our customers work, why they perform certain tasks, how they perform those tasks, and what aggravates them in the process. If we do our job really well, we can identify what activities on their daily list they wish could be automated so they can focus on strategic tasks.

    With all that knowledge, we then explain to our development team the details of a specific market problem to solve. What do they need to accomplish? What is the problem? Why is it a problem? How often does this problem occur? What impact does the problem have on their work? We do not, however, propose a solution during this discussion. We need to know everyone working together to solve the problem understands the user and her pain point so that they design the best solution, not just a workable solution. It needs to be a solution that will allow that user to feel heard, understood, and engaged with TeamMate, not just as a software vendor, but as a partner.

    So how can internal audit use this approach? After all, internal audit wants to be seen as more than just a vendor of an audit report. Here are 10 steps that demonstrate how internal audit can use the market problems approach:

    1. Do Your Homework
      Educate yourself about who you are auditing. How well did this group perform last year? Are there metrics to review? Who leads this group? Do they understand their 'market'? Can they articulate their clients’ market problems?
    2. Identify the Primary Pain Point
      During your entrance meeting, ask the business what problems they have that they are trying to solve. They may not respond to the term 'problem', so consider asking, “What is the primary objective for your group this year? Are there process or back office problems you deal with frequently that are a pain point?”?
    3. Make Connections
      You see across the entire organization. If you know that the current business manager has the same or similar business objective as someone else in the organization, why not connect them? It doesn't mean that you are endorsing the other business manager's approach but shared knowledge across the organization reduces the number of times people reinvent the wheel.
    4. Ensure Team Understanding
      Ensure your audit team knows who they are auditing. I don't just mean name and title. Who are they really? How long have they been with the organization? Have they recently transferred to this group? Were they recently promoted and are still learning the job? Have they been audited before? Were they receptive to our feedback? Ensure your team can reframe who they are working with so they can get to the next step.
    5. Expand Test Coverage
      In addition to the work you planned to do, ensure you cover their primary objective or pain point - even if that wasn't in your original audit scope. If you focus on the primary objective, you will identify potential risks, evaluate controls to mitigate those risks and test those controls specifically. You will be able to report back on risks/controls they haven't considered or are not functioning correctly or you might be able to provide assurance that plans to achieve the objective are well designed. Either is useful to the business. You might be able to elevate their concerns over process inefficiencies to senior management which helps the business stay on track.
    6. Scrutinize Control Design & Function
      Every time you test a control, ask yourself who performs the task? How frequently? What problem does it solve or prevent? Does it cause a pain point for the person performing the task? The last one is particularly important. A control may be simple, secure, and effective, but incredibly tedious. Can you suggest a solution to solve the pain point?
    7. Consult the Community
      If you are auditing a new area or function and you aren't sure where pain points should be, and the business isn't really helping, consult your internal audit community. Remember that there are other TeamMate users out there who may have already solved this market problem.
    8. Use the Solving Market Problems Framework on Findings
      When you write up your findings, use the solving problems framework. “Frank, who is a first-time people manager, has to review two separate reports on a weekly basis to confirm staff time off. This reconciliation effort takes him 2 hours every week and costs the organization an entire day of productive time each month.” This demonstrates that not only do you understand who Frank is and why this is a pain point for him, but that it happens frequently and it is costing the organization in unproductive time. In fact, if this issue exists across the organization, throw that in too. It may be only 1 day per month of Frank's time, but it could be 100 days per month across the organization. This does not mean you cannot articulate the IIA Standards Framework of criteria, conditions, cause and effect, but ensure it’s meaningful.
    9. Consider a Balance Report
      I realize not all organizations use a balanced report approach. However, consider adding a comment about how the business is solving their own market problems. If you note a process improvement, or change in how the business is dealing with customers, you need to audit the change. You will need to ensure the change is well designed, operates as intended and is effective. If it is, why not highlight that? It shows that internal audit can recognize a job well done in addition to areas that still need work.
    10. End with the Start
      During your closing meeting, start with your understanding of their market problems and your assessment of those problems. If your discussion is made relevant to your audience, you are demonstrating you are more than just the vendor of the audit report. You are the relevant partner they can call when there is a problem to solve.

    Using a market problems approach in your internal audit engagements doesn't mean you have compromised your independence or turned into a consultant. It does, however, demonstrate your value to the organization when you can clearly articulate you understand the business challenges and give them direct feedback for those challenges. Perhaps this means that senior management will consider asking internal audit to conduct a review on their behalf rather than hiring an outside consultant.

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