Making Do With LessAdapted from: Auditing in Tight Times & Making Integrated Audits Reality, Internal Auditor Magazine, April 2009Internal Auditors Doing More, Need More Training, Journal of Accountancy, March 2009 Department of Finance Office of State Audits and Evaluations OSAE sets the PACE ~Premier Auditing Consulting and Evaluations !
The Budget Crunch Times of budget cuts are the worst time to reduce audit resources and auditors. How can chief auditors continue to provide assurance with less staff and smaller budgets?
The Budget Crunch Reduce the time spent on each audit Not preferable Often first time audits A lot of uncertainty of inherent and residual risks Reduce the number of audits Better than reducing quality Auditors mistakenly believe they have to maintain the same audit coverage as previous years
Tips to Manage Budget Cuts Show the impact Change the risk profile Invest in yourself Find efficiencies Don’t wait for the cut Don’t panic
Show the Impact Discuss priorities with management Be specific about the services being reduced or cut Gives management a chance to request some audits be kept and others cut instead
Show the Impact If Management insists all audits are kept: Review the scope of each assignment Focus on high risk areas that offer greatest value for resources spent Be fully transparent about any objectives or risks not addressed This will make the report more useful and prevent misinterpretation of the level of coverage
Change the Risk Profile Focus on risks that could destroy stakeholders or stop the organization from building value. Trouble can arise in lower risk areas when high risk areas are well controlled. Coverage should be added to make sure low risk areas are, in fact, low risk areas.
Change the Risk Profile Financial control remains important Will we be able to collect on our contracts? Will our contractors/suppliers go bankrupt? Are cost saving measures delivering expected benefits? There are two areas gaining increased attention: Strategic/Business risk Operational risk
Change the Risk Profile “Internal Auditors are expanding their roles beyond compliance to include advising on business improvements and strategy, but their skills in these specialty areas may not be keeping up… internal audit’s traditional competencies don’t fully meet the needs of today’s organizations.” (Ernst and Young 2008 Global Internal Audit Study)
Invest in Yourself “Lack of time dedication to training efforts is the key impediment to specialty skills development.” (Ernst and Young 2008 Global Internal Audit Study)
Invest in Yourself Audit leaders should: Promote their shop’s value Redouble efforts to ensure work addresses changing risk factors Distinguish yourself by your credentials: Professional education Training Additional certifications Demonstrate excellence and quality of work
Find Efficiencies Thoroughly examine audit operations to stretch funding Work smarter, better, faster Avoid over-documentation Make use of technology Look at areas such as audit planning, development of risk assessment, and individual assignment planning
Find Efficiencies “One truly integrated team, managing a comprehensive, integrated audit, can accomplish the work of two teams…” (Helpert and Lazarine, Internal Auditor Magazine)
Find Efficiencies Understand your organization’s approach to the three key processes: Planning Fieldwork Reporting
Don’t Wait for the Cut Be proactive: Identify key issues in the organization Speak with personnel Look for tangible ways to help management: Meet with them Attend staff meetings Inquire about pending issues
Don’t Wait for the Cut Don’t be in the audit report and recommendation business, be in the “change” business: Address risk and how to make the department better Showing an audit’s worth might reduce cuts
DON’T PANIC! You’ve still got control!
Don’t Panic You can still decide: What will be audited When audits occur Scope of the audits If you have a mandate, an audit charter, a reporting structure, an audit universe, and a plan, then all the necessary components are already in place.