institute of internal auditors – portland chapter january 21, 2011 / koin tower / portland, oregon
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Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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 auditor’s skills on how to obtain tangible cost savings results
Examine case studies with real cost savings results
Objectives
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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 management’s interest
Larry Sawyer . . . . . . . 1973
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Cost Savings
Efficiency Effectiveness
Assurance Consultative
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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 doesn’t 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.
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
• 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.
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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; realignment
of coverage
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Cost Savings Triangle
Financial Pressure
Opportunity Good Skills
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Training and Guidance
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Financial Pressure –Audit Department Reaction
Participants from the Gain Fortune 100 survey reported increased
audit activity in Cost/Expense Reduction/Containment of:
60.6%
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Areas Where Internal Audit Activities Have Uncovered Cost Savings and Expense Reductions
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
The Evolution of Internal Audit
Prevention Assist the division in enhancing internal controls Actively promoting compliance withinternal controls
Solution• Reduce risk whileidentifying RevenueStreams & CostSavings
• 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
Ac
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Ap
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ScopeInternal Control Business Performance
Compliance
Auditing
Internal Contro
l
Process Reviews
Operational
Process Reviews
Strategic
Business Partner
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Auditor’s Fears “How can I find money on every audit?” “I don’t have time to find money” “I didn’t have to do it in my last job” “If management can’t find it, what makes you think I
can” “I don’t want to make the auditee mad” “Why wasn’t it important until now” “Will I get a percentage of the savings?” “Its not my job to have cost savings” “They didn’t teach it to me in school” “We audited in the area before and we didn’t find any
money.” “Give me cost saving audits”
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Management’s excuses “We always did it this way” “Why fix it if it isn’t 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 doesn’t work” “You tell the President when we have no parts” “I have been here 30 years I don’t 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 don’t report the savings” “That is the way my boss wants it” “We can’t do it; the system has too many bugs” “It didn’t work elsewhere why should it work here?“
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
Traditional Audits
- Assurance-Compliance
-Internal Control
Cost Saving Projects
- Operational Reviews-Management Support-Facilitated Services
Flexible Audit PlanFlexible Audit Plan
Optimal BalanceOptimal Balance
CHALLENGEKEEPING THE BALANCE
CHALLENGEKEEPING THE BALANCE
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
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
Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon
8-12%Computer/hardware
Category Savings Percentages
9-13%Computer/software
6-13%
Telecoms
5-11%Advertisingmediabrokerage
5-15%Creativeagencies
8-12%Othermarketing
8-15%CommercialPrint
4-8%Travel andentertainment
5-10%Professionalservices
5-12%Temporarylabor
8-15%OfficeSupplies
6-8%OfficeEquipment
8-12%
Logistics
7-11%Packaging/containers
6-14%Paper
4-12%Chemicals
3-10%Plastics andResins
3-12%Fuel, lubes andgases
4-10%Constructionsupplies
3-8%Metals
2-12%Rubberproducts
3-7%Capitalequipment
6-9%Utilities
5-15%Maintenance,Repair andoverhaul
6-10%Facilities/equipmentmaintenance
Smart Spending: A New Approach that Can Help You Optimize Your
Procurement Spending
Source: IBM Institute for Business Value and IBM Global Business Services analysis.
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