This is the final article on the concept of ‘adding value’ and follows on from my three previous articles discussing the topic. The topic is the final benefit criteria from my original concept and in many ways, I would suggest, the – most – likely criteria to pop into most people’s head when asked how they have, can or are adding value.
I often think it is unfortunate that money is the first thought when assessing how an internal audit can add value. I have been asked numerous times how a report’s findings and recommendations will save the organisation money and therefore in the eyes of the questioner, ‘add value’.
Too often I get the impression that for the saving of money to be a benefit, it has to be directly quantifiable and therefore should be explicit within either the report or the year end assessment of an internal audit service’s performance. This is something I have often advised Audit Committees to reconsider, including when developing performance metrics or effectiveness evaluations, not always with success.
I do not believe that the primary performance measure of an internal audit service should be quantifying the money it has saved. If the internal audit service is delivered well, by skilled staff, then it will always add value to an organisation and may even save it some money, but in many instances this is likely to be an indirect saving.
An example to help illustrate my point: An internal audit identifies a process with a number of redundant controls that are manually undertaken and time consuming. It also identifies that this process is paper based, despite the department having an IT Software system and cloud filing structure in place. At the planning meeting the lead auditee has highlighted significant staff pressures and has concerns the review will further hamper the team’s efforts to complete their tasks. The recommendations made request the removal of redundant controls, staff members be reallocated to other tasks across the department and that the audit trail for the transactions be digitalised.
In this example it can be seen that the internal audit will have saved the department’s staff time which can be utilised on other tasks, thereby reducing some, maybe even all of the pressure on the department. It will have also helped the organisation reduce the volume of paper, printer ink and physical storage required. In addition, should the ICT Software provider and cloud storage solution provide Green IT, it will have helped the organisation with reducing its impact upon the environment.
Now, we could spend some additional time reviewing expenditure patterns, usage of resources and quantify any staff productivity gains that have been derived from the internal audit review (at additional cost to the organisation I should add); or – we could focus on the other two benefits criteria first (Time and Values) and accept that there is an indirect monetary saving being made in the organisation as well.
I hope these articles have been useful to internal auditors and internal auditees alike. Thank you for taking the time to read them.
Kevin Limn, Deputy Managing Director, TIAA
Additional articles in this series;