Audit findings and the report

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Go from boring to brilliant. How to deliver audit results.

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Audit findings and the report

  1. 1. System Findings and the Audit Report Dennis R. Arter, CQA October 2013
  2. 2. What will we cover? Audit steps and rules  Definition of a Finding  How to write a Finding  Purpose of the audit report  How to write an audit report  Improve performance through audit 
  3. 3. What is an audit? Requirements Findings Observations Observations Observations Findings Findings Conclusions Evidence Findings
  4. 4. Four Phases of the Audit  Preparation (25% of the audit)  Performance (50% of the audit)  Reporting (15% of the audit)  Closure (10% of the audit)
  5. 5. First Rule of Auditing: 1. Audits provide information, about the future, to decision-makers
  6. 6. Second Rule of Auditing: 2. Auditors must be capable of doing their job.
  7. 7. Third Rule of Auditing: 3. Audits measure to agreed criteria
  8. 8. Fourth Rule of Auditing: 4. Conclusions are based on facts
  9. 9. OK, so now what?  We have all this good information. What should we do with it?
  10. 10. The reporting process Requirements Problem Bad facts Bad facts Bad facts Problem Problem Conclusions Evidence Problem
  11. 11. Definitions  Finding “An audit conclusion which identifies a condition having a significant adverse effect on the quality of the activity under review.” (Arter)  Nonconformity “Non-fulfillment of a requirement” (ISO 9000:2008) Observation (No longer in use)  Positive Practice  “An audit conclusion which identifies a condition of exceptional merit.” (Arter)
  12. 12. Do the Data Dump GOOD Lorem ipsum dolor sit amet, consectetuer adipiscing elit. Quisque auctor. Vivamus volutpat ipsum at metus.  Curabitur non lectus rutrum eros suscipit interdum. Vivamus mattis. Ut porttitor, dui malesuada commodo vehicula, purus nisi imperdiet nibh, et posuere erat dui eu dolor.  Praesent et velit a urna faucibus ornare. Ut nec justo ut velit consectetuer tincidunt. In gravida lectus et ante. Nullam eros. Ut bibendum purus non magna. BAD Fusce fermentum. Morbi tincidunt. Vivamus interdum mi vitae orci. Quisque ut nunc ut nibh vehicula tempus. Nam arcu. Etiam lacus.  Vestibulum non diam. Sed dictum tincidunt lacus. Aliquam sagittis, diam non volutpat tempus, neque augue viverra augue, vitae condimentum lorem nulla quis felis.  Donec quis erat. Morbi auctor felis. Nulla diam eros, lobortis vel, rhoncus sed, placerat ac, nulla. Fusce porttitor dui condimentum justo. Vestibulum dolor lacus, consequat blandit, feugiat ac, varius nec, augue. Aliquam et tortor quis quam adipiscing vehicula.   Nam molestie. Praesent pretium orci in purus. Phasellus massa dui, tincidunt a, dictum sed, posuere vel, lorem. Maecenas et quam. Nullam mi. Proin ac eros.   Praesent malesuada nunc non risus. Praesent fermentum vehicula libero. Curabitur libero. Ut molestie massa. Suspendisse urna. Vestibulum ante ipsum primis in faucibus orci luctus et ultrices posuere cubilia Curae; Sed nulla.  Duis in turpis. Nunc lobortis. Ut massa nisl, rhoncus imperdiet, faucibus et, semper et, lectus. Lorem ipsum dolor sit amet, consectetuer adipiscing elit. In hac habitasse platea dictumst.  Mauris quis nulla sed mauris scelerisque pellentesque. Donec sit amet sem. Proin quis velit. Ut ut erat ut mi viverra adipiscing. Sed sed ante. Integer at dolor. Vivamus porttitor est et dui. Phasellus id dui.  Integer nonummy. Fusce justo magna, ultricies pretium, rutrum ac, ultrices a, ante. Morbi gravida massa quis elit. Etiam nulla. Cras congue nibh eget metus. Integer varius nulla eget nibh. Ut at sem sit amet ipsum gravida viverra. Quisque dignissim ultricies metus. Fusce ullamcorper. Nullam nec nisl eget nibh convallis molestie. Aliquam commodo accumsan leo. Cras ligula. Sed elit ligula, faucibus sit amet, semper et, accumsan quis, neque. Etiam in augue ut nunc tristique consectetuer.   Ut cursus aliquet eros. Aenean sit amet tortor eget ipsum bibendum bibendum. Nunc vel justo sagittis libero iaculis bibendum. Donec felis erat, egestas nec, posuere ut, tempor malesuada, quam. Donec arcu nibh, blandit vitae, ullamcorper eu, posuere non, eros.    Curabitur dapibus euismod nulla. Class aptent taciti sociosqu ad litora torquent per conubia nostra, per inceptos hymenaeos.  Fusce vehicula erat id ante. Aenean non libero ut tellus scelerisque ultricies. Aenean ac leo fermentum pede porttitor varius. Donec et justo quis nisl faucibus ultricies. In odio. Pellentesque habitant morbi tristique senectus et netus et malesuada fames ac turpis egestas  Vivamus eu eros vestibulum sapien nonummy ullamcorper. Aliquam congue est sed turpis.  Nullam suscipit lobortis dui. Nam ipsum. Fusce fermentum. Morbi tincidunt. Vivamus interdum mi vitae orci. Quisque ut nunc ut nibh vehicula tempus. Nam arcu. Etiam lacus.  Vestibulum non diam. Sed dictum tincidunt lacus. Aliquam sagittis, diam non volutpat tempus, neque augue viverra augue, vitae condimentum lorem nulla quis felis.  Donec quis erat. Morbi auctor felis. Nulla diam eros, lobortis vel, rhoncus sed, placerat ac, nulla. Fusce porttitor dui condimentum justo. 
  13. 13. Do the Data Chunk Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Fact Problem Problem Problem
  14. 14. Bank audit example Equip. maintenance Teller competencies Network down  Backup server data  Bill sorting machine  Doors, locks, and keys  Cash machine jams  False security alarm    Debit and credit reversed Cash drawer daily audit No pattern   Key-in entry mistake Coins falling out of rabbit
  15. 15. Step 3 – Identify the pain Cost  Production  Risk 
  16. 16. Step 4 – Put them together Problem + Finding Pain
  17. 17. Step 5 – Turn piles over Statement of the system control problem ◦ ◦ ◦ ◦ Bad fact Bad fact Bad fact Bad fact
  18. 18. Finding Lack of equipment maintenance is causing higher operating costs.  Computer network was down for a total of 25 minutes during the month of July.  Backup server was loaded with out of date data files on July 12.  Hill Street branch experienced 3 cash machine paper receipt jams in June.  Bill sorting machine malfunctioned on July 3 and again on July 9.  Three branches experienced entry door lock jamming this year. One resulted in a key breaking.  Oak Lawn branch experienced a false security alarm on July 20. Police responded.
  19. 19. Cause and effect? Whoa! That’s much too hard (and my firm is not ready to accept this approach)! Is there a simpler way?
  20. 20. Finding Non-conformances are not being identified throughout the company. ◦ Only receiving inspection is presently using the NCR Form (#278). ◦ Operators filling boxes often have to bend pigtails to get the components to fit in the box.This is not being recorded. ◦ Observed pigtail variance on line 3 averaged 1/2 inch on Tuesday during the audit. These are called finding sheets
  21. 21. Can we say good things? These are called Positive Practices  Constructed just like negative Findings, except use good facts rather than bad facts. 
  22. 22. Write the Summary  Overall evaluation of the management controls ◦ One or two paragraphs ◦ Very subjective (by design) Is the operation safe? Efficient?  Is there reason to believe that controls will continue?  Are there any regulatory risks? 
  23. 23. Focus on the system  System: grouping of interrelated processes designed to achieve a common objective.  To have lasting effect (improvement), stakeholders must have a desire to change the system
  24. 24. Now, let’s tell someone Informal report (closing meeting)  Formal report (paper or virtual) 
  25. 25. Informal report Closing meeting always required  Present the overall summary first  Pass out draft Findings and Positive Practice sheets  Leave promptly 
  26. 26. Written report  Background material (what, why, who)  Overall summary  Highlight of problems  Highlight of strengths  Two pages plus attachments
  27. 27. Audit report Finding 3 Finding 2 Finding 1 Audit Report 1. Background 2. Summary and Conclusions 3. Any Deficient Areas Lead Auditor Date
  28. 28. Report distribution You work for the audit boss  Audit team writes report  Team leader drafts cover letter  ◦ Background ◦ Executive summary ◦ Request for corrective action Audit boss sends report out (internal)  Buyer sends report out (external)  Auditors Audit Boss Buyer Auditee
  29. 29. What next? Audit Finding Corrective Action Request Output of audit becomes input to corrective action. (But that’s a topic for another speech!)
  30. 30. Questions?
  31. 31. Summary: Phases of the Audit Preparation  Performance  Reporting  Closure 
  32. 32. Summary: Value of the Audit  Audits provide confidence: ◦ Controls are present ◦ Controls are used ◦ Controls really work ◦ Controls will continue
  33. 33. Summary: Rules for the Auditor You must be prepared  You must dig for threads and patterns  You must look for cause and effect  Managers understand the language of business (cost, production, risk) 
  34. 34. Summary: Rules for the Audit 1. Audits provide information 2. Auditors must be qualified 3. Audits measure to agreed criteria 4. Conclusions are based on facts
  35. 35. Improved performance
  36. 36. Thank you! Dennis R. Arter, CQA  Columbia Audit Resources  Kennewick, Washington  (509) 783-0377  Dennis@Auditguy.net  Web site: http://Auditguy.net  Blog site: http://Auditguy.blogspot.com 

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