Audit best practices in retail sector

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Audit best practices in retail sector

  1. 1. Store Audit Management Solution for Retail Enterprises Retailers are increasingly looking at utilizing operational efficiency and compliance of stores to enhance their brand value. One of the critical tools they are adopting to achieve this goal is a systematic and standardized store audit program. Whether retailers want to provide an unmatched customer experience or maximize brand integrity across stores, they must leverage an effective store audit program. Store audits can increase productivity, prevent errors, and ensure data integrity. They also ensure that a store's operations and processes are aligned with the retailer's standards for service, merchandising, and overall corporate compliance requirements. Other than reducing shrinkage, assisting in loss prevention programs, ensuring compliance with regulations and protecting company assets, effective store audits also strengthen a store's operational performance. Retailers can also glean valuable insights that empower them to improve the store's efficiency and controls. MetricStream's Retail Store Audit Management Solution MetricStream's solution helps retailers strategize, plan, streamline, evaluate and improve audit processes across their network of stores, and foster a culture of operational and service efficiency, integrity and accountability. It enables retailers to evaluate and efficiently manage key control areas such as safety and security, pricing, inventory control, human resources, payroll processing, cash control, cashiering and customer service, shipping and receiving and damaging and non-conforming merchandise. The solution encompasses detailed embedded audit templates and checklists to efficiently undertake an audit with a logical structure and hierarchy. The solution includes end-to-end functionalities for managing the complete audit lifecycle spanning audit planning and scheduling, store data collection, development of audit reports and recommendations, and review and implementation of recommendations, enabling retailers to efficiently monitor compliance.Standardized scorecards can further be utilized by retailers to evaluate and assign points to each control area being assessed during the audit. The solution offers a unique offline and mobile solution for data capture that allows auditors to record their findings in remote at remote stores, and synchronize this data seamlessly with the central audit database. It also provides sophisticated capabilities such as dashboards, flexible reports, and a centralized document repository to gain complete visibility into the audit exercise. The key benefits of the solution include:  Automates reporting and provides advanced analytics helping retailers enhance audit efficiency and strategic decision-making through actionable insights  Leverages store audits to boost performance of stores and comply effectively to regulatory and operational objectives  Establishes a well-integrated training program to improve the efficiency of underperforming stores  Helps manage a wide array of store audit processes through a closed-loop approach  Aligns audits results with corrective action and preventive action process
  2. 2.  Ensures proactive participation of users in important tasks such as initiating actions, responding to events, managing to-do lists and assigning tasks through web-based interactive tools  Helps retailers gain increased visibility into key performance metrics, which facilitates informed business decisions Enables retailers to drive business growth, and supports complex business processes and dynamic data, through its flexibility and scalabilityStore Audit Management Solution for Retail Enterprises Retailers are increasingly looking at utilizing operational efficiency and compliance of stores to enhance their brand value. One of the critical tools they are adopting to achieve this goal is a systematic and standardized store audit program. Whether retailers want to provide an unmatched customer experience or maximize brand integrity across stores, they must leverage an effective store audit program. Store audits can increase productivity, prevent errors, and ensure data integrity. They also ensure that a store's operations and processes are aligned with the retailer's standards for service, merchandising, and overall corporate compliance requirements. Other than reducing shrinkage, assisting in loss prevention programs, ensuring compliance with regulations and protecting company assets, effective store audits also strengthen a store's operational performance. Retailers can also glean valuable insights that empower them to improve the store's efficiency and controls. MetricStream's Retail Store Audit Management Solution MetricStream's solution helps retailers strategize, plan, streamline, evaluate and improve audit processes across their network of stores, and foster a culture of operational and service efficiency, integrity and accountability. It enables retailers to evaluate and efficiently manage key control areas such as safety and security, pricing, inventory control, human resources, payroll processing, cash control, cashiering and customer service, shipping and receiving and damaging and non-conforming merchandise. The solution encompasses detailed embedded audit templates and checklists to efficiently undertake an audit with a logical structure and hierarchy. The solution includes end-to-end functionalities for managing the complete audit lifecycle spanning audit planning and scheduling, store data collection, development of audit reports and recommendations, and review and implementation of recommendations, enabling retailers to efficiently monitor compliance.Standardized scorecards can further be utilized by retailers to evaluate and assign points to each control area being assessed during the audit. The solution offers a unique offline and mobile solution for data capture that allows auditors to record their findings in remote at remote stores, and synchronize this data seamlessly with the central audit database. It also provides sophisticated capabilities such as dashboards, flexible reports, and a centralized document repository to gain complete visibility into the audit exercise. The key benefits of the solution include:
  3. 3.  Automates reporting and provides advanced analytics helping retailers enhance audit efficiency and strategic decision-making through actionable insights  Leverages store audits to boost performance of stores and comply effectively to regulatory and operational objectives  Establishes a well-integrated training program to improve the efficiency of underperforming stores  Helps manage a wide array of store audit processes through a closed-loop approach  Aligns audits results with corrective action and preventive action process  Ensures proactive participation of users in important tasks such as initiating actions, responding to events, managing to-do lists and assigning tasks through web-based interactive tools  Helps retailers gain increased visibility into key performance metrics, which facilitates informed business decisions  Enables retailers to drive business growth, and supports complex business processes and dynamic data, through its flexibility and scalability Corporate and Regulatory Compliance Management Solution for Retail Enterprises With increasing number of regulations and expanding operations, retailers have to manage multiple legal, corporate and regulatory compliance requirements at the enterprise level as well as across departments including merchandising, retail operations, supply chain, HR, marketing and advertising, property and real estate. Increasing lawsuits and litigations, and risks to brand reputation have also made it imperative to identify and mitigate regulatory, legal and corporate non-compliance risks. The current approach and programs may not be efficient to handle the multitude compliance requirements including Food Drug and Cosmetics Act, Consumer Product Safety Improvement Act (CPSC/CPSIA), Fair packaging and labeling act (FPLA), Nutritional labeling and education act (NLEA), Food Safety Modernization Act (FSMA), Resource Conservation and Recovery Act (RCRA), Toxic Substances and Control Act (TSCA), Foreign Corrupt Practices Act (FCPA), Fair Labor Standards Act (FLSA), Employee Retirement Income Security Act (ERISA), and SOX Compliance. Also, there are requirements such as LEED certifications, employee safety, fire Safety, anti-money laundering (AML), and Consumer Trade Partnership against Terrorism (C-TPAT). While the compliance team has to have a direct control on compliance programs covering corruption, employment and labor, insider trading, anti-trust, data-privacy/security, they should also indirectly oversee fraud, product safety compliance, import compliance, environmental compliance, political contribution compliance, and vendor compliance programs. This often leads to resource constraints and oversights. Also, many retailers operate across geographies making visibility and increased control over compliance efforts a complex task. Thus, the manual and ad-hoc approach to handling compliance programs will be inefficient and costly. Organizations should adopt an integrated, automated and centralized approach to managing regulatory, legal and corporate compliance programs and requirements, to minimize the risk of compliance failures. MetricStream Legal and Corporate Compliance Management Solution
  4. 4. Retailers can adopt a collaborative, streamlined, and consistent approach to manage multiple compliance programs with MetricStream's Enterprise Compliance Solution. Based on the MetricStream GRC platform, the solution provides an automated and centralized approach to managing corporate, legal and regulatory compliance requirements. They can efficiently manage applicable departments, processes, businesses, impacted employees and third parties, and implement processes, controls, and risks in a single, unified framework. Regulatory, legal and corporate compliance teams can thus break down siloes, and enhance transparency and accountability. The solution helps create and implement relevant policies, standards and procedures; and establish teams, responsibilities and tasks for management of compliance programs. It also provides monitoring and evaluation frameworks, helps assess risks, facilitates self-assessments, and enables retailers to capture and respond to incidents. Retailers can leverage the solution to access real-rime risk and compliance intelligence that will enable them to take informed strategic decisions, and foster a culture of compliance and ethics across the enterprise. The key benefits of the solution include:  Single unified solution to manage operational as well as management aspects of the compliance program  Ability to manage and monitor the entire compliance lifecycle - ranging from policy development and distribution, to compliance training, risk assessments, control monitoring, audits, due-diligence investigations, issue management, and reporting by providing a single point of reference  Enhanced and efficient control and visibility by aligning corporate compliance with regulatory compliance activities through a federated approach  Sophisticated capabilities to togather and collate vital compliance data from multiple business units to be viewed by the top management  Capabilities and functionalities to map policies and controls to regulatory requirements in a many-to-many manner  Integration of regulatory content through data feeds, and automatic alerts to users  Closed-loop process for feedback and a streamlined compliance training mechanism at various levels in the company Internal Audit Management Solutions for Retail Enterprises The retail industry is witnessing several challenges such as the exponential growth of online retail, spread of multi- channel retailing aided by mobile technology, emergence of new markets, new innovative business models and changing behavior of customers from shop-till-you-drop to sustainable consumption. Add to these, the increasing legal and regulatory compliance requirements, policy issues, emerging risks, and supply-chain disruptions, and the performance of a retail enterprise takes a beating. With these challenges, it is evident that retailers cannot risk ineffective auditing, as the consequent operational inefficiencies can lead to much higher losses in terms of cost and reputation. Progressive internal auditing practices and an automated approach will help zero in on threats and opportunities throughout an enterprise. It will also help retailers establish and monitor policies and reliable controls for business processes, help avoid oversight, and achieve their strategic plans and goals. However, retailers need to move away
  5. 5. from traditional audit approaches, obsolete desktop based software solutions, and spreadsheet-based systems, which do not help meet these requirements. MetricStream's Internal Audit Management MetricStream's Internal Audit Management solution, based on the IIA standards, is a comprehensive application designed to help retail organizations adopt industry best practices, manage multiple audit types, and optimize a wide range of audit-related activities, data and processes. The solution helps automate end-to-end audit lifecycle including risk assessments,risk-based audit planning, audit scoping, audit scheduling and execution, managing audit findings, issue management and audit reporting. The solution is equipped with comprehensive features such as workflows, extensive audit work papers, checklists, email-based notificationsand alerts, and offline audit functionalities, which enable retailers to adopt industry best practices. The multi-language capabilities of the solution benefit culturally diverse global retailers. In addition, multiple geographically dispersed audit teams can anytime access the web-based solution, and relevant data and metrics, as well as manage and monitor the progress of tasks and projects. Key benefits of the solution include:  Provides a systematic and consistent audit process across business units, divisions, departments and locations  Accelerates and streamlines the audit management cycle and provides greater control and clear visibility into issues, status and progress to all stakeholders  Offers a unified view of all audit programs, processes, tasks, timelines, issues and risks, across the enterprise through powerful dashboards and reporting capabilities  Improves audit scheduling and resource management that will in turn increase efficiency of the audit staff, enabling them to focus on value-oriented functions such as analyzing and recognizing trends in the audit data  Eliminates errors and inconsistencies with a standardized audit data collection, analysis and reporting process across the enterprise  Provides role-based workflows, reports and dashboards for key entities such as the Chief Auditor, Vice President Audit, Director Audit, Lead Auditor, Audit Manager, Auditor and Auditee I’ve been working with a major retail brand and my engagement has included an audit and assessment of retail best practices. Although most of my work is proprietary, I wanted to share some of my findings here because I’ve found some really interesting patterns. My investigation covered several different retailers (selected for confidential reasons), representing a range of non-apparel product categories, and business sizes and scopes, including:  The Container Store – the $650MM “original storage and organization store”  IKEA – the Swedish home furnishings big box and catalog concept  Uncommon Goods – the niche catalog and online gift retailer
  6. 6.  Wegmans – the $5BB regional grocer with 75 stores in 5 states  Williams-Sonoma –the $3BB “catalog for cooks” Although each of these concepts has its own strengths, together they paint a good picture of what works best in retail. Here are6 best practices from the group: 1. distinctive brand personality More than the products these companies sell, their brand personalities are what distinguish them from less remarkable concepts in their categories. From The Container Store’s positivity to IKEA’s pragmatism to Uncommon Goods’ whimsy, the personalities of these brands are distinct and memorable. The brand personalities manifest themselves in the entire shopping experience – from the visual strategy to sensory stimuli to product assortment to customer service to tone of voice in messaging. In fact, you could take all the branded signage down and still know you are in a particular brands’ store. Generally speaking in retail companies, merchants drive the business – they set the brand strategy through the product range and assortment they cultivate. But the strength of execution on brand personality in the concepts I investigated suggest thatmarketing, merchandising, and store operations are all working together to deliver a distinctive personality which permeates the entire customer experience. 2. self-promotion Most of these brands are unabashed in their self-promotion – they very clearly communicate their product and brand stories, and their features and services. But I’m not talking about advertising or PR. In addition to these traditional methods, the companies I studied integrate their brand promotion into the actual customer experience. Through pages on their websites, in their catalogs, and in their in-store collateral, they actively promote what makes them different and better than other companies. Wegmans, for example, explains in a website section “How Wegmans Supermarkets Compare to Others.” Folksy stories about the company and profiles of designers are sprinkled throughout IKEA’s catalogs. Executing on your brand promise (doing what you say) is obviously the priority for any company – but once you’re doing that, it’s OK to let people know. This kind of self-promotion is welcome because it has integrity and it invites people into relationship with the brand. And it’s not considered bragging if you’re good. 3. value added services and content Every one of these retailers delivers more value than their product alone.
  7. 7. Some add value to their products through the stories and details they provide about their products. Uncommon Goods tells its shoppers about the origins, cultural significance, and manufacturing processes behind their products. In doing so, they enable customers to buy into shared values and significance. Others show how to use their products. Whether it’s recipes from Williams-Sonoma or organizational tips from The Container Store, the value of these brands’ products increases as customers’ usage of them improves. Design and installation services are additional sources of revenue for IKEA and The Container Store. Classes play a similar role for Williams-Sonoma and Wegmans. So these are smart business offerings – but they’re also smart marketing approaches, as they facilitate more personal interactions and engender trust among customers. 4. sensory engagement When a customer walks into a Williams-Sonoma store, she gets a feeling of walking into a kitchen. It usually smells like food because there’s a cooking demonstration or samples being offered; customers’ sense of taste are also tickled by these. Kitchen furnishings are used for displays, fabrics cover many surfaces, and aprons are worn by the staff, engaging the visual and tactile senses. It’s a full-sensory experience. Uncommon Goods which does not have physical locations engages its customers’ senses through its multi-media website. Sound files let you hear what an alarm clock sounds like; videos show you what products do when they’re turned on. An immersive, entertaining shopping experience comes from engaging as many senses as possible. 5. cross-channel shopping experience 2.0 As recently as only a couple of years ago, retailers could distinguish themselves by offering the option of ordering a product online and then picking it up in store. Or of buying a product a product online and returning it to the store. Now these options are expected and quite commonplace. To really stand out and serve customers well, retailers must take the cross-channel shopping experience to the next level. The Container Store stands out as a leader in this area. Their “Go Shop” platform offers services support their brand value of simplicity and streamlining, including options such as: - order online, call when you’re on the way to the store, and get the product delivered to your car when you arrive. - use a scanner instead of a shopping cart to select your items in store and get the products delivered to your home.
  8. 8. IKEA and Wegmans not only allow you to create shopping lists online but they produce itemized print-outs indicating where you can find the items in store. IKEA also informs you whether or not the product is in-stock at your local store. No doubt, these tools and processes not only make it easier for customers to shop; but they also make it easier for them to buy more. So facilitating cross-channel shopping is a win-win for the companies and their customers. 6. strong organizational culture and values Almost all of the companies I researched have strong organizational cultures and values. And these are manifested in a superior customer experience. Wegmans and The Container Store are renown for how well they treat their employees. No wonder their employees seem so happy and are so helpful! IKEA’s earth-friendly business practices and commitment to product affordability make their products unique. The value Uncommon Goods places on social responsibility is a primary reason why people shop the brand. As such, these companies are the ultimate examples of what a brand is – that is, a brand is a bundle of values and attributes which define:  the value delivered to customers  the unique way of doing business with all stakeholders. INTERNAL AUDIT RISK ASSESSMENT BEST PRACTICES As the COSO Internal Control – Integrated Framework (2013) states, “risk assessment involves a dynamic and iterative process for identifying and assessing risks to the achievement of objectives.” Yet many in-house internal audit functions look at the annual internal audit risk assessment process as a check-the-box activity, required mainly to be in compliance with the IIA Professional Practices Framework. The internal audit risk assessment presents an often missed opportunity for internal auditors to understand their organization’s evolving objectives and implement a more dynamic risk-based approach to the internal audit process. This whitepaper outlines considerations for a successful risk assessment and takes a look at a typical
  9. 9. audit scenario to see where mistakes are commonly made. Read this whitepaper to learn about: • Reviewing standard internal audit procedures • Identifying internal audit risk assessment red flags • Five steps to turn risk assessment principles into positive actions

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