Value Added Auditing

In business and industry, auditing has long been viewed as a time consuming and daunting task that is simply meant to pinpoint failure and non-compliance. Due to this negative stigma, organizations often fail to embrace the internal auditing process for what it truly is – a business improvement tool that adds value throughout the entire company.

In today’s business marketplace, it’s more important than ever for companies to be able to set aside the negative connotations associated with the word “audit” and start taking advantage of the critical insight into business operations that can be gained from value added auditing.

Auditing for Compliance vs. Value Added Auditing

It’s understandable why management is sometimes adverse to the internal auditing process. Looking back throughout history, the audit was created with the end-goal of ensuring that companies were complying with government or industry regulations. When audits would take place and non-compliance existed, organizations were left with the weight and consequences of failure on their shoulders.

Nothing has changed in business and industry in regards to compliance. Auditing still needs to take place to ensure that companies are meeting all of the required quality standards and government regulations. While that part of the process can’t change, what can change is the affirmation of failure that companies have long dealt with once the auditing process has been completed. However, this change is dependent on whether businesses focus on compliance auditing or value added auditing.

What’s the difference? Auditing for compliance misses the wealth of opportunity that exists for business improvement. When a business’s only intention with their audit is to make sure that they are within compliance, the result is going to be a stressful experience that repeats itself audit after audit. This is because the business will be constantly be in a repetitious pattern of finding and fixing areas that are out of compliance, rather than centralizing their efforts on preventing issues from occurring in the first place.

On the contrary, auditing for value is built around the proven concept that if the right training, documentation, procedures and quality management systems are in place from the get-go, then a business will never have to worry about being out of compliance. With proper planning and execution, the auditing process can actually be used as a tool to prevent issues from arising during future audits.

The Process of Value Added Auditing

One of the first – and most important steps that a business can take in regards to value added auditing is simply committing to the process through and through. When companies hang on to the negative stigma that they have associated the audit process with in the past, it can prevent an open mind and the willingness to fully embrace the beneficial process that your organization is about to embark on.

The next step in value added auditing is selecting your team of auditors. It’s essential to not only select a team that is unbiased and objective, but also a team that has the creative ability and unsurpassed focus to set your organization up for future success. Again, emphasis should be placed on a team that enables your business for success with all future audits, not just the audit at hand.

A key point to keep in mind is that companies that build their audit teams from management or others who work directly within the organization may be hindering the process more than they are helping. Every company that has been through an audit before knows that the process takes time and resources. When management has to take time away from their normal operational responsibilities to focus on the audit, it can be detrimental to all aspects of day to day business operations. Another factor to consider is that companies are used to performing their audits one way or they’re stuck in that process of finding and fixing mistakes, it leaves little opportunity to find value in the auditing process.

Once your audit team is in place, the following steps are fundamental to the value added auditing process:

- The pre-audit conference – while this stage seems obvious, it’s essential to ensuring that the audit process goes smoothly and that core goals are clearly understood by both management and the auditing team.

- When it comes to value, the next stage of data gathering resigns supreme. Data gathering involves 3 focal points, which includes document review, direct observation and interviewing. One of the reasons why this stage is so vital is because it includes interviewing, which is often not utilized effectively during the audit process. Interviewing can be one of the best tools in continuous business improvement, but only when interviews are conducted properly and by unbiased and objective interviewers.

- Outside of interviewing, direct observation is a telling sign of the quality of products or services that are being produced. Direct observation focuses on performance – what’s actually being done compared to what the documentation claims is being done.

- Document review is still part of the auditing process and it serves an important role, but what’s important to remember is that direct observation and performance based auditing often results in the most accurate data being realized.

- The final two stages involve the data analysis process and the post-audit conference to present the findings.

Further Advantages of Value Added Auditing

As mentioned in the value added auditing process, the interviewing stage can be the difference between realizing failure and realizing areas for continuous business improvement. There are two defining reasons why the interviewing stage often fails during the auditing process. The first is due to the interviewer not possessing the necessary interviewing skills to get to the root of any problems that may exist. For example, questions may not be open enough or the questions being asked may not have a direct impact on business operations.

The second reason why interviewing often fails is due to organizations assigning an interviewer who works directly within the company. It’s difficult, if not absolutely impossible to obtain accurate and honest information from the interviewees when the person asking the questions has a daily role within the company. It’s also extremely challenging for the interviewer to develop questions that are going to be objective enough to receive the answers that would be beneficial for continuous improvement.

Value added auditing through an experienced and unbiased 3rd party internal auditor can eliminate common issues that occur during the interviewing stage. If positive change is going to happen, the auditing process needs to be able to acquire open, honest and pertinent information that will set your organization up for future business improvement.

In addition, organizations who truly embrace the concept of value added auditing will also:

- Realize methods that will help increase business efficiency and productivity.

- Be able to spend more time focusing on business operations and less time on the repetitious pattern of finding and fixing mistakes.

- Have exceptional documentation and procedures in place that will help each person employed within the organization truly understand their role and what’s expected of them.

And best of all, businesses that embrace value added auditing won’t have to worry as much when it comes time for the next audit. When proper documentation, procedures and training are in place to begin with, businesses are setting themselves up for confirmation of success, rather than confirmation of failure.

If your company wants to avoid the yearly audit stress and wants to get out of the pattern of auditing to find and fix mistakes, 5M Solutions can help. Our value added auditing services focus on business improvement solutions that will set your organization up for future audit success. It’s time to start using the auditing process as a powerful tool that increases business productivity and efficiency throughout all facets of your organization. Contact us today for more information!