Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon.

Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon

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

Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon

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

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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as

siv

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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

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.

Institute of Internal Auditors – Portland ChapterJanuary 21, 2011 / KOIN Tower / Portland, Oregon

Look for cost savings…

They are there.Emphasize in departmentBe realisticDialogue with managementMonitorReportRecognize