Lean Auditing. Paterson James C.

approaches include:

      • SIPOC mapping

      SIPOC refers to Supplier, Input, Process, Output, and Customer and is a framework that can be used to breakdown a process;

In an internal audit context, a number of the key SIPOC elements are set out in Figure 3.2.

      • Deployment flowcharts (or Swim Lane diagrams)

Figure 3.2 The SIPOC model as applied to an audit assignment (simplified)

      Which can be used to illustrate, amongst other things, the roles of different functions in a process.

      Process mapping is a technique familiar to many in internal audit. When applied to internal audit processes it can be a powerful way of drawing out a range of improvement opportunities in audit planning, assignment delivery and the process of drafting, editing and rewriting audit reports.

      IDENTIFYING WASTE (MUDA)

      Lean principles regard waste (or Muda in Japanese) as being anything a customer would not want to pay for. No matter how normal difficulties, delays or waste seem, lean demands that we pursue waste free ways of working. However, Shigeo Shingo observed:

      “The most dangerous kind of waste is the waste we do not recognize.”

      Indeed, much of my work with auditors starts with helping them to notice waste in audit activities that seems so normal it has become invisible.

      Lean defines the normal waste items that so often get missed. Taichii Ohno of Toyota suggests seven key areas of waste in a production context:

      • The waste of overproduction;

      • The waste of waiting;

      • The waste of unnecessary motions;

      • The waste of transporting;

      • The waste of over-processing, or inappropriate processing;

      • The waste of unnecessary inventory;

      • The waste of defects.

      In a service context, other forms of waste include:

      • The waste of making the wrong product;

      • The waste of untapped human potential;

      • Excessive information and communication;

      • The waste of time;

      • The waste of inappropriate systems;

      • Wasted energy, resources and other natural resources;

      • The waste of (excessive) variation;

      • The waste of no follow-through;

      • The waste of knowledge.

      Other difficulties that can interrupt the flow of value to the customer include:

      • Unevenness, or Mura in Japanese;

      • Overburden, or Muri in Japanese.

      To address the various types of waste that can arise, lean provides a range of tools and techniques, including:

      Heijunka

      This technique aims to prevent issues arising by smoothing the flow of work. This includes techniques to standardize and sequence what is done.

      Jidoka – Also Known as Autonomation

      This aims to prevent errors arising. The idea is to create machines, systems and processes that rapidly identify when poor quality occurs because of the impact on the customer as well as the resulting waste and rework that arises from poor quality.

      Just in Time

      This is a widely known lean technique, and is about delivering the right quality product or service at the right time at an optimal cost.

      Andon – Visualization

      Lean ways of working require ongoing monitoring of what is going on with clear, visible indicators or metrics. These allow staff and management to identify any issues or difficulties and act on them in a timely manner. In an audit context this is a particularly useful technique when tracking assignments.

      Root Cause Analysis (RCA)

      RCA is a fundamental technique in lean, and one that should be familiar to internal auditors. Specific RCA methods include:

      • The Five Whys: the approach encourages us to question why things are happening, so that the real reasons for difficulties are known, thus maximizing the chances of a proper solution;

      • The Fishbone (Ishikawa) diagram: where effects/symptoms are traced back to their causes using a structured framework.

      A WORD OF CAUTION ABOUT LEAN TOOLS AND TECHNIQUES

      In addition to my neutral stance on any specific brand of lean, I want to flag up an important message at the outset in relation to lean tools and techniques: these should be used to enable and facilitate efficient and value adding internal audit work, not become a thing in themselves.

      John Earley (Partner, SmartChain International) explains:

      “Which lean tools you apply and how you apply them is situation specific. There’s nothing in the lean toolkit that is mandatory. This is where the difference between success and failure could be. You have to be very pragmatic how you apply lean.

      To take an analogy: If you are going to hang a door, and you have got a toolbox full of tools, you don’t use every tool in the box. You pick the tool that you need to do the job properly and you make sure they’re in good shape and you know how to use them, and then you do the job, then you put the tools back in the box and wait for the next job.

      When applying lean over a period of time, there’s always a progression of things happening and the techniques that you use at one point in time may not be as important at another time. However, the constant factor that runs through that whole thing is the mindset and culture of customer value, efficiency and continuous improvement.”

      Norman Marks (GRC thought leader) offers similar advice:

      “You don’t have to necessarily go off to Japan and get a black belt in lean. You’re not going to learn about lean internal auditing by going to Toyota and walking through their plant.

      My advice is that this is mostly common sense. It’s standing back and saying, I want to be of value to my customer, so what do they need? Not just what I want to give them, but what do they actually need for them to be effective.

      Throw out the traditional and replace it with common sense. And just because everybody else is operating in a traditional way, doesn’t mean it’s best.”

      References and Other Related Material of Interest

      Kano, N. (1984) Attractive quality and must-be quality. Journal of the Japanese society for quality control.

      4

      The Development of Lean Auditing and Its Benefits

      It was originally intended that I would be the CAE at AstraZeneca for three or four years, but the work we did on lean auditing and the impact it was having encouraged me to stay longer (for seven years in all). Increasingly, I became interested in sharing the lean auditing ideas and practices that we had developed with other CAEs. In addition, I could see an opportunity to do more work in the field of leadership development and culture change (which I had done for two years prior to becoming CAE at AstraZeneca). As a result, at the beginning of 2010, I set up my own business specializing in lean auditing, Risk Assurance, CAE coaching and internal audit effectiveness (www.RiskAI.co.uk).

      Whilst I have seen significant differences in the contexts and cultures that audit functions have to operate within, it is noteworthy that many of the challenges and dilemmas faced by audit functions across the globe are similar