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 (albeit each with its own very specific flavour). Some common challenges and dilemmas facing the internal audit functions that I work with are:
• How to prioritize the differing needs of multiple stakeholders in the audit process: the board/audit committee, senior managers and those being audited;
• How to develop an audit plan that addresses the most important risk areas when there are often strong expectations that audit should focus on financial controls and compliance testing;
• How to get a place “at the top table”, influencing senior management whilst retaining independence and objectivity;
• Managing requests to delay or cancel assignments, which can result in difficulties completing the audit plan each year;
• Getting information and data on a timely basis so that audit assignments can start without delay;
• Finding that many managers are not engaged with the audit process;
• Arguments over whether audit has enough evidence to demonstrate its findings, sometimes requiring additional testing;
• Disagreements concerning the wording of audit reports, the timescales that actions should be completed within, and the grading of reports.
The root causes for these areas of difficulty are various and may be linked to problems with communication and underlying systems. However, a number of the problems that arise are due to poor process disciplines in audit and, from my experience, questions about the role of audit, as well as the mindset of some managers and auditors.
As we will see during the course of this book, lean ways of working can help audit to navigate through many of these challenges and dilemmas, helping the internal audit function become more impactful, as well as providing a range of other benefits at an organizational level.
As I mentioned in the introduction to this book, my experience developing lean auditing techniques as the CAE of AstraZeneca provided a solid foundation to work with clients and workshop participants. However, other CAEs I have worked with have faced other areas of difficulty, which we addressed through new lean auditing approaches. In addition, other CAEs I know have developed their own good practices that further “raise the bar” on what value adding and efficient auditing can be like.
As a result, this book contains many internal audit best practices developed by, and with, other CAEs, alongside those developed during my time as the CAE of AstraZeneca.
THE KEY BENEFITS OF ADOPTING A LEAN AUDITING APPROACH
The key benefits of adopting a lean audit approach
