Internal Audit Through the Lens of COVID 19, Business Efficiency Reviews

When times are tough and cash liquidity is a concern, every organization does its best to reduce costs, increase revenue and improve business processes. At such times, receptiveness of management to the value provided by internal audit is low. The tendency is to defer normal internal audits to a later date when the financial situation of the company improves. Given the pressures of business commitments, management cannot be faulted for thinking on these lines.

 

So what should internal auditors do to get management’s attention...

 

The answer lies in being able to demonstrate an internal audit approach, that is aligned with management’s current need, namely Show Us The Money. At UHY James, we have done exactly this, and have come-up with an approach that we call, Business Efficiency Reviews.  The objective of such reviews is to identify all potential areas of cost and revenue optimization, as well as work efficiencies, without compromising compliance, without exposing the organization to risks that outweigh rewards, and within a quick turnaround time. The above image visually explains what constitutes business efficiency audits.

 

• Identify all areas with potential for cost and revenue optimization as well as work efficiencies
• Identify all other areas within the organization that could impact or be impacted by above
• Identify the mandatory compliance requirements, relevant to these areas
• Obtain key volume and value related background information about the areas identified

• Estimate, in quantitative and qualitative terms, the outcomes of cost or revenue optimization opportunities, as well as of work efficiencies
• Where possible, discuss and validate the estimates with line management

• Assess the feasibility of efficiently and effectively achieving the desired results, taking into consideration related internal and external factors, like, targeted business objectives, available resources, infrastructure, employee morale, corporate social responsibility, social media, industry and customary practices etc
• Assess whether the rewards of cost or revenue optimization and work efficiency measures, outweigh the residual risks, if any, of these initiatives
• Where possible, discuss and validate the assessment with line management.

Potential cost or revenue optimization and work efficiency areas

Some examples of areas of cost, revenue optimization and work efficiencies are:

Supply Chain optimization, Process Automation, Inventory Management, Resource allocation, Business Process Outsourcing, Work Efficiencies through Data Analytics, Customer Self-Service, Continuous Improvement Culture, Information Technology Costs, Utilities and Administrative Costs, Marketing Costs, Improved Data Management, etc.