Opportunity Auditing

Day 1: The power of Opportunity auditing

What is Opportunity auditing?

• How does it differ from other audit approaches?
• Key questions
• Does your Internal Audit function add measurable added value to your organisation?
• Do you specifically evaluate and report this added value?
• Are you happy with this process?
• Do you measure the value of monetary savings made as a direct result of your audits?
• Have these savings been at least double the cost of your function in each of the past 2 years?
• Are these savings known to and recognised by management?
• Does your audit programme target areas of opportunity as well as risk?
• Do you carry out any specific value for money audits?
• Do VFM assignments account for more than 5% of the annual work programme?
• The benefits of opportunity auditing
• Other outcomes
• Performance Auditing guidance
• The associated dangers e.g. trying to quantify non-quantifiable savings
• Exercise 1 – The benefits of opportunity auditing

The 3 E’s

• The 3 E’s – the cornerstone of opportunity auditing
• Economy and how it can be evaluated
• Minimising the cost of resources whilst maintaining acceptable quality
• Examples of poor economy
• Efficiency and how it should be assessed
• The relationship between inputs and outputs and the use of resources
• Why it is critical to evaluate efficiency – with examples
• Effectiveness and how it can be assessed
• The degree to which the goals or objectives are met
• The measurement of that achievement
• Identification of inputs and outputs
• How to measure the 3 E’s
• Exercise 2 – Assessing the 3 E’s

Opportunity auditing techniques

• Identifying over-managed risks
• These are likely to be the risks in the green zone of the risk matrix
• Opportunity management is a business enabler
• The flip side of risk
• When did you last suggest reducing controls?
• Challenge ‘we have always done it this way’
• Do we have to do it?
• What are the benefits / penalties associated?
• Can we reduce effort in some areas to give time and resource for the priorities?
• Exercise 3- What areas would be useful to review?

Key steps in completing an opportunity review

• The research phase
• Objectives, methodology and techniques
• Establishing terms of reference
• Defining the boundaries of the review
• Gathering of information
• Evaluation of data and effectiveness of management processes
• Evaluation of performance and cost saving potential
• Exercise 4 – Determining the opportunity audit objectives/scope

Choosing the opportunity Audit

• Risk and opportunity approach
• Audits should be prioritized as other audits
• Most common topics
• Travel management
• Mobile communications
• Insurance
• Stationery
• Energy management
• Budgeting
• Meetings management
• Consultancy
• Exercise 5 – Selecting the VFM audit

Day 2: VFM auditing in practice

Performing the Opportunity assignment

• Audit programmes with examples
• Walk through tests
• Audit testing – how to decide the type and depth of testing
• Ask personnel re their frustrations and ideas
• Ask for reports and measures already in use
• Ask about measures they would like to see
• Spending levels and revenues
• Major operations, including in the field
• Control systems
• Functional and audit objectives
• Determining sources of information
• Concerns expressed
• Audit working papers
• Adopt an opportunity matrix
• Prioritising actions to deal with over-managed risks
• Develop an opportunity register
• Exercise 6 – The VFM audit in practice

Performance measures

• How to determine performance measures
• Good KPI’s
• SMART measures
• Auditing performance measures
• Audit programmes in this regard
• Exercise 7 – Assessing Performance measures

Specific VFM assignments – with hints and tips

• Mobile Telecommunications
• What are the objectives?
• What are the risks?
• How to compare bills, tariffs and added value benefits.
• Hardware versus airtime costs – how to evaluate.
• Understanding the trends in the market.
• Identifying the inputs and outputs
• What measures of the 3 E’s would you expect?

• Travel Management
• Building a picture of travel costs – travel recording and management reporting.
• How to gauge the effectiveness of a travel policy.
• Evaluating policy compliance and its financial impact.
• Evaluating the service provided by a travel agent.
• The need to get the best from suppliers.
• How to evaluate savings potential.

• Budgeting
• Evaluating the costs and time involved in preparing a budget
• Steps in agreeing a budget
• Buy in to the budget process and the final budget
• The Forecasting process and the link to budgets
• Ways to improve the process
• How to evaluate savings potential.

• Insurance
• Evaluating current spend.
• Assessment of number of claims.
• Evidence of controls required by the insurer
• Use of captives
• Assessment of self-assurance.
• Could any areas be over insured?

• Procurement

• Marketing

• Audit conclusions