Keep Your Audit Department Viable

1. Keep Your Audit Department Viable Cost Savings - Changing it From Concept to Reality

2. Objectives • 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

3. 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

4. Assurance Consultative Cost Savings Efficiency Effectiveness

5. 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

6. 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.

7. 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.

8. 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; realignmentof coverage

9. Cost Savings Triangle Financial Pressure Opportunity Good Skills

12. Training and Guidance

14. Financial Pressure –Audit Department Reaction Participants from the Gain Fortune 100 survey reported increased audit activity in Cost/Expense Reduction/Containment of: 60.6%

15. Areas Where Internal Audit Activities Have Uncovered Cost Savings and Expense Reductions

16. The Evolution of Internal Audit Active Strategic Business Partner Operational Process Reviews Approach Internal Control Process Reviews Passive Compliance Auditing Business Performance Internal Control Scope

17. 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

18. 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”

19. 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?“

20. 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

21. CHALLENGE KEEPING THE BALANCE Cost Saving Projects - Operational Reviews -Management Support -Facilitated Services Traditional Audits - Assurance -Compliance -Internal Control Flexible Audit Plan Optimal Balance

22. 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

24. Smart Spending: A New Approach that Can Help You Optimize Your Procurement Spending Category Savings Percentages 8-15% Office Supplies 4-8% Travel and entertainment 7-11% Packaging/ containers 3-12% Fuel, lubes and gases 8-12% Computer/ hardware 5-11% Advertising media brokerage 6-9% Utilities 6-8% Office Equipment 6-14% Paper 4-10% Construction supplies 9-13% Computer/ software 5-15% Creative agencies 5-15% Maintenance, Repair and overhaul 5-10% Professional services 8-12% Logistics 6-13% Telecoms 6-10% Facilities/ equipment maintenance 3-8% Metals 8-12% Other marketing 4-12% Chemicals 5-12% Temporary labor 3-10% Plastics and Resins 2-12% Rubber products 8-15% Commercial Print 3-7% Capital equipment Source: IBM Institute for Business Value and IBM Global Business Services analysis.

25. Look for cost savings… They are there. • Emphasize in department • Be realistic • Dialogue with management • Monitor • Report • Recognize