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    Commandments of Auditing

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    Commandments of Auditing

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    140 views17 pages

    Ten Commandments For Auditing

    Uploaded by

    Paul Agra
    Commandments of Auditing

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 17
    =o ts international Lertmcation services QUALITY ASSURANCE THE TEN Slee) OF AUDITING 4 wd , ®N > (anicley WS gn? SECTION 4 Section 4 TEN COMMANDMENTS FOR QUALITY AUDITORS Peshaps some of you have a question in your mind as to what quality auditing is whilst others may insist that quality auditing has long been a method of evalution used by Quality Managers. Generally, quality auditing has been used in connection with the verification of product quality or as 2 means of evaluating @ new sunnier or the periodic surveillance of an established one voday, however. one only needs to scan the daily newspapers to realize that the big stories and great issues of the day now regularly include masters of Quality Assurance: oil spills in the North Sea. product recalls, or a most recent disastrous and unfortunate incident - the scaffold collapse from the cooling tower at Willow Tsland,West Virginia, There is no difficuky in concluding that in broad terms what we call Quality Assurance is vital to modem society ‘These Quality Assurance issues have made the managerial task exceedingly Gifficult but more essential 1o maintaining business viability. To assure the effectiveness and reliability of the Quality System, managers are looking to modem quality audits for verification of the quality status of the company ‘There is a subtlety in the end of that last statement that bears repeating - top management is Jooking to the quality audits for verification of the quality status of the company, 25 contrasted from the traditional and continuing, quality status of the product of the company Jn egining the term modern quality auditing, 1 have chosen to use the adjective modern to differentiate from some of those traditional approaches of auciting associated with inspection and quality control: Overly simplified, modem quality auditing is doing what the Chief Executive of the company would do if he had the time and know how. Page 41 Section 4 ‘The approach I have elected to use in the presentation of this paper is to look at generic levels of corporate problems, to take a brief look at a profile of a quality auditor, and close by reviewing some basic principles that not only apply to quality auditing, but can be applied 10 any type of auditing-namely, the Ten Commandments of Auditing Before we eet to the subject of the auditor and auditing, let me review some generic levels of problems that face corporate management ‘The problems which most often plague corporate management oceur at three separate levels of corporate existence. The most recognizable, problems occur at the operational level Gi nerally these problems are caused by personnel who Jack the facilities, skill, knowledge. motivation or direction necessary 10 do their job right first-time, Once the problems are understood, the solution becomes apparent and with appropriate corrective action gets corrected. Problems involving “techniques” occur at what may be called the technological level. At this level the basic problem is how the funetion may be performed efficiently. The solution involves the application of technology to a specific system: ie, the quality system, the purchasing system, or any of their related subsystems. So far as the top management is concerned, the solution to this class of problem is quite straightforward - assign someone with adequate technical knowledge or whatever other resources are needed to research and correct the problem:satisfactorily. Many corporate problems, however, lic deeply ‘embedded in the basic conceptual design of the company. Problems at this level may appear to be caused by managerial ineptitute or by technically imperfect systems, yet no amount of replacing or reshuffling of personnel at the operational level. nor any degree of exact technical sophistication will correct problems at this Page 42 x eect auuiiat Cer uneauun oervives Section 4 level. Because the conceptual design of the total corporation includes all of its elements organizational structure; management methods; economic characteristics; physical configuration; industrial; environment; information flow, and decision making systems, these problems are the direct responsibility of top management, and their solution most usually requires a change in the conceptual design of the corporation. Planning an! audit that addresses these generic problem levels is beyond the scope of this paper. However, an auditor should be sensitive to their existence and be prepared 10 address the issue if that is where the audit trail leads him. What a company can or cannot da may sometimes be limited by the very nature of their business. For example, in the civilian nuclear industry what a company does about its Quality programme is covered by regulation, The Nuclear Regulatory Commission has defined Quality Assurance as. ” All those planned and systematic actions necessary to provide adequate confidence that sirncnure system, or component will perform satisfactarily in service.” In principle, this concept of Quality Assurance directs that you know the desired results and the importance of obtaining them and then spell out the plan, provide for independent technical review of the plan. audit its implementation, and be prepared to prove that you did what you said'you would do, and that the product will perform as required Well, what does it take to practice modem quality auditing? I would not dream of telling you it is casy. It is not. And some people with perfectly good credentials enter the field and never Page 43 << Stes imemational Cerutication Services Section 4 make it. Oh yes, they can carry out an audit assignment, but they may do it in a pedestrian fashion, without spark, without imagination, without observing the fundamentals, Which brings me to some of the building blocks of modem quality auditing - the concepts the modern quality auditor must take with him when he goes to his job, the combinations that will help him’ open the best guarded vaults of information. They can be looked upon as the Ten Commandmants of Modern Quality Auditing. They are not particularly new, but I think they are particularly important The First Commandment - KNOW THE OBJECTIVES Know the mission. The purpose, the raison d'etre. However you say it and in whatever language you articulate it, the first step of the quality auditor is 1 know the objective of the company, of the division, of the department, of the section, of the activity or of the function that he is auditing, Unless those objectives are clearly understood, the audit will miss its mark. Taking a clear sharp picture of the activity's objectives is the mark of the prefessional auditor Also, the auditor should differentiate between objective and goals. The objective is more difficult to isolate than goals, For example, quality procedures may state that the Purchasing Department shall issue purchase orders after a review by the Quality Department. But that does not hit the mark. The objective of the purchasing department, plain and simple, is to get the right quality product, at the right price, in the right quantity, at the right’ time. With those objectives in mind, the quality auditor will make a far more incisive audit than if he were merely seeking to determine whether the department was issuing properly approved purchase orders Further, if the primary objective of an activity is to process something promptly, the controls Page 44 *{@ L355 intemational Certification Services Section 4 devised should be centered on ensuring timeliness and meeting schedules. If, on the other hand, the objective is precision, with timeliness secondary, the control should be concerned with accuracy and adherence to established standards. Hence, the auditor should be sorting out in his mind exactly what the ojectives are and what the goals are, He should find out whether formal statements of objectives have been prepared, whether these objectives are in consonance with company objectives. whether the objectives are known to all who participate in their achievement; and whether the objectives realistically consider the activity's available resources. The Second Commandments - KNOW THE CONTROLS An organizational entity operates through three basic functions: planning, organization and controlling, Control is the auditor's particular area of concern. It is an area that is not new to the quality professional, He should be intimately familiar with the range of choice for control available to the entity - that is, control before, during. or afier the event Control does not exist in a vacuum. Control is not a faceless, formless thing - it is a physical device. Control is a specific subject: i.e, material, test certificates, inspection and test reports, the diameter of a shaft, the number of defects in a weld. To the quality auditor, control comprises all the means devised in a company to direct, restrain, govern, and check upon the various activities for the purpose of seeing that the company's quality objectives are met. The means of control include. but are not limited to, the form of organization, its policies, systems, procedures, instructions, standards, com ees, Page 45 (NEGLI international Certification Services Section 4 chart of accounts, forecasts, budgets, schedules. reports, records, checklists, methods and devices. Since the control subject is the hub, the auditor will want to be sure he has identified it and has it in focus for it follows that if the control subject is worthless, the whole control procedure built around that control subject is likewise worthless. The Third Commandment - KNOW THE STANDARDS In auditing, the actual testing and verification of transaction is essentially measurement. And measurement implies 2 standard to measure against. Without a standard there is no logical basis for maki 12 a decisioon or taking action. It also implies units of measurement. You measure the speed of a 100 yard dash runner with a stop watch, The seconds and yards are the units of measurements but the units mean nothing without a standard. We know that 10 seconds is pretty good for 100 yards, not record breaking, but pretty good. We know that 9.3 seconds is superb. Armed with this information we can express an educated opinion the next time we put a stop watch on a runner. In auditing, the auditor will find that he has wasted a lot of time and effort unless he has determined (or reached agreement on) standards before he starts his test. If he is testing the accuracy of engineering drawings, for example, he would want to come to some agreement with the Chief Engineer as to the number or percent of rejected drawings that are considered “normal”, Then, when he makes his test , he would be sure whether or not standards have been met Page 46 ‘= international Certification Services. Section 4 Standards exist in almost every phase of human endeavour. They may be established by what considered average. They may be established, by management directive, by contract, by specifications, by statute, by government regulations, by good business practice, or by the multiplication table But, however they were established, the auditor should understand them before he embarks on his audit. It is rare that an auditor can make an audit and then state intuitively, and with assurance, that the results were good or bad, without relating those results to standards, The very fact that the auditor understands the need to determine the standards, before he makes audits, puts him a little bit ahead of the crowd at the outset. Che Fourth Commandment emauonat Veruncauon services Section 4 Where he seeks honestly and sincerely to understand people and their problems they will help him, and he will be able to help them. Above all, he will be serving management better. The Ninth Commandment-KNOW HOW AND WHEN TO COMMUNICATE J use the term here in its broadest sense. I speak of communication from the time the audit begins, through the examining of individual records and activities to the final reports 10 management The modern quality auditor is in communication with the auditee from the very start of the audit, He holds well-structured entrance interviews that move along smoothly, and show that vell-structured entrance interviews that move along smooth U the auditor has done his homework ——eaoerxrer He is in communication with supervisory personnel as he makes a preliminary review and seeks to find out - What is the job? : Who does it? - How is it done? - Why is it done? He is in communication with line personnel as he makes his test and explores the significance of aiid the reasons for deficiencies. He is fully aware of his own limitations in a new and sometimes strange environment, and he wants to make sure he has the whole story before drawing to conclusions. Page 53 - SES intemational certification Services Section 4 He is in communication currently with auditee management when conditions need correcting, These communications can be through oral-visual presentations or through written progress reports. He is in communication with the auditee manager at the end of the job through an oral-visual presentation of all the findings of the audit - both good and bad. And at that time he discusses the corrective action taken or in process He is in communication with every relevant manager in the company when he issues his final crisp, incisive report that tells what is satisfactory about the operation he had audited and sounds a call to action to correct what is deficient The Tenth Commandment _- KNOW THE MODERN METHODS We live in an ever-expanding universe. Modem management understands fully that nothing stands still. If it is not moving head. it is moving backwards, And if the quality auditor does not understand this concept just as fully, he will not be able to keep pace with those he serves. As an audit is a search for variability, the modem quality auditor is well prepared to apply the statistical techniques to the programmatic aspects of the Quality programme with the same degree and comfort that he has applied the techniques to the control of hardware. Page 54 “

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