What is Audit Vs Deming's Famous Quotes. What is Audit?

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Internal Audit in Manufacturing Companies
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How to keep it interesting?

• Interactive
• Some new thoughts
• Practical Approach Less of Theory
• Last but not least

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How to keep it interesting?

• Interactive
• Some new thoughts
• Practical Approach Less of Theory
• Last but not least
• -Keep it Short !!

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Agenda

• What is Internal Audit?
• Relevance of Internal Audit for manufacturing
  Companies
• My experience and Few thoughts for consideration

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What is Internal Audit ?
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Why the Wording Also do Auditing

• Perception - Ticking or Checking - Fault
  finding - A necessary evil in life

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Why the Wording Also do Auditing

• Perception of Audit
• - Ticking or Checking - Fault finding - A
  necessary evil in life
• Is this Wrong perception or Truth ?
• We get answer by Asking our self - What is the
  real nature of Audit?

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Wrong perception or Truth

• What is the real nature of Audit? - A Toll for
  Quality Improvement process - Comparable with
  TQM, 6 Sigma etc. - Not properly marketed!! -
  Hence the problem in - Attracting Talent -
  Recognition
• What is the proof ??

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Why the Wording Also do Auditing

• What is the real nature of Audit? - A Toll for
  Quality Improvement process - Comparable with
  TQM, 6 Sigma etc. - Not properly marketed!!
• What is the proof ??
• Deming has said it!!!

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What is Audit Vs Demings Famous Quotes

• What is Audit?- DOES
• Management's job is to know which systems are
  stable and which are not.
• The aim should be to work on the method of
  management.
• We want best efforts guided by theory.

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What is Audit Vs Demings Famous Quotes

• What is Audit? DONT
• Manage the cause, not the result.
• Management by results is confusing special causes
  with common causes.
• Judging people does not help them.
•  Meeting specifications is not enough.

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What is Audit Vs Demings Famous Quotes

• What is Audit?- HOW
• Management of outcomes may not be any more than a
  skill. It does not require knowledge.
• You do not find knowledge in a dictionary, only
  information.

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What is Audit Vs Demings Famous Quotes

• What is Audit?- ROLE
•  Role is a coach, not a judge.
•  We are being ruined by the best efforts of
  people who are doing the wrong thing.

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What is the real nature of Audit?

• Quality Process -Science - Analytical
  Skills - Logical Approach - Technical
  knowledge

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What is the real nature of Audit?

• Quality Process - Is it just a science? - NO

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What is the real nature of Audit?

• Quality Process -Science (Intelligence) -
  Business acumen - Different from
  intelligence - Outstanding examples C V
  Ramans bank deposit Einsteins investment
  in shares - Ability to differentiate

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What is the real nature of Audit?

• Quality Process -Science (Intelligence) -
  Business acumen - Different from
  intelligence - Outstanding examples - Ability
  to differentiate - Losers Winners - Big
  Small - Good Bad - Combination of science
  art

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What is the real nature of Audit?

• Quality Process -Science (Intelligence) -
  Business acumen - Different from
  intelligence - Outstanding examples - Ability
  to differentiate - Combination of science
  art - Is it just Science Buss. Acumen?
• NO

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What is the real nature of Audit?

• Quality Process Also An Art!! -Science
  (Intelligence) - Business acumen - Art -
  Judgment - Inter-personal skills -
  Communication skills
• Hence wrong Perception Only

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What is Internal Audit

• Double whamming

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What is Internal Audit

• Why Double whamming?
• By adding Internal Another value diluting
  adjective to Audit

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What is Internal Audit

• Double whamming
• Internal Another value diluting adjective
• Better adjectives - Experts - Specialists

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What should be the name?
Need a fancy title
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What should be the name?
ESOP
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What should be the name?
ESOPEvaluation by Specialist of Operations
Processes
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What is Internal Audit?
Evaluation by Specialist of Operations
Processes Inernal Audit is an evaluation of an
organization, system, process, project or
product. It is performed by a competent,
independent, objective, and unbiased person or
persons, known as auditors. The purpose is to
verify that the subject of the audit was
completed or operates according to approved and
accepted standard or practice
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Internal Audit in Manufacturing Companies
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Internal Audit in Manufacturing Companies
Evolution of commercial activity Agriculture
Trade Manufacture
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Internal Audit in Manufacturing Companies

• As we progress complexity Increases
• Increase in Activity (number, frequency and short
  time gap)
• Inter-dependence
• Coordination
• The need and the difficulty
• Leads to greater risk
• Hence greater importance of internal audit

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Internal Audit in Manufacturing Companies

• Nature of Internal Audit
• - Transaction audit
• - Systems audit
• - Management audit
• Each has different Role

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Internal Audit in Manufacturing Companies

• Nature/Role of different type of Internal Audit
• - Transaction audit C R Das
• - Systems audit Rahul Dravid
• - Management audit M S Dhony

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Internal Audit in Manufacturing Companies

• Transaction audit - Can be pre, concurrent or
  post - Necessary evil - Help discipline in
  the organization - Systems cannot totally
  replace this

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Internal Audit in Manufacturing Companies

• Systems audit - Backbone to the
  process/operations - Vital for efficiency
  control - Necessary for survival

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Internal Audit in Manufacturing Companies

• Management audit - Judgmental - Hence
  controversial
• Requires - In-depth knowledge - Technical
  capabilities - Credibility
• Difficult to identify the areas for application

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Internal Audit in Manufacturing Companies

• Management audit Requires In-depth knowledge /
  Technical capabilities Credibility
• Difficult to identify the areas for application
• Prerequisite - Mutual respect of management
  auditors
• Different Attitude - Mistakes are common in
  management - Getting it right 100 is
  inefficient

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Internal Audit in Manufacturing Companies Some of
my experiences

• Transaction Audit - Selection - Type of
  Audit - Coverage - Resources - Cost /
  Benefit analysis

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Internal Audit in Manufacturing Companies Some of
my experiences

• Systems Audit - Resources -Multi Function
  skills -Availability - Attitude of
  -Auditor -Management - Evaluation of
  Performance

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Internal Audit in Manufacturing Companies Some of
my experiences

• Evaluation of Performance of Systems Audit
• What cant measured cant be improved
• A must for any Quality Process
• Hence the need for measurement

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Internal Audit in Manufacturing Companies Some
of my experiences

• Pre requisite for Evaluation Performance of
  Systems Audit
• Change of mindset both for Management and
  Internal Auditor
• Not a cost center but a value contributor
• Agree in advance -Target -Audit
  Process -Evaluation Process
• Auditors knowledge of the Business, Industry and
  Environment
• Technical Skill

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Internal Audit in Manufacturing Companies Some of
my experiences

• Evaluation of Performance of Systems Audit
• Measure Against -Agreed Objectives -Other
  Tools -Cost Vs Benefit

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Internal Audit in Manufacturing Companies Some of
my experiences

• Management Audit - Tricky Role For CFO!! -
  Often dont Find the Champion - Mutual Suspicion
  - Legal /Statuary Requirements - Management
  commitment / Attitude - Adverse Findings -
  Fear of impact - Not a Black White case

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Internal Audit in Manufacturing Companies
Conclusions

• Internal Audit is Quality Tool
• A must for Manufacturing Companies
• Manufacturing Companies need - All 3 Audits
• Should have robust measurement System
• Lead Role to be taken by CFO
• Commitment of Management

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Internal Audit in Manufacturing Companies
Thank you