ASQ CQA – 4. Audit Program Management and Business Applications

1. 4A1 Senior Management Support

Welcome to section four of the CQA Body of Knowledge. Section four is audit program management and business applications. Let’s recap what we have learned so far. In section One, we talked about audit fundamental. There we talked about basic terms related to audit, the benefits of audit and few other things. So the section one was basically focused on the fundamentals related to auditing. Then we moved to section Two. Section Two was audit process. There we talked about individual audit. We prepared an audit plan. We planned for the audit. We did that audit starting with the opening meeting, having some interviews, doing some document reviews, and then having a closing meeting, issuing a formal report and follow up activities. So that’s what we learned about an individual audit in section Two, which was Audit Process. Then we move to Section Three, which was auditor competencies. There we looked at what all is required for an auditor to be successful, the auditor needs to have skills related to conflict resolution, need to understand the team stages, and need to learn about presentation skills and few other skills. So this is something which we talked in section Three, which was Auditor Competencies.

Now we are coming to section four which is Audit Program Management and Business Application. Remember that in section Two we talked about auditing that was related to an individual audit. The plan, the audit, the closing meeting, the report, everything was related to a single audit. What happens in a single audit. Now, what we are talking here in section Four is a much bigger picture of auditing. Here we are talking about the audit program as a whole. So when you are learning about this section which is Audit Program management, don’t think yourself as an auditor, think yourself to be the manager of number of auditors. So let’s say in your organization, just think that you have five or six auditors. You are managing those auditors, you are managing the audit program. So keep that thing in mind when you are looking at section four. In section four there are two broad subsections which are audit Program management.

The one which we were talking right now, how to manage the audit program. And the second section, the section four B is Business and Financial Impact. We will talk about four B which is Business and financial impacts later on. But now let’s stick to four A which is audit Program Management. In audit program management there are a number of topics. So here you see ten topics related to audit program management which are senior management, support staffing and resource management, auditor Training and development, audit Program evaluation, internal and external audit Program Management, best practices, organizational risk management, business Review input, electronic Record and computerized System considerations. So these are the topics which we will be covering in audit program management. Let’s start with senior management support. For any program to be successful, the support of senior management is important. Without the management support, no program can be successful.

So when we are talking about senior management support, let’s think about the audit program. And let’s say you have five or six auditors working under you implementing this audit program. The audit program could consist of multiple locations and multiple management systems. So let’s say you have an organization which has plans in number of locations, and then these plants are implementing different management systems or multiple management systems. Then your audit team or your audit program should cover all those locations, how you will be covering those locations, and also all these locations might have multiple management systems implemented. And when I say multiple management systems, this could be 9001 for quality management system, 14,001 for environmental management system and so on. So your audit program could be comprehensive covering multiple location and multiple management systems. The audit program which you want to implement should be measured and monitored to make sure that the objectives of the program are achieved. So when you are implementing the audit program, you might have some objective. So that is the reason you are implementing the audit program.

So the objective of audit program could be compliance. The objective of audit program could be ensuring ISO 9001 certification for these plans. So whatever objective it is, your program should be able to measure and monitor those objectives. And to implement audit program, you need to have competent individuals, competent auditors who will be implementing the audit program. This is the background of an audit program. Now you need management support and management support in terms of resources, in terms of auditors, in terms of budget, what you will be needing to implement this audit program, and so on. So you need management support. Management support is not just for the budget. Management support is also for setting up the direction and establishing the importance of the audit program. So let’s say if management is interested in implementing the audit program effectively, then everything works fine. But on the other hand, if management is not interested in this audit program, they don’t take it seriously, then things might not work out well for your audit program. Let’s take an example of internal audit.

So you have an internal audit, you set up the opening meeting and then you plan to do some audit interviews and do the closing meeting. If management is not interested, you can very well expect that no one else will be interested in the audit. So when you have opening meeting, you will see that audity is not attending the meeting. Because auditing might have an excuse that no, there is something else has happened, so I cannot attend the opening meeting. Audit might not give the time to auditor to do the audit interviews because something else is happening. This is just because the management is not supporting the audit program. On the other hand, if management is supportive of the audit program, everything will work fine. The auditor will attend the opening meeting. There will be interviews, there will be findings. There will be action taken to resolve those findings. The system will improve. So that’s the reason. Management support is important for the audit program to be successful.

2. 4A2 Staffing and Resource Management

Here our main focus will be on budgeting, getting money, getting resources, getting people for running the audit program. When it comes to audit budget, let’s look at what are the expenses related to auditing. One of the important resource in auditing is people. The time value of people or the time value of auditing. Here you need time for auditor to do the audit. Audit time which auditor has to spend in supporting the audit. Let’s say if five days are spent by an auditor in planning, auditing, publishing, report and follow up, then the salary or the cost related to that auditor’s five day will be the cost of that audit. So you need to budget for that.

You need to budget for people who are doing the audit. Also you need to budget for the time which audit you will be spending in supporting the audit. And then when you do audit, there will be some work interruptions. So you need to consider the value of that as well in your budget. Personally, I have not seen this particular component which is the cost of work interruptions going into the budget. But still you need to consider that as well when you are planning for auditing or the budgeting for the auditing. And then there are costs related to traveling, accommodation and other arrangements. When your audit is in different city, in different country or in different location. Let’s say if your company is running five plants and you have all the audit team at plant number one.

So to do the audit of plan two, plan three, four or five, these auditors have to travel and stay there, do the audit and come back. There are costs related to that. Also you might be doing some second party audit of your suppliers. So for that also you might have to go visit your supplier, stay there for two days, three days. The cost related to that also needs to be budgeted. In addition to actually doing audit, you need to budget for auditor training and development as well. We will be talking about auditor training and development more in the next video. But here let’s understand that you need to budget for that as well. So these are the key components of budgeting for audit program. Number of times I have seen pressure from the management to reduce budget. Now if you are running the audit program and then you have to reduce the budget, there are a number of things which you could do.

But then you need to be aware of risks associated with that. One thing could be outsourcing. Outsourcing internal or external audit. So let’s say if you have an audit which is in a different country, different location, then what you could do is instead of sending your auditor to go there, do the audit and come back. Rather than that, you could hire a third party which could do the audit on your behalf. This could be for internal audit or this could be for external audit. When it comes to internal audit, this is not a good choice, but many times you might have to do that. But in external audit, for example, auditing of your supplier, this is an option which could be considered. But then when you are considering this option, you need to be aware of risks associated with that. When you have a third party doing audit on your behalf, that third party might not exactly know what are your requirements, what are your specifications, they might need to spend some time to learn about those.

Whereas when you have this audit done by your own auditor, in that case, this auditor will be aware of the organizational’s need and organizational standards, et cetera. So it will be much easier, much better if your existing auditor does this audit instead of a third party doing the audit. So you need to balance that. When you are thinking of reducing cost by having an external or subcontracted or outsourced auditor, there is a choice to have full time auditor versus part time auditors. So there is a possibility that in your audit program you might have two full time auditors or three full time auditors. Instead of that, you might have some part time auditors as well.

These part time auditors might be working in different areas. Let’s say a person who is working in design department, a person who is working in production department based on the need could be used as auditor. So these fellows are trained in auditing process. So these could be brought in for doing audit as and when needed. So this is another way to look at the cost reduction in audit process. Also, your audit budget needs to be adjusted regularly depending on the result of previous audits. So if you do an audit of a supplier and you find number of issues related to the quality system implementation, then you might have to increase the frequency currency of audits. You might have to spend more money.