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The contents of this presentation are confidential. Copyright © 2017 Workiva.
Incorporating Lean Six Sigma into the Internal Audit Process
Ernest Anunciacion, MBA, CIA Senior Product Marketing Manager, Workiva
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Agenda
• Background • Learning Objectives • Six Sigma vs Lean Overview • Tools of the Trade • Audit Management Process Review • Conclusion and Questions
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Introduction – Why should I listen? • Not your typical internal auditor
• General Electric – IMLP & Corporate Audit Staff • Ceridian Corporation – Enterprise Risk Management • The Mosaic Company – Risk Advisory & Assurance • Grant Thornton – Business Advisory Services • Workiva – Product Marketing
• Professional Certifications • Certified Internal Auditor (CIA) • Six Sigma Black Belt • Executive MBA
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Learning Objectives
• Gain an understanding of the fundamental differences between Six Sigma and Lean principles
• Provide an overview of “Lean Thinking” and the most commonly used Lean Six Sigma tools
• Identify opportunities to integrate Lean Six Sigma principles within the Audit Management process
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The contents of this presentation are confidential. Copyright © 2017 Workiva.
Why do companies fail?
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Why Do Companies Fail?
"If your firm does not have the ability to learn and improve, it will soon be out of business."
- Professor Arthur Hill, Carlson School of Management
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Motivation 1. All “work” is a process.
2. All processes can be improved.
3. All processes can be improved by making them faster, better, stronger, and cheaper.
4. Faster, better, stronger, and cheaper processes add more value to the world.
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Six Sigma vs Lean Overview
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
Philosophy • Data-driven decision making • Leadership development
• Simple, error-proof, standardized • Involve “GEMBA” in process
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
Philosophy • Data-driven decision making • Leadership development
• Simple, error-proof, standardized • Involve “GEMBA” in process
Ownership Program Champion Chief Kaizen Leader
Leadership Green Belts, Black Belts, Master Black Belts Kaizen leaders
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
Philosophy • Data-driven decision making • Leadership development
• Simple, error-proof, standardized • Involve “GEMBA” in process
Ownership Program Champion Chief Kaizen Leader
Leadership Green Belts, Black Belts, Master Black Belts Kaizen leaders
Project Management
DMAIC = Define, Measure, Analyze, Improve, Control Kaizen Events (Workshops)
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
Philosophy • Data-driven decision making • Leadership development
• Simple, error-proof, standardized • Involve “GEMBA” in process
Ownership Program Champion Chief Kaizen Leader
Leadership Green Belts, Black Belts, Master Black Belts Kaizen leaders
Project Management
DMAIC = Define, Measure, Analyze, Improve, Control Kaizen Events (Workshops)
Strengths • Cross functional teams • Formal project management
• Easy and quick • “GEMO”
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Six Sigma vs. Lean Six Sigma Six Sigma Lean
Origin Motorola Quality Function Toyota Factory Floor
Philosophy • Data-driven decision making • Leadership development
• Simple, error-proof, standardized • Involve “GEMBA” in process
Ownership Program Champion Chief Kaizen Leader
Leadership Green Belts, Black Belts, Master Black Belts Kaizen leaders
Project Management
DMAIC = Define, Measure, Analyze, Improve, Control Kaizen Events (Workshops)
Strengths • Cross functional teams • Formal project management
• Easy and quick • “GEMO”
Criticisms • Too much “Greek” • Projects take too long
• Too much “Japanese” • Projects too focused
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Best of Both Worlds – Principles
LEANReducewasteby
reorganizingaprocess
SIXSIGMAReducedefectsbysolvingproblems
+LEANSIXSIGMA
Reducewasteandsolveproblemstobecomefaster
andmoreefficient
=
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Lean Six Sigma & the IPPF Standards According to the Institute of Internal Auditors (IIA): “…an independent, objective assurance and consulting activity designed
to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”
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Lean Six Sigma & the IPPF Standards According to the Institute of Internal Auditors (IIA): “…an independent, objective assurance and consulting activity designed
to add value and improve an organization's operations. It helps an organization accomplish its objectives by bringing a systematic,
disciplined approach to evaluate and improve the effectiveness of risk management, control, and governance processes.”
GOAL: To become a trusted business advisor that adds value
• How do we add value?
• Why is it so difficult to achieve?
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Lean Thinking
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“Lean Thinking” 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize
Values: • Simplicity • Visibility • Error-Proof • Waste-less • Standard
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Find the 8 Types of Waste 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize
• Downtime • Overproduction • Waiting • Non-Utilized Talent • Transportation • Inventory • Motion • Extra Processing
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The 5S Program 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize
• Sort • Set in Order • Shine • Standardize • Sustain
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Implement Products & Processes 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize
• Automatic Controls • Automatic Shutdown • Automatic Warnings • Human Factors • Selection, Training,
Discipline
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Focus on Time 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize
• Reduce setup cost • Reduce lot size • Level the schedule • Lean the supply
chain
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Strive for Perfection 1.Iden>fyWaste
2.Simplify
3.Error-Proof
4.IncreaseFlow
5.Standardize• Work instructions
• Respect for people • Measure metrics
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Lean Six Sigma Tools
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RACI – Contract Example R = Responsible A = Accountable C = Consulted I = Informed
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RACI – Contract Example R = Responsible A = Accountable C = Consulted I = Informed
Component / Section
Sta
tem
ent o
f W
ork
Preamble
Scope & Pricing
Billing
Term
s an
d C
ondi
tions
Legal Terms
Business Terms
Addendum
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RACI – Contract Example R = Responsible A = Accountable C = Consulted I = Informed
Component / Section Sales Legal Accounting Finance Services Operations
Sta
tem
ent o
f W
ork
Preamble
Scope & Pricing
Billing
Term
s an
d C
ondi
tions
Legal Terms
Business Terms
Addendum
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RACI – Contract Example R = Responsible A = Accountable C = Consulted I = Informed
Component / Section Sales Legal Accounting Finance Services Operations
Sta
tem
ent o
f W
ork
Preamble I R Scope & Pricing R I I A C I
Billing I R I A
Term
s an
d C
ondi
tions
Legal Terms I R I Business
Terms R I C A
Addendum A R A
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SIPOC Example – Risk Assessment
§ Audit Committee
§ Management
§ Regulators
§ External auditors
§ Prior audits
Suppliers Inputs § Surveys
§ Interviews
§ Research
§ New regulations
§ Open audit findings
Outputs § Risk assessment
§ Annual audit plan
§ Reports
Customers § Audit committee
§ Executive management
§ Regulators
§ Business process owners
Process § See Below
Create Audit Plan
Prioritize Risks
Assess Risks
Identify Risk
Determine Criteria
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Value Stream Map Example
NVA 15 min VA 5 min VA 15 min NVA 15 min
NVA 10 min
NVA 5 min
NVA 10 min 3 Xs –10 min each
NVA 30 min
NVA 15 min
Search for contact on
web
Check back to confirm opening
Call customer service to
verify opening
Rep explains process for
opening account on
web
Type in account info
on web
Transfer call to IRA
specialist
Call Account
Specialist
Customer service links new account to existing account
Verify account linked by logging in
START: Request
Account Setup
END: Setup
Complete
What is the Customer
Willing to Pay For?
Process Statistics Total Cycle Time
Non-Value Added (NVA)
Value Added (VA)
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Value Stream Map Example
Search for contact on
web
Check back to confirm opening
Call customer service to
verify opening
Rep explains process for
opening account on
web
Type in account info
on web
Transfer call to IRA
specialist
Call Account
Specialist
Customer service links new account to existing account
Verify account linked by logging in
NVA 15 min VA 5 min VA 15 min NVA 15 min
NVA 10 min
NVA 5 min
NVA 10 min 3 Xs –10 min each
NVA 30 min
NVA 15 min
START: Request
Account Setup
END: Setup
Complete
What is the Customer
Willing to Pay For?
Process Statistics Total Cycle Time ~1 week
Non-Value Added (NVA) 100 mins
Value Added (VA) 20 mins
• Start and end with the Customer in mind • Evaluate from the customer’s point of view • Focus on cycle and wait time
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Cause & Effect – Fishbone Diagram
Why do we have high employee turnover?
Externalities
People
Process
Technology
Culture Inadequate recruiting
Lack of quality training programs
Inappropriate skill sets filling job roles
Feeling of being underpaid and overworked
Too much manual work
Old systems cause frustration
Closed door policy
Overly competitive atmosphere
Increased competition
Better benefits externally
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The Audit Management Process
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Audit Management Lifecycle
Cyclical nature of process • Driven by organizational risks • Key challenges & pain points • Continuous improvement
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Audit Planning and Scoping
Building the Audit Plan • Risk assessments • Planning memos • Project plans
• Resource assignments • Audit budget • Audit kick-off presentations
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Data Requests and Collection
Managing the Documentation • Review/request documents
• Process flow charts • Process narratives
• Risk and control matrix • Process walk-throughs • Audit program guide
• Test plans
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Fieldwork and Testing
Conducting the Audit Work • Workpapers and review • Supporting evidence • Test of design
• Test of effectiveness • Observations • Status update meetings
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Conclusion and Reporting
Closing the Audit • Issues/findings log • Management responses • Final report
• Closing meeting • Budget to actuals • Summary memo
• Audit surveys
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Follow Up and Monitoring
Continuing Engagement • Issues/findings management • Balanced scorecards • External audit reports
• Audit committee materials • Regulatory reports
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The contents of this presentation are confidential. Copyright © 2017 Workiva.
What are your challenges?
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Universal Audit Process Challenges FIELDWORK REPORTINGPLANNING
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Universal Audit Process Challenges REPORTINGPLANNING FIELDWORK
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Universal Audit Process Challenges PLANNING FIELDWORK REPORTING
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Universal Audit Process Challenges • Manual effort (comments, notes, roll forward, copy, paste, updates, format,
reformat, tick and tie, foot and cross-foot totals, etc.)
• Unintended or missed changes
• Consistency within and across documents
• Babysitting data
• Tracking deliverables and status
• Version control
• Review and approval
• Audit trail (who changed what, when, where, and why)
The entire process is extrapolated by the number of audits!
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Solving Challenges with Technology • Value vs. non-value time (analysis, more audits, process improvement)
• Reduce risk (inaccurate findings, delayed timing, turnover)
• Repeatable, sustainable, documented process
• Improve overall quality, reliability, consistency
• Effective control management/audit trail
• Increase overall productivity
• Work-life balance (less stress, less overtime)
• Fulfilling job responsibilities
Ensure the solution supports your process;
not the other way around!
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Conclusion
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Learning Objectives
• Gain an understanding of the fundamental differences between Six Sigma and Lean principles – Eliminate waste from the customer’s perspective to provide value add
• Provide an overview of “Lean Thinking” and the most commonly used Lean Six Sigma tools – Embrace the mentality and leverage tools where applicable
• Identify opportunities to integrate Lean Six Sigma principles within Audit Management process – Opportunities exist with people, processes, and technology