Audit toolkit

Business Process Auditing Toolkit

South East Training
228 Dyke Road
Brighton
BN1 5AE
Telephone: 01273 555567
Email: enquiry@southeasttraining.co.uk
Web: www.southeasttraining.co.uk
Toolkit: www.businessprocessauditing.co.uk

South East Training Business Process Auditing Toolkit

Copyright

The Business Process Auditing Toolkit is owned by South East Training. Organisations and individuals
are granted a free licence to use the toolkit on condition that they acknowledge both the ownership and
the source if reproduced.

Ownership: © South East Training 2010

Source: www.businessprocessauditing.co.uk

South East Training
228 Dyke Road
Brighton BN1 5AE

Telephone: 01273 555567
Email: enquiry@southeasttraining.co.uk
Web: www.southeasttraining.co.uk
Toolkit: www.businessprocessauditing.co.uk

Digital image content © 1997-2007 Hemera Technologies Inc., a wholly owned subsidiary of Jupiter Images Corporation.
All Rights Reserved.

© South East Training 2010 BPATK V1.1 Page 1


CONTENTS
CONTENTS ............................................................................................................................................ 2
1. INTRODUCTION ............................................................................................................................ 4
About South East Training ................................................................................................................................... 4
Business Process Auditing Toolkit ....................................................................................................................... 4
Business Process Improvement ............................................................................................................................ 4
Business Process Auditing .................................................................................................................................... 4
The Audit Criteria ................................................................................................................................................. 5
Economy, Efficiency and Effectiveness ............................................................................................................. 5
2. THE BUSINESS PROCESS AUDITING TOOLKIT ............................................................................... 6
Preparation Phase ............................................................................................................................................... 7
Investigation Phase .............................................................................................................................................. 7
Follow-Up Phase................................................................................................................................................... 8
3. PRE-AUDIT ACTIVITIES .................................................................................................................. 9
Establish the Purpose and Scope ................................................................................................................... 10
Establish the Audit Criteria .............................................................................................................................. 10
Nominate the Audit Team ................................................................................................................................ 10
Obtain Information Required for Planning................................................................................................... 10
Establish the Audit Trail and Sample ............................................................................................................ 10
Develop the Audit Programme ....................................................................................................................... 11
Inform the Auditee and Confirm Dates ......................................................................................................... 11
Brief the Audit Team......................................................................................................................................... 11
Prepare Checklists............................................................................................................................................. 11
Prepare for the Opening Meeting ................................................................................................................ 11
4. AUDIT PROGRAMME .................................................................................................................. 12
Example .............................................................................................................................................................. 12
5. AUDIT CHECKLISTS ...................................................................................................................... 13
Benefits ................................................................................................................................................................ 13
Preparation ........................................................................................................................................................ 13
Formats ................................................................................................................................................................ 13
Checklist Example ............................................................................................................................................. 14
Use ....................................................................................................................................................................... 14
6. AUDIT INVESTIGATION ............................................................................................................... 15
Opening Meeting .............................................................................................................................................. 16
Audit Investigation ............................................................................................................................................ 16
Audit Team Meetings........................................................................................................................................ 16
Auditee Wash-Up Meetings............................................................................................................................ 16
Documenting Findings ....................................................................................................................................... 17
Closing Meeting................................................................................................................................................. 17
7. THE OPENING MEETING .............................................................................................................. 18
Suggested Agenda ........................................................................................................................................... 18
8. OBSERVATION STATEMENTS ...................................................................................................... 19
Some Examples.................................................................................................................................................. 20


9. SUMMARY STATEMENTS ............................................................................................................. 21
An Example Summary Statement ................................................................................................................... 21
10. THE CLOSING MEETING............................................................................................................... 22
Suggested Agenda ........................................................................................................................................... 22
11. POST AUDIT ACTIVITIES .............................................................................................................. 24
Report Writing................................................................................................................................................... 25
Requesting a Response .................................................................................................................................... 25
Evaluating the Response .................................................................................................................................. 25
Assisting with the Action Plan .......................................................................................................................... 25
Verifying Effectiveness of the Corrective Action ......................................................................................... 25
Close Out ............................................................................................................................................................ 25
12. AUDIT REPORT ............................................................................................................................ 26
Content ................................................................................................................................................................ 26
Tips for Completion of the Report ................................................................................................................. 26
13. BUSINESS PROCESS IMPROVEMENT ACTIVITIES......................................................................... 27
Business Process Improvement ......................................................................................................................... 27
1. Identify and Prioritise Opportunities for Change .................................................................................. 27
2. Establish Measures of Performance .......................................................................................................... 27
3. Define and Validate the Current Process ................................................................................................ 27
4. Solicit Commitment and Support ............................................................................................................... 27
5. Collect, Collate and Analyse Data ........................................................................................................... 28
6. Select Options for Change ......................................................................................................................... 28
7. Re-Define the Process .................................................................................................................................. 28
8. Plan Implementation..................................................................................................................................... 28
9. Gain Approval for Your Plan .................................................................................................................... 28
10. Evaluate Success and Close ..................................................................................................................... 28
14. BLANK FORMS ............................................................................................................................ 29



1. INTRODUCTION
About South East Training

South East Training is a network of experienced business consultants who provide a wide range of
consultancy services, focused on employee development, to help our customers enhance their business
performance.

South East Training is an Institute of Leadership and Management (ILM) approved provider of endorsed
awards.

Business Process Auditing Toolkit

The Business Process Auditing Toolkit was developed by South East Training to provide both new and
experienced auditors with a set of tools to help guide them through the complexities of the business
process audit. These tools are the copyright of South East Training. However, you are free to use them
on condition that you acknowledge both the ownership, © South East Training 2010, and the source,
www.businessprocessauditing.co.uk, if reproduced.

Auditors attending the South East Training Business Process Auditing Course receive a printed copy of
the Business Process Auditing Toolkit along with their participant notes.

South East Training is part of the businessballs community. Follow the link www.businessballs.com for
more free resources. If you want to join in discussions about auditing or any of the other topics listed,
click on the businessballs community link.

Business Process Improvement

As the recession deepens and managers at all levels are facing hard decisions about where to apply
cuts in expenditure, South East Training is keen to help its customers make the right decisions for their
businesses. Expenditure cuts applied in the wrong place can damage an organisation's capability to
continue meeting its customers' expectations. A failure to provide the service that your customers have
come to expect leads to poorer business results and possible long term decline. The goal, therefore, is
to find a way to rationalise your business while continuing to provide excellent customer service, leading
to future growth. The answer lies in improved Business Process Management.

However, Business Process Management activities can be time consuming and costly. When you
embark on a Business Process Improvement project, how do you know if you are targeting the right
areas? What confidence do you have that the improvement activity will provide a return on your
investment? Business Process Auditing provides a solution by offering a low cost method for identifying
where processes are failing to deliver economy, efficiency and effectiveness, allowing you to focus on
critical issues.

Business Process Auditing

Unlike traditional forms of auditing that concentrate on assessing compliance with national standards or
internal rules and procedures, Business Process Auditing focuses on evaluating the economy, efficiency
and effectiveness of the business processes that are critical to meeting your strategic objectives. The
Business Process Auditor is concerned with understanding how these processes operate and how they
support the achievement of strategic goals.



The Audit Criteria

Business Process Auditing involves a structured investigation of your critical processes to assess their
'health' in relation to criteria that are important to your business. These criteria might include business
strategy, corporate policy, business plans, departmental targets, past performance, current performance
in other parts of the business or customer expectations. The choice is yours.

Economy, Efficiency and Effectiveness

The Business Process Auditor seeks to answer questions in relation to economy, efficiency and
effectiveness, such as:

Economy

 Are we acquiring goods and services at the lowest possible prices whilst maintaining the required
quality?
 Are we achieving Value for Money?
 Where else can we save money?

Efficiency

 Can we do this task, activity or process in a smarter way?
 Have we eliminated all the waste we can?
 Could we do this differently?
 Do we even need this process?

Effectiveness

 Do we know what our customers' expectations are?
 Are we meeting our customers' expectations consistently?
 Are we positioned to meet our customers' future needs?

Whilst Business Process Auditing does look at compliance as part of the investigative process, it is more
concerned to determine if the business process under examination, whether defined or simply adopted
as common practice, is fit for purpose in meeting the organisation's needs. In most cases, this means the
auditor is evaluating the 3Es: economy, efficiency and effectiveness.

Copyright

Please feel free to distribute this document to anyone involved in business process auditing. Please
remember, however, when reproducing any part of this document to include the ownership, © South
East Training 2010, and the source, www.businessprocessauditing.co.uk .



2. THE BUSINESS PROCESS AUDITING TOOLKIT



Preparation Phase

This section outlines the activities involved in preparing for
a Business Process Audit from identifying which
processes to investigate through to preparation of the
audit checklists use as an aide memoire by the auditors.

Pre-audit activities include:
 Establish the purpose and scope of the audit
 Establish the audit criteria
 Nominate the audit team
 Obtain documents/information required for
planning
 Establish the audit trail and sample
 Develop the audit programme
 Inform the auditee and confirm dates
 Brief the audit team
 Prepare checklists
 Prepare for the opening meeting.

Additional information is provided on the following pages.

 Pre-Audit Activities
 Audit Programme
 Audit Checklists

Investigation Phase

The audit investigation involves gathering evidence about
the performance of the process. This section deals with
the activities from the opening meeting, which marks the
start of this phase, through information gathering and
preparation of observation reports, to the closing meeting
that marks the end of the investigation phase.

Activities during the investigation stage include:
 The opening meeting
 Audit investigation
 Audit team meetings
 Auditee wash-up meetings
 Documenting findings
 Closing meeting.


 Audit Investigation
 Opening Meeting
 Observation Statements
 Summary Statement
 Closing Meeting



Follow-Up Phase

This section outlines the activities undertaken by the
auditors after the investigative phase, starting with
preparation of the audit report through to assisting
management with corrective action and eventual close-out
of the audit.

Post audit activities include:
 Report writing
 Submitting the report and requesting a response
 Evaluating the response
 Assisting with the action plan
 Verifying corrective action has been taken and is
effective
 Close out


 Post Audit Activities
 Audit Report
 Business Process Improvement Activities



3. PRE-AUDIT ACTIVITIES



Establish the Purpose and Scope

Which business processes you choose to audit can depend on numerous factors. The most common
reason for selecting a process to audit is concern over its capability to deliver the process objectives. An
increase in customer complaints or a failure to meet targets for quality or productivity might suggest the
need for a systematic investigation. However, there may be other drivers, such as impending change in
legislation or the availability of new technology, that give rise to questions about future process
capability. In all cases, however, the principal purpose of Business Process Auditing is to assess the
economy, efficiency and effectiveness of the process against pre-defined criteria.

With regard to scope, we, at South East Training, suggest that organisations audit processes 'end-to-
end'. The most common causes of failure are interfaces between functions, sections or departments. It
is only by examining the process from its initiation, for example by receipt of a customer request, through
to completion that the audit team can gain a true picture of the health of the process.

Establish the Audit Criteria

Business Process Auditing is a comparative exercise. In all cases the business process auditor is
comparing evidence of process performance against a set of pre-defined criteria. Selection of the audit
criteria depends on the purpose of the audit. These criteria might include business strategy, corporate
policy, business plans, departmental targets, past performance, current performance in other parts of the
business or customer expectations.

Nominate the Audit Team

The size and composition of the team depends on the scale and complexity of the processes to be
audited, and the amount of time available to the team. From time to time it may be necessary to include
within the team auditors with specific technical expertise, such as IT, finance or health and safety
specialists.

Obtain Information Required for Planning

In order to develop an audit programme, the auditors need an understanding of the processes to be
audited. For organisations that operate management systems conforming to the International Quality
Management System Standard ISO 9001, or similar, this might simply mean obtaining a copy of
the quality manual and relevant operating procedures. However, many organisations have not
documented their processes to the level required by such standards. This, then, requires the lead
auditor to conduct some preliminary investigations to ascertain the sequence of activities within the
process to be investigated. One option for the auditor is to conduct a business process mapping
exercise. The resulting process map provides a template for production of the audit programme and the
audit checklists.

Other documents the auditor might request at this stage are previous audit reports, customer complaints
and performance statistics.

Establish the Audit Trail and Sample

In constructing the audit programme, the lead auditor needs to consider the most appropriate
sequence for the investigation. One option is to follow the end-to-end process from start to finish,
selecting samples on the way. Another is to select a process output, say a fulfilled order or completed
project by way of a sample, and trace the process back to its origins. These are referred to as
downstream and upstream approaches.



Develop the Audit Programme

The audit programme is a timetable stating which functions, sections or departments will be visited and
when. The audit programme includes a statement of the audit purpose and scope and the names of the
auditors. An example of an audit programme is shown on the Audit Programme page.

Inform the Auditee and Confirm Dates

Business Process Auditing is intended to be a part of a planned business process improvement activity.
It is not a witch-hunt or policing activity aimed at catching people out. With this in mind, there is never an
argument for the 'surprise' audit. Business Process Auditing is a collaborative activity involving the
auditors and the auditees equally. For this reason, the auditee management is always consulted on the
best time to conduct the onsite phase of the audit. It is usual to confirm the dates of the audit at least
two weeks prior to the visit.

Brief the Audit Team

It is likely that, up to this stage, the planning has been solely in the hands of the lead auditor. If the audit
team is composed of more than just the lead auditor, there is the need for a briefing session. This
should cover the purpose and scope of the audit and a sharing of all the information collected in
preparation of the audit programme.

Prepare Checklists

Audit checklists act as aide memoires for the auditors. They help the auditors maintain the pace and
depth of the audit, ensuring nothing is forgotten and the full scope is covered. Having individual audit
team members prepare checklists for their own part of the audit is a good way to help them become
familiar with the processes or parts of processes they will be investigating. At South East Training we
recommend that you do not use pre-defined checklist prepared for previous audits. Your checklists
should be unique to your audit. Further information about audit checklists is included on the Audit
Checklist page.

Prepare for the Opening Meeting

The opening meeting marks the start of the investigation phase of the business process audit. It is held
on site, with the local management, and is chaired by the lead auditor. The audit team should have
copies of the following documents available at the meeting:

 The meeting agenda
 The audit programme
 An attendance list

Further information about the conduct of the opening meeting is provided on the Opening Meeting page.



4. AUDIT PROGRAMME
The audit programme should include:

 location of the audit
 purpose and scope
 dates
 starting time for the opening meeting
 timed programme of visits
 starting time of closing meeting
 names of the audit team.

Example

Audit Programme
Location: XYZ Fire and Rescue Service Headquarters
Purpose: The audit is part of a planned programme of business process audits designed to provide
senior management with information about the economy, efficiency and effectiveness of core
business processes essential to Brigade performance and to support the Brigade's
Performance and Review Team in their preparation of Best Value Performance Plans.
Scope: The scope of the audit will include:
1) Planned and routine maintenance of fire appliances (including special projects)
2) The procurement of capital equipment
3) The management of major contracts
Dates: 10 November 2xxx
Audit Team: Pat Kelly - Audit Team Leader
Chris Balls - Auditor
Sam Brookes - Observer
Time Activity
09.00-09.30 Opening Meeting
09.30-10.30 Maintenance Function:
 Roles and responsibilities
 Documentation and records
 Special projects
10.30-12.00 Visit to ABC Fire Station
 Roles and responsibilities
 Special projects
12.00-13.00 Lunch and Audit Team Meeting
13.00-14.30 Procurement Function:
 Roles and Responsibilities
 Budget management
14.30-16.00 Contract Function:
 Roles and Responsibilities
 Budget management
16.00-17.00 Audit Team Meeting
17.00-17.30 Closing Meeting
Lead Auditor
Pat Kelly Date: 17/10/2xxx



5. AUDIT CHECKLISTS
Benefits

Pre-planning the audit by preparing checklists is one of the techniques of effective auditing. The use of
checklists:

 helps to ensure the audit sample is well balanced
 helps to ensure that the auditors are well briefed about the objectives and permits the lead
auditor to evaluate the preparatory work carried out by other members of the team
 helps the auditors control the ‘pace’ of the audit
 is helpful where there is need to reassign part of the audit from one auditor to another
 provides a record of the specific areas and activities investigated during the audit.

Preparation

With the audit programme agreed the audit team must then decide what aspects of the processes and
controls are to be examined in each area. This information is documented in a checklist. In doing this,
the auditor is defining the sample of activities to be investigated at each stage. During the audit, the
checklist will be used as an aide-mémoire to remind the auditor what to investigate.

Guidance points for the preparation of audit checklists are:

 Before preparing the checklists the auditor should become fully conversant with the objectives
and scope of the audit, the audit criteria, the activities carried out in each area, and the controls
for ensuring that requirements are met.
 There should be a separate checklist for each department or work area. It may be helpful to
have more than one checklist for a single area where there is more than one process involved,
e.g. training development and training administration.
 The number of items to be included in a checklist will depend on the time available for that part of
the audit.
 The amount of detail included in the checklist should suit the needs of the auditor. The auditor
may write out a series of questions, or simply list headings.

The level of detail on the checklist may be restricted by the amount of information available during the
preparatory phase. Some auditees may not have defined their processes and controls, and therefore
will not be able to provide adequate process descriptions. In such cases it will be necessary for the
auditor to determine the sequence of activities during the audit and, possibility, even construct outline
process diagrams in order to understand where the controls apply.

Formats

There are numerous different checklist formats. However, they tend to fall into three categories:

 Bullet list: A list of bullet points consisting of one or two words on each line which serve to
remind the auditor of the points to be covered during the audit. This type of list is common with
experienced auditors. The disadvantage with this type of checklist is that there may be
difficulties if the checklist has to be used by another member of the audit team.
 Questions for the auditor: A list of questions to which the auditor requires answers. However,
since these questions are often ‘closed’, i.e. requiring only a yes/no answer, these questions are
not in a form that can be put directly to the auditee if informative answers are required.
 Questions for the auditee: A list of questions in a form suitable for putting directly to the
auditee. These questions are generally ‘open’ in format, i.e. they cannot be answered with yes
or no. Typically, these questions would be begin with what, how, when, where, who or why.



Checklist Example

The following is an example of the questions that might be asked by the auditor to determine the extent
to which an equal opportunities policy has been implemented within a department.

Audit of the Equal Opportunities Policy - Checklist Questions for Interview with Department
Manager

 Could you please explain what you understand by the term ‘equal opportunities’?
 Please may I see where the equal opportunities policy is documented? (check existence and
availability)
 Can you show me where the definition of equal opportunities is documented? (check existence
and availability, check against own definition)
 Who has received copies of the policy statement (and equal opportunities definition) and when?
 What training or coaching in equal opportunities has been provided to staff?
 Could I please see the records of training/coaching? (check dates, content, coverage)
 What reference to equal opportunities is made during the induction of new employees?
 What special training in equal opportunities, if any, is provided for recruiting staff?
 Is there any special mention of equal opportunities in the recruiting procedure, if so, could you
please show me where?
 How do you make sure that recruiting staff comply with the requirement?
 Etc.

Note that the checklist above includes not only the questions for the department manager, but where a
document or record is requested, what the auditor should be looking for, e.g. check training records for
dates, content and coverage of events.

Use

The checklists should be a good servant, never the master, of the auditor. The auditor may come across
useful information, not referenced in the checklist, which could provide a valuable insight into the way the
process operates. However, the auditor should only deviate from a checklist if time allows and the
overall objective of the audit is not jeopardised. In general, if an audit has been well prepared, deviation
from the checklist should not be necessary.



6. AUDIT INVESTIGATION



Opening Meeting

on site, with the local management, and is chaired by the lead auditor.

The meeting gives the auditors the opportunity to confirm the purpose, scope and programme for the
audit, to explain the audit process and to confirm the availability of the interviewees. The meeting may
also provide the auditor with an insight into the local management's attitude towards business process
auditing and business process improvement in general.

Further information is provided on the Opening Meeting page.

Audit Investigation

The purpose of the investigation phase is to obtain objective evidence of the effectiveness, efficiency
and economy of the processes and their controls. This evidence may be found in the form of:

 oral statements
 documents
 records
 the auditor's own observations.

It is up to the auditor to make sure the evidence collected is:

 relevant to the purpose of the audit
 accurately documented in the audit records
 verifiable.

The auditor collects evidence mainly through interview but it is essential that the auditor confirms oral
statements by asking the auditee to verify the facts. This might be provided in the form of documents or
records that support the statements. In some cases, where there is no documentary evidence, it may be
necessary for the auditor to ask the same question to several interviewees for corroboration.

Audit Team Meetings

During the course of the investigation phase, the audit team meets up to share information and take
stock of how the audit is progressing. Evidence obtained in one area may be pertinent to the
investigation in another, particularly if the team is looking at different parts of the same end-to-end
process.

Auditee Wash-Up Meetings

If the audit extends over more than one day, as most do, it is normal to have periodic meetings with the
auditee representative to share any evidence obtained during the investigation. This has two purposes.
Firstly, it ensures that there are no surprises for the auditee when it comes to presentation of the findings
at the closing meeting. Secondly, it allows the auditee the opportunity to provide an explanation for any
deficiencies identified and/or correct any factual errors in the evidence. This helps the auditor ensure the
accuracy of the findings.



Documenting Findings

The auditors document each finding as a separate observation statement for presentation at the closing
meeting. These statements form the basis of the corrective action that the auditee management should
initiate as soon as the audit has been completed. It is important that the statements are factually correct,
point to the reason for the deficiency if this is known and provide a conclusion. They should also include
the evidence that has led the auditor to raise the issue as a deficiency.

Further information is presented on the Observation Statements page.

The team also produce a summary statement for presentation at the closing meeting. This provides an
overview of the audit and its findings.

Further information can be found on the Summary Statement page.

Closing Meeting

The closing meeting marks the end of the investigation phase of the business process audit. Again, it is
held on site, with the local management, and is chaired by the lead auditor.

The purpose of the meeting is to relay the results of the audit investigation to the local management and
gain a commitment from them that actions will be taken to address the issues identified. Observations
should have been declared to the auditee representatives when they were found, so there should be no
surprises at this meeting. A formal report, incorporating the results presented at the meeting, will follow
at a later stage.

Further information on the closing meeting is provided on the Closing Meeting page.



7. THE OPENING MEETING
on site, with the local management, and is chaired by the lead auditor.

The meeting gives the auditors the opportunity to confirm the purpose, scope and programme for the
audit, to explain the audit process and to confirm the availability of the interviewees. The meeting may
also provide the auditor with an insight into the local management's attitude towards business process
auditing and business process improvement in general.

This meeting should normally take no longer than 15 minutes.

Suggested Agenda
Introductions of all present at the meeting and completion of an attendance list. The
Introductions
list forms part of the audit record.

Explanation of the purpose of the audit and, if necessary, a statement about the
Purpose
authority for conducting it.

Scope Confirmation of the scope of the audit.

Review of the audit programme. The auditors should confirm that personnel with an
Programme understanding of the processes to be investigated will be available for interview.
Further information about audit programmes appears on the Audit Programme page.

The introduction of personnel who will guide the audit team from one location to
Guides
another as required.

Identification of audit responsibilities, e.g. which auditors will audit which areas?
Responsibilities
Who will agree the observation statements for the auditee?

Confirmation of the status of documents, e.g. policy statements, procedures,
Documentation
protocols, used by the auditors to prepare the audit.

With whom the audit team should communication in the event of a serious problem
Communication being encountered during the audit, such as a failure of personnel to co-operate with
the audit team.

Confirmation of arrangements such as:
 meeting place for the audit team
 access to photocopier, telephone, etc., if required
Logistics  any special Health and Safety requirements
 lunch arrangements
 transport
 time and place for the closing meeting.

Auditee
Response to any information offered, or questions put, by the auditee management.
Response



8. OBSERVATION STATEMENTS
Business process deficiencies identified during the course of a business process audit are written up in
the form of observation statements that are presented to the auditee management at the closing
meeting. These statements form the basis of the corrective action that the auditee management should
initiate as soon as the audit has been completed. It is important that these statements are factually
correct, point to the reason for the deficiency if this is known and provide a conclusion. They should also
include the evidence that has led the auditor to raise the issue as a deficiency. The observations
statements do not, however, include suggestions for rectifying the problem. It is up to the auditee
management to determine the corrective action.

The Format of Observation Statements

Observations should be structured to include: Your conclusion should refer to one or more of the
following:

 Existence: There is an absence of a necessary
 The audit criteria system
 The requirement  Compliance: Failure to comply with the defined
 Your observation (state your evidence) system
 Why there is a problem  Effectiveness: Failure to achieve objectives
 The cause of the problem (if known)  Economy: A cheaper option for achieving the
 Your conclusion. same outcome exists
 Efficiency: Outputs do not justify the inputs (a
more efficient way exists)

Tips on Completing Observation Statements

Avoid the following phrases: Reconsider your findings if you are tempted to use any
of these phrases:

 The audit team could not identify….. (Were
 The audit team looked at…. you looking hard enough?)
 The audit team identified that….  There appears to be….. (You are not certain)
 During the audit it became clear that….  It seems that….. (You are not certain)
 The audit team understands that….  Anecdotal evidence suggests that…. (You
 The audit team considered…… don’t have the evidence)
 This obviously means/is because/makes…..
………..just state the evidence you have! (Auditor opinion)

……..re-examine your evidence or withdraw the
observation statement!



Some Examples
Example 1 - Ineffectiveness
Manual note ABC, Version X, states that firefighters should return defective radio equipment to ICT so
the cause of failure can be determined.

Four Firefighters at Fire Stations A, B and C, stated that although they had completed Hazard Reports
(HR 1,2,3, 4) regarding the perceived failure of radios to operate as expected, they had not returned the
equipment to ICT claiming they were unaware of the requirement. This has made it impossible to
determine whether or not the equipment ‘failures’ were due to the environment in which they were being
used or due to battery charging issues.

The lack of communication of the requirement in manual note ABC to impound and return
defective radio equipment to ICT has led to ineffectiveness in the system for equipment fault
analysis and repair.

Example 2 - Inefficiency
The Training Centre Bookings Schedule showed that 50% of all courses over the last 6 months and 85%
of all courses over the last month (May 200X) scheduled to run at the Training Centre had to be
cancelled owing to a lack of participants.

The XXXX Borough Commander stated that despite staff being nominated for training 6 months in
advance of the advertised date, the Training Department did not notify participants of their attendance on
courses until two weeks prior to the start of any event, which did not leave enough time for participants to
make the necessary arrangements to attend. Records for cancelled courses BA12, BA13 and BA14 all
scheduled for May 200X confirmed his statement.

The Training Manager stated that the delays were due to both the Operations Department and HR
having to approve the nominations prior to scheduling.

The process for booking participants on to training events is inefficient, leading to an
uneconomic use of training facilities which are under-utilised.



9. SUMMARY STATEMENTS
The summary statement is prepared for presentation at the closing meeting and provides an overview of
the audit and its findings. The statement is normally read out prior to presentation of the observation
statements. However, some auditors prefer to present this afterwards as it helps move the meeting to a
conclusion. Whilst the auditors do not change the wording of the observation statements for inclusion in
the audit report, it is permissible to alter the text of the summary statement as long as this does not affect
the overall conclusion.

An Example Summary Statement
Example Summary Statement

The audit was conducted as part of a planned programme of process audits designed to provide senior
management with information about the economy, efficiency and effectiveness of core business
processes essential to Brigade performance and to support the Brigade's Performance and Review
Team in their preparation of Best Value Performance Plans.
This audit, conducted between 10-14 November 2XXX, investigated three processes with the purpose of
evaluating their compliance with existing procedures and regulations, and evaluate their economy,
efficiency and effectiveness against defined audit criteria included within both internally and externally
published Brigade documents.
The processes evaluated were:
1. Planned and routine maintenance of fire appliances
2. The procurement of capital equipment
3. The management of major contracts
The auditors made 14 observation, 3 of which were regarded as major.
The auditors concluded that, in general, adequate controls were in place to ensure the economy,
efficiency and effectiveness of both the maintenance function and the capital procurement process. The
8 minor observations raised in these areas dealt mainly with deviation from documented procedures and,
in some cases, the absence of appropriate documentation. Despite these deficiencies, staff interviewed
seemed aware of process requirements and performance in all areas met or exceeded targets. It is
noted that the Brigade Management System is in the process of being rewritten and that some of the
deficiencies may be addressed by the revision.
Review of the management of major contracts gave rise to 3 major and 3 minor observations. The 3
major observations relate to:
1. A failure to communicate requirements effectively to contractors
2. A failure to monitor contractor performance standards adequately
3. A failure to progress corrective actions in a timely fashion resulting in unacceptable delays and
overspend.
The 3 minor deficiencies relate to inaccuracies and omissions in the process relating to the recording of
contractor competences and certification.
Urgent action is required to correct the deficiencies identified in this area and their consequences.
Further, system controls need to be updated and implemented to ensure that similar deficiencies are
prevented from occurring in future.
The audit team would like to thank all the managers and staff involved in the audit for their willingness to
assist throughout.



10. THE CLOSING MEETING
The closing meeting marks the end of the investigation phase of the business process audit. Again, it is
held on site, with the local management, and is chaired by the lead auditor.

The purpose of the meeting is to relay the results of the audit investigation to the local management and
gain a commitment from them that actions will be taken to address the issues identified. Observations
should have been declared to the auditee representatives when they were found, so there should be no
surprises at this meeting. A formal report, incorporating the results presented at the meeting, will follow
at a later stage.

The lead auditor should try to limit the meeting to 30 minutes.

Suggested Agenda

Even though introductions were made during the opening meeting, it is likely that the
closing meeting will be attended by personnel who were not at the opening meeting
Introductions
and, therefore, this should be included as an agenda item. The attendance list forms
part of the audit records.

The lead auditor should thank the auditee management for their assistance and any
Thanks
hospitality received.

Purpose and
The lead auditor should briefly restate the purpose and scope of the audit.
Scope

The auditors should explain that the audit involved the investigation of only a limited
sample of the organisation's activities, and the implication of this for the management:
they should be reminded that as well as any issues identified by the audit, there may
Sample
be other similar issues in areas audited, or in other areas. The auditee management
should look for and correct such deficiencies, as part of their business process
improvement activities.

The observation reports should be read in full without deviation from the written text or
interruption. Copies of the written statements should be handed over to the auditee.
This can be done either before or after they have been presented orally. Handing
Findings
them out after presentation prevents the auditee reading ahead. An explanation of the
categorisation of the deficiencies should also be given. Further information about
observation statements appears on the Observation Statements page.

The main conclusions to be drawn from the audit should be stated in a ‘summary
Summary statement’. It should be explained that this statement may be modified when the
Statement auditors have had more time to consider the significance of the findings. Further
information about summary statements appears on the Summary Statement page.

The auditee management should be given any explanations they request to clarify the
Clarification observation reports. However, there should be no debate about the facts or their
significance.



If, during the closing meeting, evidence is provided to show that a finding
Withdrawals (not to be
is in error, it should be withdrawn immediately and an apology given. If
included on the written
the evidence is too large or complex to be reviewed during the closing
agenda)
meeting, its consideration should be left until after the meeting.

The auditor should ask the auditee management to sign each report
Acknowledgements acknowledging their understanding. If the auditee refuses to sign the
reports, they should nonetheless be left with them.

State when the report may be expected and explain briefly the response
Audit Report Availability expected. Further information about audit reports appears on the Audit
Report page.

The auditee management may wish to make a brief statement to the
Auditee’s Response effect that they have noted the findings of the audit and will take such
corrective action as is necessary as quickly as possible.

As soon as the essential business of the meeting is completed the
Departure auditors should thank the auditees again for their courtesy and depart.
Prolonging the meeting risks reopening the issues raised earlier.



11. POST AUDIT ACTIVITIES



Report Writing

The audit report is normally available within two weeks of the closing meeting. Although organisations
differ in what they want to see within the report, it should always include the findings as they were
presented at the closing meeting and should be signed by the lead auditor. It should be a true record of
the audit. It is worth remembering that in some public organisations, the audit report may become a
'public document'.

Further information on audit reporting is available on the Audit Report page.

Requesting a Response

The report is submitted to the auditee management via the 'client', i.e. the function or department that
commissioned the audit. In most cases, the client requests a response from the auditee. The response
might consist of a simple commitment to rectify problems identified by a certain date or might take the
form of a fully developed action plan.

Evaluating the Response

At South East Training, we recommend that the auditor is involved in evaluating the auditee's response
to the report. Their role is to ensure that the auditee has correctly interpreted the findings and to make a
judgement as to whether or not the proposed corrective action is an appropriate response to the
deficiencies observed.

However, we strongly advise against the auditors making recommendations for corrective action or
owing the action plan. The responsibility for ensuring the economy, efficiency and effectiveness of the
process under investigation lies with the process owner. By making recommendations or taking
ownership of the plan, the auditors take on responsibility for the health of the process.

Assisting with the Action P lan

Any further involvement of the auditors will depend on the nature of the corrective action proposed and
the auditors' related technical expertise.

It is possible that the auditors' findings result in the process owner initiating a process improvement
project, involving a more in-depth analysis of the process characteristics. In this case, the auditors' first
hand knowledge of the deficiencies may be of value to the project team. The danger of involving the
auditors at this stage, however, is they would lose their independence and could not then be involved in
the next step. Further information on improvement activities is included on the Business Process
Improvement Activities page.

Verifying Effectiveness of the Corrective Action

Verifying the effectiveness of the corrective action may involve observing or sampling a part of the
process to see that problems identified during the audit have been rectified, or it may involve a reaudit of
the process. Whoever conducts the verification activity should be independent of the process and the
corrective action taken.

Close Out

Close out is achieved once all parties are satisfied that no further corrective action in relation to the audit
observations needs to be taken.



12. AUDIT REPORT
Content

The audit report should include the following:

 Title, Dates, Audit Team
 Executive Summary
 Purpose and Scope
 Audit Criteria
 Key Personnel Interviewed
 Introduction / Context
 Findings
 Conclusions
 Acknowledgements
 Signature of the Lead Auditor

At South East Training, we advocate against the auditors including recommendations in the report. The
responsibility for process improvement lies with the business process owner. The auditors'
independence from the process and the corrective action may be compromised if they are seen to be
taking ownership of the solutions. However, the client may choose to add recommendations. If this
happens, the report should make clear that these have been added by the client rather than the auditors.

Tips for Completion of the Report

The audit findings should be presented exactly as they were at the closing meeting. It is possible that the
auditee has already started to take corrective action by the time they receive the report and would not be
happy if they were to see the findings had been changed.

As with the observation statements, avoid the following:

The audit team could not identify….. (This suggests you weren't looking hard enough)

There appears to be….. (You are not certain)

It seems that….. (You are not certain)

Anecdotal evidence suggests that…. (You don’t have the evidence)

This obviously means/is because/makes….. (This suggests 'auditor opinion', which is not objective).



13. BUSINESS PROCESS IMPROVEMENT ACTIVITIES
Business Process Improvement

The steps involved in changing a business process follow the sequence below:

1. Identify and Prioritise Opportunities for Change

It is during this first step where Business Process Auditing is most useful.

Business Process Auditing provides a quick and relatively cheap way of identifying processes that would
benefit from improvement. The technique also helps the Business Process Improvement team identify
exactly where, within the selected process, they should concentrate their efforts.

This targeted approach saves both time and money.

Information about the Business Process Auditing Course is available on the South East Training
Business Process Auditing page.

2. Establish Measures of Performance

Once having decided what aspects of a business process we need to change, the next step is to
establish a target performance for the process. Objectives need to be realistic, so it is often useful to
have some sort of framework (such as SMART) for setting those objectives. The most important
requirement is that any performance objectives should be consistent with the higher level business
objectives.

3. Define and Validate the Current Process

As with any journey, it is impossible to plan a route to your destination unless you know your starting
point. The same is true for the process improvement journey. Once we have set an objective for the
process, we need to find out exactly how far away we are from reaching that goal and what obstacles
stand in our way. The approach we advocate at South East Training is to construct an 'as is' process
map. This means creating a business process diagram exactly as the process operates at the moment,
complete with exception paths and any anomalies.

This diagram provides us with a blueprint for subsequent analysis.

Further information on Business Process Mapping is provided on the South East Training Business
Process Mapping and Business Process Modelling Notation (BPMN) courses.

4. Solicit Commitment and Support

The following step involves the Business Process Improvement team in collecting data about the
performance of the process. This can be intrusive and resource intensive. It is good practice, therefore,
to solicit commitment and support for the change activity from the process owner and those involved in
its operation. This can be achieved by explaining why you believe improvement is necessary and what
help you need from them in collecting the data necessary for process analysis. The Business Process
Improvement Team needs to be careful, however, not to suggest options for change at this stage.



5. Collect, Collate and Analyse Data

Techniques for collecting, collating and analysing data depend on what it is you need to know about the
process.

Data collection methods might involve interviews, focus group meetings, questionnaires, observation,
measurement or testing.

Data collation involves displaying the data in a format suitable for analysis. Techniques for quantitative
data range from simple tally charts to frequency plots and scatter diagrams, while affinity diagrams and
flowcharts can be used for display of qualitative data.

Useful analysis techniques include tools such as Pareto Analysis and Ishikawa (cause and effect)
diagrams.

6. Select Options for Change

The process analysis activity is likely to throw up a number of options for change. Some may be
mutually exclusive. This requires the Business Process Improvement team to make choices. A number
of techniques are available to assist this process including nominal group technique, multi-voting and
paired comparison. Options for change should also be validated to ensure stakeholder acceptance and
risk mitigation.

7. Re-Define the Process

Once the Process Improvement Team has settled on the changes that are required, the next step is
to illustrate the revised process in a new Business Process Diagram. This provides a blueprint for
revision of the process.

8. Plan Implementation

Simply redefining the process will not have any impact by itself. Implementation may involve activities
such as automation of parts of the process, reallocation of responsibilities, introduction of new
technology, retraining or even outsourcing. As with any change initiative, this needs to be planned.

9. Gain Approval for Your Plan

It is good practice at this stage to take your plan to your stakeholders for comment. This involves
explaining to them why you feel the changes are necessary, the options you have considered and the
one(s) you have chosen, and the process you have followed in reaching that conclusion. Their feedback
can then be incorporated, giving a higher probability that the plan will succeed at the approval stage.

10. Evaluate Success and Close

Once your plan has been implemented and the changes made, there is a need to confirm realisation of
the benefits you predicted. This is where Business Process Auditing can again be used.

These ten steps provide the framework for the South East Training Business Process Improvement
course. Further information about this course can be found on the South East Training website by
following the Business Process Improvement link



14. BLANK FORMS

The following blank forms are included:

 Audit programme
 Internal Audit Checklist
 Observation statement
 Summary statement



Audit Programme
Location:

Purpose:

Scope:

Dates:

Audit Team:

Time Auditee Activity

Opening Meeting



Audit Team Meeting

Closing Meeting

Lead Auditor Date:



Internal Audit Checklist

Area/Topic Audited: Prepared by: Date: Page of

Item Questions Reference Notes



Observation Report
Area Audited: Report No:

Date Issued:

Reference Documents:

Observation:

Auditor:



Summary Statement
Area Audited: Date of Audit:

Auditor: Date:


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