Quality Management 012 Lecture Slides.pdf
- 1. Week Twelve: Quality Audits QUALITY MANAGEMENT DR EBENEZER ODURO ANTIRI
- 2. 2 • The term audit refers to the process of examining and evaluating your business’s financial statements. • During an audit, an auditor checks if the business’s financial statements are up-to-date and devoid of any errors • Performing frequent internal and external audits helps maintain the credibility of your finances. • Unfortunately, many business owners only realize the true value in auditing after having to face the consequences of error-prone data. What is an Audit? Q U A L I T Y A U D I T S
- 3. 3 • There are three main types of audits: • Internal • External • Government audits Types of audits Q U A L I T Y A U D I T S
- 4. 4 • An internal audit is useful for evaluating your business’s accounting processes. • It ensures that your business is in compliance with the relevant rules and regulations, and enables you to produce timely reports of your financial data. • An internal audit is usually carried out by an accountant or an auditor who is a part of your business. • The main goal of this audit is to check the effectiveness of your financial operations, understand the risk factors involved, and come up with viable solutions to exercise better financial management. • Internal audits are conducted on a weekly, monthly, or annual basis. Conducting regular internal audits helps you identify the pain points in your business operations, prevent potential fraud, and rectify errors before they are reflected during external audits. Internal Audit T Y P E S O F A U D I T S
- 5. 5 1. Even before you plan to conduct an internal audit, it is necessary that your management come up with an internal audit plan in collaboration with the auditor. You will need to fix the time within which the audit can be conducted and finalize what steps and procedures will be followed. It is also good practice to keep your employees informed about the audit so that they can get important documents ready even before the audit begins. 2. During the internal audit, the designated auditor will look through the financial documents, take notes, and have conversations with several employees to test their understanding of your business’s objectives, safety standards, and rules and regulations for compliance. Internal Audit Process I N T E R N A L A U D I T
- 6. 6 3. Once the auditor has finished the investigation, management will be informed about the results. The auditor will convey the strengths and the pain points in your processes and advise your team on how to implement fixes. 4. Once the discussion with management is over, the auditor will prepare the auditor’s report, which summarizes the investigation and has a final list of expectations that need to be amended by management. Once all the amendments are made to the relevant documents, the audit is officially closed. Internal Audit Process I N T E R N A L A U D I T
- 7. 7 • The main aim of an external audit is to validate your business’s financial statements. • The result of an external audit provides assurance to third parties that your finances are secure and accurate. • Most businesses consider it beneficial to perform external audits because the auditor’s report, in this case, is an asset for that business. Unlike internal audits, external audits are perceived to be much more reliable. • Since the external audits are conducted by independent, third-party accountants or accounting firms, the review process and reports presented are unbiased. External audits are usually conducted once every financial year. External Audit Q U A L I T Y A U D I T S
- 8. 8 1. It is important to prepare your team well in advance before beginning an external audit. Usually, each department will be assigned an audit manager, who will be in close contact with the auditor or the auditing firm’s personnel. Each time there are any questions or concerns, the auditor must know who to reach out to. The audit manager must ensure that all relevant documents are ready for quick reference for the auditor. 2. Once you have appointed an external auditor or an accounting firm to conduct the audit, the auditor will thoroughly collect, interpret, and assess your financial and accounting records to understand your business activities. Some of their key responsibilities include proper planning and execution of audit trail procedures, examining finances, and investigating business risks, if any. External Audit Process E X T E R N A L A U D I T
- 9. 9 3. The auditor may even recreate your financial statements to check if standard accounting principles were followed while preparing them. They may also look at the other competitors in the field to check if your progress is realistic or look for irregularities in your reporting. 4. Once the audit is over, they are likely to hand over a report and give their objective opinion about your business. Their opinions and input are necessary for rating a company’s performance, which acts as an assurance factor for business owners. External Audit Process E X T E R N A L A U D I T
- 10. 1 0 • Tax audits are conducted by government organizations to ensure that all the financial records submitted by a business for returns are tax compliant. • There is no specific time or date on which it is conducted. • It is mostly conducted randomly or called for in situations of non- compliance or fraud. Government Audit Q U A L I T Y A U D I T S
- 11. 1 1 1. The key task here is to keep everything organized at all times because you’ll never know for which transaction you might get called for. So keep your bills, receipts, agreement documents, and more organized month by month and year by year. This will help you answer all the questions raised by a government agent. Government Audit Process G O V E R N M E N T A U D I T
- 12. 1 2 2. During the audit, the agent and the taxpayer will have conversations where the taxpayer will need to answer the agent’s question with suitable document proof. Once the investigation comes to an end, there are three probable outcomes. • * The taxpayer will AGREE to make the relevant changes pointed out by the IRS agent. • * The taxpayer will NOT AGREE to make the changes and will instead go for an appeal in court. • * The two parties come to the conclusion that everything has been reviewed and no changes need to be made. Government Audit Process G O V E R N M E N T A U D I T
- 13. 1 3 • Quality auditing is the systematic and independent examination of your quality system to verify its compliance, effectiveness, and suitability. • It can be done internally by your own staff or externally by a third- party auditor. • The purpose of quality auditing is to identify strengths, weaknesses, opportunities, and risks in your quality system and to provide feedback and recommendations for improvement. • Quality auditing can also help you prepare for certification, accreditation, or recognition by external bodies. Quality Auditing Q U A L I T Y A U D I T S
- 14. 1 4 • Quality auditing is checking an organization's processes to make sure they meet quality standards. • It looks at how well the quality system works, finds areas to get better, and checks if rules are followed. • The main goal is to report on how things are going and make things better and more efficient. • Quality management is about all the steps to keep up a good level of quality. • This means making a quality policy, planning for quality, making sure quality is good, and always trying to improve. Quality Auditing Q U A L I T Y A U D I T S
- 15. 1 5 • Quality auditing and quality management are complementary but not interchangeable. • Quality auditing is a tool that supports quality management by providing objective and independent information and feedback. • Quality management is a process that uses quality auditing and other methods to ensure and improve quality. • Quality auditing and quality management should be aligned and integrated with your strategic goals and organizational culture. Quality Auditing vs Quality Management Q U A L I T Y A U D I T I N G
- 16. 1 6 • There is no one-size-fits-all definition of quality auditing and quality management. • You need to define them according to your context, which includes your industry, sector, size, scope, customers, stakeholders, regulators, standards, and best practices. • You also need to consider your vision, mission, values, objectives, and policies. • You can use frameworks, models, and guidelines such as ISO 9001, ISO 19011, PDCA cycle, or Baldrige criteria to help you define and implement quality auditing and quality management in your context. Defining Quality Auditing and Quality Management in Your Context Q U A L I T Y A U D I T I N G
- 17. 1 7 • Quality auditing and quality management can have a positive impact on your organization by: • Improving customer satisfaction and loyalty • Enhancing stakeholder • Trust and confidence • Reducing costs and waste • Increasing productivity and profitability • Fostering continuous improvement and learning • Strengthening risk management and compliance • Promoting innovation and excellence • Creating a culture of quality Benefits of Quality Auditing and Quality Management Q U A L I T Y A U D I T I N G
- 18. 1 8 • Quality auditing and quality management can be maximized by establishing clear and measurable objectives and indicators, involving and engaging employees, customers, and stakeholders in quality activities, communicating and documenting the quality system, training and empowering staff to perform quality audits and tasks, seeking and acting on feedback for improvement, reviewing and updating the quality system regularly, and celebrating and rewarding quality achievements. • All the Quality audits are part of Quality Management system. • Identify all the applicable type of audits based on the Organizational products, processes and type of customers. Tips for Quality Auditing and Quality Q U A L I T Y A U D I T I N G
- 19. 1 9 • Prioritize the audits and make the audit plan based on the criticality and importance of the processes. • Typical quality audits can be Product, Process, LPA, Pokayoke verification, PPAP etc. on the other hand, Management system audits like ISO 9001, IATF 16949, AS 9100, ISO 17025 etc. can be done in an integrated way, so that resources can be utilized effectively. • Integrating different standard requirements and covering different QMS standards in a single audit checklist, will save lot of time, resources and avoid the repetition of activities and verification. Tips for Quality Auditing and Quality Q U A L I T Y A U D I T I N G