Building a successful audit organization: by integrating four basic factors in its approach to internal auditing, the Americas audit group of asea Brown Boveri has become a "world-class" function

Internal Auditor, August, 2002 by Michael R. Plumly, Edward M. Dudley

CHASING BEST PRACTICES IS NOT ENOUGH TO ensure a highly successful audit organization. To add value to the company and excel in the audit world, internal auditors must be agile in anticipating change, using resources, and partnering with management to address risks and improve operations.

The Americas internal audit group of Asea Brown Boveri (ABB), an international leader in power and automation technologies, subscribes to just such a philosophy and has built what many of its peers have deemed a "world-class" organization over the last several years. The group has learned that to be successful it must generate an appropriate internal audit infrastructure, tailor audit approaches to each business unit within the company, and create "over-the-top" results by focusing on four basic elements: people, processes, electronic platforms, and focused collaboration with senior management.

HIRING THE RIGHT PEOPLE

Internal auditing at ABB is organized regionally, with the chief audit executive located at the company's world headquarters in Zurich, Switzerland, and audit groups located around the world. The Americas internal audit group, located in Connecticut, is responsible for audits in Canada, the United States, Mexico, and Central and South America.

The Americas group is primarily focused on processes, including operations and business process and financial controls, throughout all areas of the company's businesses. A diverse group of auditors brings several skill sets to audit areas that include project management, manufacturing, supply management, and product marketing and sales.

The internal auditors who work for the Americas group were hired both for their potential and their experience. Within the context of this framework, most of the auditors possess advanced degrees and are, at least, bilingual.

The audit group enhances the specific professional skills of newly hired experienced personnel by teaching them auditing techniques within the multifunctional electronic-systems platform. It is far more important for technical skills -- rather than audit skills -- to be the primary focus of this experienced group of people because ABB deals with a wide range of technology products and services.

The attributes most important for less experienced auditors are a keen, analytical mind; a consultative outlook; and potential for future movement into a business unit. These characteristics should be coupled with a tremendous curiosity, a desire to learn, and a willingness to work hard in a fast-paced travel environment.

Once hired at ABB, inexperienced internal auditors develop skills rapidly as they are exposed to a variety of business issues in several different ABB companies. Typically, a team of two or three auditors will cover two or more major business processes during fieldwork that lasts up to three weeks. The auditors obtain a diversity of experience coupled with a commonality of basic operating and control principles that enable them to add more value to the business each day they are there. They are also given written performance evaluations during at least the first year to monitor progress and identify areas for improvement.

The overall goal within the Americas group is to retain a small core of experienced auditors and to rotate the balance to operating units after they have been in the audit group for approximately three years. The constant mix and change of players within the audit organization results in immense personal satisfaction, diversity of work experience, and continual challenge.

IMPROVING AUDIT PROCESSES

Over the last several years, ABB internal auditing worldwide has made significant changes to its audit processes. The techniques used hardly seem revolutionary, but have proven effective over time. Ten years ago, the audit environment was characterized by:

* Basic audit processes that had wasteful steps and redundancies.

* Minimal planning for individual audits.

* Fieldwork that lasted too long -- four to eight weeks -- and was often too detailed.

* Audit reports that took too long to issue.

* Hard-copy workpapers that were often weeks behind schedule and contained too much extraneous data.

* Disjointed audit follow-up.

* Key performance metrics that were not tracked.

* Audit customers who did not receive the auditors' full attention.

Beginning with the upgrading of personnel resources, the internal audit group began to take steps to improve its processes. These steps included:

* Mapping basic audit processes and making necessary changes to be more efficient and to add more value.

* Revamping guidelines for internal audit operations.

* Re-engineering the audit process to reduce cycle time, measure performance, and improve consistency.

* Introducing electronic audit platforms within Lotus Notes to gain significant efficiencies.

* Implementing a permanent quality process.

* Improving customer focus.

* Developing an audit mission and marketing brochure to help customers understand internal auditing's mission and the skills that the auditors bring to the table.