James C. Paterson - Lean Auditing: Driving Added Value and Efficiency in Internal Audit

James C. Paterson

This edition first published 2015
2015 James C. Paterson / Risk & Assurance Insights Ltd.
First edition published by John Wiley & Sons, Ltd.

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Library of Congress Cataloging-in-Publication Data

Paterson, James C., 1963
Lean auditing : driving added value and efficiency in internal audit / James C. Paterson. First edition.
pages cm
Includes bibliographical references and index.
ISBN 978-1-118-89688-4 (hardback)
1. Auditing, Internal. I. Title.
HF5668.25.P367 2015
657'.458dc23

2014031378

A catalogue record for this book is available from the British Library.

ISBN 978-1-118-89688-4 (hbk) ISBN 978-1-118-89690-7 (ebk)
ISBN 978-1-118-89689-1 (ebk) ISBN 978-1-119-01706-6 (ebk)

Cover Design: Wiley
Cover Image: iStockphoto.com/Rogotanie

DEDICATIONS

This book is dedicated to:

Isabelle, my wife and companion I love you:

And my children:

Tim, Will, Nick and Felicity.

I'm so proud of you all!

CAEs and others in governance, risk, compliance audit and assurance, who are working to bring about positive change against, sometimes, quite considerable opposition.

I hope that this book serves in some small way to acknowledge many of the challenges and dilemmas you face. I also hope it gives some comfort that you are not alone in facing these challenges.

WITH SINCERE THANKS

To Lynda McGill thank you for reading every word and for such patient, constructive and insightful input and for being so much more than just a conventional editor.

To all the Chief Audit Executives (CAEs), auditors and others, named and unnamed, who agreed to be interviewed: THANK YOU for your wisdom, practical good sense and for demonstrating just how useful the lean mindset can be.

To past colleagues in internal audit at AstraZeneca between 2002 and 2009 we did work that was ahead of its time. Your efforts and achievements gave me the inspiration to go into consulting and training, and to write this book. Thank you.

To my clients and all who have participated in workshops with me across the globe. Thank you for your contributions, insights and enthusiasm for learning and for sharing your war stories and practical insights. Your ongoing interest has kept me going over the nine months it took to research and write this book.

Lean is a valuable concept, because it forces you to think about the bigger picture. It's a way of thinking; it's a mindset, with related tools and process behind it.

We start with identifying what are the valuable services and products that matter to your customer. And then thinking about what is necessary for you to deliver those in an acceptable level of quality and all the rest of it. Everything else is Muda (waste).

Norman Marks (GRC thought leader)

If you are reading these words, I imagine you have some interest in lean or in audit, or both, and may be wondering how these disciplines might be combined.

This is what I wondered in 2005 when I was Chief Audit Executive (CAE) for AstraZeneca PLC. Lean was suggested to me as something that could help the audit function step up its added value contribution, as well as improve its productivity.

I was uncertain at first about the applicability and usefulness of lean tools and techniques to internal auditing. But, as we learned about lean, and started to apply it, we were able to create a number of best practice ways of working and also achieved significant productivity gains (of around 20%).

This book outlines what lean can offer to internal auditing. It is based on over four years' experience applying these techniques as a CAE. Thereafter, I have been running my own company and lean auditing has been one of the core areas of my training and consulting work. I have been fortunate to travel to the US, across the UK and Europe, the Middle East, the Far East and Australia to share lean auditing principles and techniques. I have been heartened by the interest in what I have had to say, and in the results that have been achieved by applying these ways of working.

As I prepared to write this book, I was keen to ensure that the efforts of other CAEs and auditors who are working to improve the impact of internal audit should also be captured. I therefore interviewed a number of CAEs from a range of organizations in the UK, US and elsewhere and their views and insights are captured throughout the book. I have also been fortunate to receive insights from other leading figures in the internal audit world, including Richard Chambers, President & CEO of the Institute of Internal Auditors (IIA), Norman Marks (a well known thought leader in Governance, Risk and Compliance (GRC)), Sarah Blackburn and Nicola Rimmer (both former Presidents of the UK Chartered Institute of Internal Auditors (IIA UK)) and Chris Baker, Technical Manager of the IIA UK. Herein are also selected board members' observations about internal audit.

Consequently, this book represents not just the best of what I managed to achieve at AstraZeneca, and with my clients. It also captures a wider range of progressive practices in internal audit as well as related good practices in the GRC arena. You only need to reflect on the devastating impact of the financial crisis of 2007 and 2008, and countless other risk and governance surprises, to recognize there is considerable room for improvement in this field!