Sunday, December 7, 2014

Internal Audit : Do you Apply " Self Root Cause Analysis" When you Fail ?

This post was insipid by a recent post by Norman Marks entitled " Why Internal Audit Fails at Many Organizations " and a training document presented by Larry D. Hubbard  entitled "Reporting Audit Issues and Root Cause Analysis " . I thought of combining the two subjects in this post !

First, we know that internal audit fails from time to time ,
Second, we know that IIA standard 2320 stipulates that Internal Audit must base conclusions and engagement results on appropriate analysis and valuations .Practice Advisory 2320 - 2 deals with root cause analysis for internal auditors .

Internal auditors are encouraged to perform root cause analysis to provide a meaning to their audit findings and recommendations.

Before I get to my point, here is a quick reminder:

What is Root Cause Analysis ?

Think Reliability website defines it as "  an approach for identifying the underlying causes of why an incident occurred so that the most effective solutions can be identified and implemented. It's typically used when something goes badly, but can also be used when something goes well."

Root Cause Analysis Techniques :

Some of the widely used techniques are :
  • The famous five why's analysis .Remember by the fifth why, you should be able to identify the root cause !
  • The Pareto analysis ( also known as the 80/20 rule)
  • Fishbone diagram
  • Fault Tree Analysis
  • Flowcharting of process flow, system flow and data flow .
The following document provides comparison of common root cause analysis tools and techniques.

Now ,when  internal audit fails , do internal auditors take a moment to perform a root cause analysis of their own failure ? I honestly ,doubt that ! It is easy to blame the failure on the lack of audit committee oversight and  lack of management support ( and these are very legitimate reasons) ,but the key to identify the root cause of the failure should start with soul searching and hard look at the internal audit activity itself !

Let's get into a hypothetical  scenario and assume that your internal audit activity has failed and you decide to perform a root cause analysis using the 5 why's .What will your why's be ?

Please participate in this mental exercise !


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