What Is This Thing Called Value-add?

 

In June of 1995, I published an article in Internal Auditor describing how Farmers Audit developed its own vision statement. Here is a quote from that article: “In trying to determine how best to explain ourselves, we started with familiar buzzwords and catch phrases, ‘consultants’ and ‘value-added,’ for example.” Note the date. Almost 14 years ago, internal auditors were bandying about the word “value-add” — not to mention “consultant” — and we were all trying to figure out how to get that done. I don’t know how it is around your audit shop, but I see this phrase continues to have a starring role in many seminars, conferences, and chapter meetings — not to mention how prominent it is within our own department. Which begs the question:

When are we going to quit talking and just make it an inherent part of what we do?
 
Maybe I’m missing something here, but …
 
… If you are spending your time trying to figure out how you add value and trying to convince your customers you add value (in particular if you are using those exact words), then close up the shop and call the movers, the game is over, the band has left the field, Romeo and Juliet are dead, the roadies hit the stage, the fat lady has sung, the case is closed, --30--, the analogies have run out, it’s a Mark VII. (That last one is a Dick Van Dyke reference for anyone old enough to remember.) I am not coming out against marketing your audit department — that’s a continuous requirement. But I’m saying that, if you’re doing your job correctly, your customers will intrinsically understand your value. The minute you start hyping your value in a “look what we did” approach, your self-aggrandizing will destroy any credibility you may have established. Tom Peters (luckily for us, talking about human resources departments) once said something to the effect of “Beware of any department that spends its time telling you how important they are. If you don’t already understand what they provide, then they are providing nothing.”
 
Now, this doesn’t mean you stop reassessing your department (if you have to use the word “value-add” to facilitate the process, that’s fine), and it doesn’t mean that you don’t constantly exhibit to your customers your value. Just recognize that value-add is not what we all are trying to achieve; it is table stakes to the game.
 
Or am I missing something?
 
(Join us next time, or the time after, or some time soon for Maslow’s Hierarchy of Auditing, which includes value-add [maybe] but probably a lot lower on the list than you might expect.)

 

Posted on Feb 19, 2009 by Mike Jacka

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  1. You bring up a great point, what is the value audit provides that everyone recognizes (or should recognize)?  We as auditors are quick to point out our value, but just saying it doesn't make it true.  If the people paying our salaries don't see value, our opinion is a moot point.  I have heard auditors recently say things like, "if the company downsizes they will need auditors more than ever".  Theoretically this may be true due to the possible degradation of the control environment (e.g., lack of segregation of duties due to downsizing), but if a company has to cut costs, the first place they will cut are those departments viewed as "overhead".  Can auditing be a valued resource that can play a key role in helping companies make it through these tough economic times, or are we just overhead?

    To keep our audit shops out of the overhead category we need to ask some tough questions about the potential value of each audit.  This is probably best done during the risk assessment and preliminary understanding phase of the audit.  For example:  1)  Will this audit tell the client something they already know?  If so, why do the audit?  Maybe a better approach is to spend the time in a consulting role, rather than audit role, facilitating the resolution of the issue (notice I said facilitating, not fixing).   2) If the initial risk assessment indicates a high probability that issues exist that will require additional resources or capital expenditures to fix, and we know the company is cutting budgets and reducing spending and does not have the funds (thus the desire) to address audit recommendations, does it make sense to conduct the audit?  Again, maybe a different approach is in order rather than a full blown audit.  3)  Maybe an audit of the company's investment strategy is more timely than the annual petty cash audit?  4) The audit is on the annual audit schedule, but there are other emerging audit areas that may be more valuable and timely to management, shoud we do this audit just because it is on the schedule?

    Straying from what some call the "pure" audit approach may be considered heresy, but without some real reflection on how we can better serve the companies we work for, we run the risk of being labeled as overhead.

     

  1. I look at this the reverse way. It is important for auditors to focus on the "value-add" from the persepective of the client or end-user of the audit. Too often we "preach" our own vision of value when we should be focusing on what value the end-user requires. Who cares what we think? By realistically looking at what the organization is looking for we make a better product. We tell then "what this means to you". The value I am speaking about is not what auditors perceive or know as the value, but what the organization percieves as the value (if they see any value at all). By focusing on value to the audit user we bridge the gap between auditor goals and organizations goals (which might be more different than you think).

  1. In my view, auditors should demonstrate their value by quantifing the savings garnered from the audit program as well as quanifing the value of management improvement recommendations that are implemented.  More thought needs to be given to tailoring audit procedures to saving money, improving company operations, and finding fraud where it exists.  In other words, focus the audit program on issues involving economy, efficiency, and effectiveness of company activities and programs.  Then measure the results so that when the question about value added surfaces, the CAE has the data to answer the question.

     

    Don Kirkendall, CIA 

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