CHAPTER 6

1. How can internal auditors use histograms during internal audits?

A visual representation of data distribution is represented by constructing a histogram.

Histograms are graphs that use rectangles to display the frequency distribution of numerical data, each
of which represents intervals. Through histograms, internal auditors may present vast quantities of data
that are difficult to interpret in tabular form, then demonstrate the frequency of occurrence of these
data values and easily explain the data distribution (Murdock, 2018).

Some internal auditors are already relying on bar charts to better understand the programs and
procedures that they review but bar graphs are sometimes limited to categorical data. Since internal
auditors examine variable or continuous data, the histogram will be an effective tool for them. Using the
histogram, internal auditors can visually compare if current process information or data is similar to the
previous ones. In this way, internal auditors can easily pinpoint anomalies and improvements. It can
visually show how the process is performing and progressing. Also, using histograms, internal auditors
can test if two or more identical processes have the same distribution of data which will provide a
deeper understanding of the process they review.

2. How can management use control charts as part of their ongoing monitoring activities?

A graph that is used to study how a process changes over time is called the control chart. It is
one of the seven fundamental quality tools and is commonly used by experts in quality control. This tool
will be helpful to internal auditors since the controls of an organization is also necessary to be
monitored. By doing so, the management can have useful information that will help the internal
auditors to identify the strengths and weaknesses of the said controls and what improvements should
be applied. Control charts can be used to predict the future because using this tool as monitoring
ongoing activities, internal auditors can identify things that will or may affect the future performance of
the organization. This tool can also assess whether ongoing activities are stable or in statistical control
(Murdock, 2016, pp. 144-145).

3. How can internal auditors use takt time during internal audits?

Takt time refers to the amount of time per unit for a business to produce enough goods to meet
customer demand. This tool is useful to ensure that the production flows most efficiently so that there
will be no delays or bottlenecks. Internal auditors should use this to monitor the production process very
closely. To ensure that takt time is used, if there is for some reason, a certain stage is finished earlier
than expected or fails to keep up, then internal auditors can look for ways to rebalance the production
stages. It also assists internal auditors to set the performance expectation on the production process, so
organizations meet their goals and even surpass it (Murdock, 2016, pp. 164-165).

4. How can the 5S model be used during an operational audit?

5S composed of (1) seiri (sort); (2) seiton (set in order); (3) seiso (shine); (4) seiketsu
(standardize); and (5) shitsuke (sustain). The primary goal of 5S is to minimize waste and improve
efficiency, thus reducing manufacturing costs while increasing productivity, safety, and employee
satisfaction (Murdock, 2016, pp. 175-176).

An operational audit is defined as an analysis of the way an organization does operations, to

point out changes that will enhance its effectiveness and performance. Implementing the 5S model can
help an organization achieve its set goals and objectives. A clean and organized work area can help
internal auditors to easily identify the roots of potential problems that may arise and make
improvements out of it. Also, it can reduce the amount of time spent looking for supplies which can be
easier for the internal auditors to acquire materials needed for the review. It may also create a healthy
and clean working environment for employees which will promote motivation. In this way, it will reduce
risks that an internal auditor should control and eliminates.

5. How can management use RACI charts to improve accountability in operating units?

RACI stands for Responsible, Accountable, Consulted, and Informed. RACI charts are useful tools
that organize and clarifies the roles in an organization which in turn, eliminates confusion to the
personnel. It facilitates an efficient way to distribute roles which in effect, employees can easily
recognize their roles and responsibilities. RACI charts are used to improve accountability and resolve a
conflict by not finger-pointing who to blame when an activity was not performed as expected because
there is a clear distribution of roles and responsibilities. Once there are employees assigned to each
RACI component, employees may feel more comfortable with engaging in their roles because they
understand exactly what they are responsible for. This RACI chart gives a clear idea to the employees on
what they need to do to contribute to the organization's success (Murdock, 2016, pp. 176-178).

6. Describe the benefits of a communications plan and a communications matrix.

According to Murdock (2016), a communication plan offers a framework for communicating

while the communication matrix is used to summarize the communication plan by describing details of
the communication activities used during the team or department's activities (p. 179). Communication
plan defines what data will be spread, when and where will this be communicated and who should
receive the information, when and where will this be communicated. While the communication matrix
contains details of the communication plan. These tools will help the management to make sure that
message is spread and understood by those who are intended to receive it. Messages and information
should be communicated to everyone as much as possible to make everyone in an organization get on
the "same page". In this way, everyone is informed of the happenings and aware what they can do to
contribute to the success of the organization.

7. What are the elements of a SIPOC map and how can use it improves the understanding of a unit
under review?

SIPOC is an acronym standing for Supplier, Input, Process, Output, and Customer. Suppliers refer
to those people who provide the inputs, which are processed (in a process) to produce the outputs for
the customers or recipients (Murdock, 2016, p. 181). The five components of this map are important
because it gives a high-level overview of the program or procedure under review to the internal
auditors. In this way, internal auditors can understand the process they are reviewing and can also point
out or identify anomalies or opportunities and make an improvement out of those. This is very useful
because it can visually present the process for the understanding of all which will make everyone on the
same page. It also helps identify areas that are needed to be isolated because it is not needed, or it only
adds little value to the organization. Using a SIPOC map can help internal auditors to determine errors
and opportunities for improvements. In this way, internal auditors can review a certain unit effectively
and efficiently. Every information or data contained in a SIPOC map has a lot of value for internal
auditors to look at to improve the understanding of a unit under review.

8. Explain how using the principles of Poka-Yoke/mistake-proofing can help further the goal of
preventing errors, accidents, and operational breakdowns.

Poka-Yoke is any mechanism in a process that helps to eliminated errors as early as possible. Its
goal is to eradicate product defects by preventing, fixing, or drawing attention to the occurrence of
human errors (Murdock, 2016, p. 182). Implementing the principles of Poka-Yoke can help systems or
processes function correctly for the first time, making it almost impossible for errors to occur, thus, help
them to achieve the goal of an organization in preventing errors, accidents, and operational
breakdowns. Since not all anomalies or errors can be 100% prevented, mistake proofing's goal is to also
detect current defects and reduce the severity of these defects. In addition to the stated goals of
removing human and mechanical errors, using mistake proofing can make work less repetitive as it
allows them to work for the first time with error-free processes and prevent them from having to do it
again if there are defects. Therefore, the quality of processes will improve, and it will also yield high-
quality products.

9. Describe how the 5 Whys can be used to identify the root cause of an operational issue.

According to Murdock (2016), the 5 Whys is one of the tools that is used to identify the root
cause of problems and issues. Not all issues have a common root cause so to discover several root
causes, the process must be repeated by asking different series of questions. Each answer forms the
base of the next question. The response to one "why" can give an explanation that will uncover the
other "why" and so forth. To arrive at the root cause of the problem, it often takes five "why's" to ask
but sometimes it can take more or less than 5 "why's". By asking a sequence of "why" questions, the
exact reason that causes the issue or problem can be identified and can be addressed (p. 185-186).

10. What are the benefits of RCA?

Root Cause Analysis (RCA) is described as determining why a problem has arisen and not just analyzing
or reporting on the issue itself (Murdock, 2016, p. 185). It is a simple and widely used approach that
allows individuals to address the question of why the problem happened in the first place. The
advantages of RCA are that it shows links between causes and symptoms of problems, works at the root
itself to solve problems and offers concrete proof of cause and effect and solutions (Hertvik & Shiff,
2020). RCA focuses on solving the issue rather than blaming others and it resolves the problems once
and for all. By finding issues early, RCA greatly decreases the cost and time spent. In the early stages,
defining the source of the problem helps to provides process enhancement.
REFERENCES:

Murdock, Hernan. (2018, October 23). Using Histograms to Better Understand Data. Retrieved from
https://misti.com/internal-audit-insights/using-histograms-to-better-understand-data

Hertvik, J., & Shiff, L. (2020, August 31). RCA in IT: Root Cause Analysis for IT Environments. Retrieved
from https://www.bmc.com/blogs/root-cause-analysis/