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BUSINESS PROCESS AUDITS

What is a Business Process Audit?

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A business process audit is a comprehensive evaluation of an organization's business processes, systems, and workflows to assess their efficiency, effectiveness, and alignment with organizational goals. The purpose of a business process audit is to identify inefficiencies, bottlenecks, or weaknesses in processes and to recommend improvements to optimize operations and achieve better business outcomes.

 

Unlike operations audits, which examine overall operational performance, business process audits focus specifically on how individual processes are executed and how they can be improved to achieve strategic objectives.

Benefits of a Business Process Audit:
  1. Improved Efficiency:

    • By identifying and eliminating inefficiencies, redundancies, and bottlenecks, a business process audit can help streamline workflows, leading to faster turnaround times, fewer delays, and more effective use of resources.

  2. Cost Savings:

    • Business process audits often uncover opportunities for cost reduction by eliminating waste, automating tasks, or improving resource allocation. These savings can significantly impact the bottom line.

  3. Higher Quality and Consistency:

    • Improving processes can lead to higher product or service quality by reducing errors, standardizing procedures, and increasing control over output. This can result in better customer satisfaction and fewer defects.

  4. Increased Employee Productivity:

    • Simplifying and optimizing processes frees up employees from redundant tasks, allowing them to focus on higher-value work, thus increasing overall productivity.

  5. Better Alignment with Business Goals:

    • A business process audit ensures that processes are aligned with the organization’s strategic objectives and help achieve business goals, such as growth, profitability, or customer satisfaction.

  6. Agility and Scalability:

    • Well-designed and optimized processes make it easier for organizations to scale operations and adapt to changing market conditions or business demands without facing significant operational disruptions.

  7. Regulatory Compliance and Risk Mitigation:

    • Process audits help ensure that business processes comply with industry regulations and standards, reducing the risk of legal issues or fines. This is particularly important in heavily regulated industries like healthcare, finance, and manufacturing.

Some Specific Client Need:

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"How can I ensure my company's business processes are efficient & effective with adequate & effective controls, risk mitigation capabilities, are optimal, agile, scalable & aligned to achieve business objectives and goals?" ​​

Why Choose Us?

We are committed to driving tangible results for your business. With specialized &/or expert knowledge, skills, competence & experience in Business Process Auditing, our proven track record and dedication to excellence make us the ideal partner for your business needs & requirements.

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Following are four (4) useful actual STAR Scenarios allowing us to provide clear, concise examples of our expertise, skills, competence & knowledge in action. It demonstrates our problem-solving abilities, highlights our strategic approach, and emphasizes the tangible outcomes of our work. By focusing on real results, we can effectively show you how we turn challenges into opportunities and drive success for our clients. Whether you're looking for increased profits, improved efficiency, risk management, internal controls & business processes, or innovative solutions, the STAR method helps you understand exactly how we deliver value.  You will see more of these as you continue to browse our services and get to know The CFBS Advantage.

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In these four (4) STAR Scenarios we demonstrated the following skills, among others: 

Risk Assessment Skills
Internal Controls Evaluation

Audit Planning & Execution
Sampling Techniques
Report Writing & Communication Skills
Teamwork Skills
Leadership Skills
Independence & Objectivity
Analytical & Critical Thinking
Attention to Details

Accounting Principles & Standards
Client Management
Project Management
Technology Proficiency
Data Analytics

STAR Scenario #1: SAP Phase 2 Implementation of a Multinational Company
SAP APO.png

SITUATION:

SAP Phase 2 implementation including Supply Chain Mngt. (SCM ) Advance Planner Optimizer (APO), Demand Planning (DP), Supply Network Planning (SNP), Production Planning (PP), Detailed Scheduling (DS)

TASK:

Provide audit assurance and consulting support including risk-control assessments for SAP Phase 2 implementation.

ACTION:

1) Provided audit expertise specially in risk-control assessments;
2) Provided data validations using ACL.
3) Attended training in SAP SCM APO, DP, SNP, PP, DS among others;

RESULTS:

1) SAP Phase 2 Team – Special Citation during the 9th TOPs Awards for its major contribution to enterprise excellence in systems, processes, and information technology.

2) Ensured that necessary controls and risk mitigations are integrated in the system.

STAR Scenario #2:  Capital Expenditure Business Process Audit of a Group of Power Companies

SITUATION:

Based on risk-based audit planning I conducted, we need to conduct a Capital Expenditure Process Audit

TASK:

Audit the Capital Expenditure Processes.

ACTION:

1) Perform walk thru of Capital Expenditure Processes identifying and documenting risk-control assessment;
2) Identified weaknesses in internal controls and risk exposures recommending appropriate mitigating controls and action plans to take;
3) Perform analytical and substantive tests including test of controls determining adequacy and effectiveness.

RESULTS:

1) On an overall basis, significant weaknesses were noted that could expose the auditable unit to unacceptable levels of risks if left uncorrected.  Likewise, existing practice and/or processes collectively calls for further enhancements and strengthening like implementing the following:

  • Additional key measures in evaluating investments such as (i) Return on Investment (ROI) & (ii) Net Profit Rate (NPR) and consistently matching the projected ROI/NPR vs. actual for performance evaluation;

  • Securing Board of Directors (BOD) approval for the P1.286B year 2019 Capex Budget of 20 project sites under development;

  • Monitoring Capex Budget vs Actual per project/ site per line item;

  • Proper segregation of duties in purchasing;

  • For purchasing, to strictly comply with procurement policy;

  • Including the responsible personnel for asset tagging in Fixed Assets Policy; and

  • Maintaining Asset Tags in the Fixed Assets System/ Register as well as on actual physical items;

2) The uncovered issues and weaknesses in internal controls were discuss with appropriate personnel for execution of appropriate change implementation action plans that were recommended and agreed upon.

STAR Scenario #3:
Procure to Pay Business Process & Compliance Audit of a Distribution Company

SITUATION:

As revealed by risk-based audit planning I conducted, we need to conduct a Procure to Pay Business Process & Compliance Audit.

TASK:

Audit the whole business process from procurement up to payment and determine compliance.

ACTION:

1) Perform walk thru of procurement to payment processes identifying and documenting risk-control assessment;
2) Identified weaknesses in internal controls and risk exposures recommending appropriate mitigating controls and action plans to take;
3) Perform analytical and substantive tests including test of controls determining adequacy and effectiveness.

RESULTS:

1) Uncovered internal control weaknesses with medium to high risk rating in purchasing, receiving, and payment and appropriately recommended change implementation action plans and mitigating controls to reduce risks to acceptable levels;
2) Some of the uncovered internal control weaknesses in purchasing were:

  • undocumented computerized systems, policies and procedures, 

  • untracked usage of production budget, 

  • none use of canvassing sheet with supporting supplier quotations, 

  • undocumented supplier accreditation, 

  • no supplier performance monitoring and others.

3) Some of the uncovered internal control weaknesses in receiving were: 

  • undocumented computerized system, policies and procedures, 

  • admin purchasing has no receiving report for office deliveries, 

  • receiving system has no user access roles, 

  • receiving system allows receipt in excess of PO quantity, 

  • manual monitoring of transactions with pieceworkers, 

  • overstatement of received quantities,  

  • weaknesses in quality check process and others 

4) Some of the uncovered internal control weakness in Accounts Payable & Payments were: 

  • undocumented computerized system, policies and procedures, 

  • unlinked PO and Materials Receiving Report (MRR) to Accounts Payable, 

  • purchase of services – without Service Receiving Report (SRR), 

  • system Accounts Payable Voucher (APV) has no system approval process, 

  • maturing accounts payable has no system monitoring, 

  • unsigned Chevron charge slips, 

  • incomplete details on Pieceworker's Receiving Report (PRR), 

  • some CVs without Official Receipts (ORs)/ Invoice, and 

  • Cancelled checks – unmarked “CANCELLED”.

5) The uncovered issues and weaknesses in internal controls were discuss with appropriate personnel for execution of appropriate change implementation action plans that were recommended and agreed upon.

STAR Scenario #4:  Collection Business Process & Compliance Audit of a Distribution Company

SITUATION:

As revealed by risk-based audit planning I conducted, we need to conduct a Collection Business Process & Compliance Audit.

TASK:

Audit the collection business processes and determine compliance.

ACTION:

1) Perform walk thru of collection processes identifying and documenting risk-control assessment;
2) Identified weaknesses in internal controls and risk exposures recommending appropriate mitigating controls and action plans to take;
3) Perform analytical and substantive tests including test of controls determining adequacy and effectiveness.

RESULTS:

1) On an overall basis, significant weaknesses were noted that could expose the auditable unit to unacceptable levels of risk if left uncorrected.  Likewise, existing practice and/or processes collectively calls for enhancements and strengthening of controls to eliminate/reduce probability of misappropriation of cash collections and non-compliance.  These may be achieved by monitoring completeness of collection documents i.e. provisional receipts (PR) and official receipts (OR) on a periodic basis, validating PR/OR date vis-a-vis actual deposit date and enforcing sanctions for non-compliance.
2) Uncovered inadequate controls over the collection process with delayed deposits raging from 7-30 days up to more than 180 days.  Exposure amounts to about P636K+ for a collection period of about 2.5 years.

Key Features of a Business Process Audit:
  1. Objective:

    • The main goal of a business process audit is to evaluate the efficiency and effectiveness of specific business processes within the organization. It aims to identify areas of improvement to enhance performance, reduce costs, improve quality, and ensure that processes are aligned with the organization's overall goals.

  2. Scope:

    • Business process audits can cover a wide range of processes across the organization, such as:

      • Sales and marketing processes (e.g., lead generation, customer acquisition)

      • Customer service processes (e.g., support ticket handling, customer inquiries)

      • Supply chain processes (e.g., procurement, inventory management, logistics)

      • Human resources processes (e.g., recruitment, employee onboarding)

      • Product development or manufacturing processes

      • Financial and accounting processes (e.g., invoicing, financial reporting, budgeting)

  3. Approach:

    • The audit typically follows a systematic methodology that includes:

      • Mapping the process: Identifying all the steps involved in a process.

      • Evaluating process performance: Reviewing metrics such as time, cost, quality, and customer satisfaction.

      • Identifying gaps: Pinpointing inefficiencies, redundancies, and areas where performance can be improved.

      • Recommending improvements: Suggesting ways to streamline processes, reduce costs, or improve quality.

Steps Involved in a Business Process Audit:
  1. Planning and Defining Objectives:

    • The audit begins with setting clear objectives and defining the scope of the business processes to be audited. This includes identifying which specific processes (or process areas) will be the focus of the audit.

    • Key stakeholders and process owners are identified to ensure the audit aligns with the business’s strategic goals and key performance indicators (KPIs).

  2. Mapping and Understanding the Process:

    • Process Mapping: The auditor maps out the process to understand how it works step-by-step. This could involve creating flowcharts, diagrams, or process documentation that visualizes the workflow.

    • Data Collection: Gathering data on how the process is being executed in practice. This can include performance metrics, system logs, transaction records, or interviews with employees involved in the process.

  3. Data Analysis and Performance Assessment:

    • Evaluate how well the current process is performing against performance metrics such as:

      • Efficiency (e.g., time taken to complete tasks)

      • Cost-effectiveness (e.g., direct and indirect costs)

      • Quality (e.g., defect rates, error rates)

      • Customer satisfaction (e.g., response time, service levels)

    • Assess whether the process is meeting its intended outcomes and whether the resources are being utilized effectively.

  4. Identifying Issues and Bottlenecks:

    • Pinpoint any bottlenecks, delays, or inefficiencies within the process. For example:

      • Are there any redundant steps?

      • Are employees overloaded with tasks?

      • Are there delays in information flow or approvals?

      • Are there issues with technology or systems that hinder performance?

    • Evaluate whether the process design and flow are optimized or if they can be improved to better meet goals.

  5. Root Cause Analysis:

    • Once inefficiencies or problems are identified, the auditor performs a root cause analysis to determine the underlying reasons for these issues. This could involve:

      • Lack of training

      • Ineffective technology/tools

      • Inadequate communication or coordination

      • Manual processes that can be automated

    • The aim is to move beyond symptoms and identify the true causes of inefficiencies.

  6. Developing and Recommending Improvements:

    • Based on the findings, the auditor suggests specific improvements to the business processes. These may include:

      • Streamlining steps or eliminating unnecessary activities.

      • Automating repetitive tasks with software or technology.

      • Enhancing employee training or reallocating resources.

      • Improving communication channels.

      • Revising process roles and responsibilities.

    • Recommendations often focus on improving efficiency, reducing costs, and enhancing quality.

  7. Reporting Findings:

    • The auditor prepares a report that includes:

      • A detailed analysis of the current processes.

      • A description of the issues found during the audit.

      • Actionable recommendations for improvements.

      • A cost-benefit analysis (if applicable) to show the potential value of implementing the suggested improvements.

    • The report should also prioritize the recommended changes based on their impact and feasibility.

  8. Follow-Up and Continuous Improvement:

    • After the audit, it’s crucial for the organization to implement the suggested improvements and monitor their effectiveness.

    • Continuous monitoring and periodic reviews ensure that the processes remain optimized and adapt to changing business needs or market conditions.

When Should a Business Process Audit Be Conducted?
1) During Process Changes or Reengineering:

  • When an organization is redesigning or reengineering a specific process, an audit can identify areas that need improvement or adaptation to new requirements.

2) When Performance Lags:

  • If the organization is facing declining performance, high costs, or low productivity, a business process audit can uncover inefficiencies and help realign processes with business goals.

3) Before Introducing New Technology:

  • Before implementing new systems or software to automate or support business processes, it’s useful to audit existing processes to ensure that the technology will be integrated seamlessly and is aligned with the goals.

4) To Support Continuous Improvement:

  • Regular business process audits are an essential part of a continuous improvement culture. They help organizations periodically assess and enhance their operational efficiency and effectiveness.

5) When Expanding or Scaling:

  • As businesses expand, their processes need to scale. A business process audit helps ensure that the processes can handle increased demand and are adaptable for future growth.

Summary:

A business process audit is a valuable tool for organizations looking to enhance operational efficiency, reduce costs, improve quality, and better align processes with strategic goals. It provides insights into process inefficiencies, bottlenecks, and areas of improvement, and offers actionable recommendations that lead to more streamlined, cost-effective, and high-performance business operations.

Audit
Why CFBS?

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CFBS’ Internal Audits provides an independent, objective assurance and consulting activity designed to continuously add value and improve an organization’s operations. We help organization’s accomplish its objectives by bringing a systematic, disciplined approach to continuously evaluate and improve the effectiveness of risk management, control, and governance processes. Our more than fifteen (15) years of experience, professional service practice & recognized excellence, education & training gained from various industries can give you much leverage & advantages.

Continuously improve & reach your objectives in the midst of the ceaseless & speedy changes in market conditions!
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