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TRANSCRIPT
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Lean Audits & Leaner Audit Fees
Presented by:
Robert F. Watson, CPA & Kevin D. Warren, CPA
Welcome to Washington, D.C.
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Washington, D.C. Fun Facts • There is one lawyer for every 19 residents and 74 lobbyists
for each U.S. senator.
• More wine is consumed per person in Washington D.C. that in any state in the U.S.
• The Library of Congress contains 535 miles of bookshelves.
• D.C. averages 39 inches of rainfall each year – more than Seattle.
“Outside of the killings, Washington has one of the lowest crime rates in the country.” – Marion Barry
Outline
• LEAN
• Six Sigma
• LEAN Six Sigma
• Industries/Processes Covered
• Audit Process
• LEAN Six Sigma and the External Audit
• New Auditing Standards – How the Clarity Standards Will Impact You
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What is Lean?
What is Lean? • Focus is on eliminating waste
from processes while listening to the voice of the customer.
• End customer can be internal or external.
• Lean is the purposeful elimination of waste which frees capacity and resources while only doing value added activities. Results in a better use of resources.
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History • Waste reduction concepts
have been around a long time
• Benjamin Franklin and Poor Richard’s Almanac
• Henry Ford and “mass production”
• Dawn of the “efficiency experts”
• Toyota and “pull production” (Toyota Production System)
History
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The Efficiency Expert
Types of Waste DEFECTS
OVERPRODUCTION
WAITING
NOT UTILIZING PEOPLE’S TALENTS
TRANSPORTING
INVENTORY
MOTION
EXCESS PROCESSING/ OVERPRODUCTION
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More Types of Waste
Unsafe conditions
Underutilization
Confusion
Examples of Deadly Types of Waste in the Office
• Defects – Data entry errors – Employee turnover
• Overproduction – Printing paperwork (that may change) before needed – Processing an order (that may change) before needed
• Inventories – Purchasing office supplies before needed – Unread mail
• Over Processing – Re-entering data into multiple information systems – Making extra copies
• Human Motion – Walking to copier, printer, fax
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• Transportation & Handling – Multiple hand-offs of electronic data
– Approvals
• Waiting – Slow computer speed
– Waiting for information from customer
• Confusion – Any missing or misinformation
• Unsafe or Unergonomic – Conditions causing carpel tunnel/eye fatigue
• Underutilized Human Potential – Restricting employee’s responsibility to make routine decisions
– Highly paid staff doing routine tasks not requiring unique expertise
Examples of Deadly Types of Waste in the Office
Toyota Definitions
MUDA = Waste in any form MURA = Unevenness, overburden, strain MURI = Demand that exceeds process and equipment capacities
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Lean Goals
• Improve Quality
– Understand what the customer wants
• Eliminate waste
– If it does not add value, get rid of it
“It is not necessary to change. Survival is not mandatory.”
– W. Edwards Deming
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What is Six Sigma?
• Quality! • Consistency
• Capacity
• Value
History of Six Sigma • Developed by Motorola back in the 1980s
• Further evolved by GE in the 1990s under Jack Welch
• Focus on product/process improvement
• Identify and remove the causes of errors
• Minimize the variability in processing/production
• Six Sigma – the desired defect-free statistical rating of six standard deviations between the process mean and the nearest specification limit (or 3.4 defects per million)
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Six Sigma – Methodology for an Existing Process
Six Sigma – Certification & Focus
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Audit Process
• Professional standards specify certain tasks must be performed:
– Engagement acceptance/continuance
– Planning
– Fieldwork
– Review and supervision
– Reporting
Critical Definitions
• Auditor
• Attorney
• Actuary
• Economist
= One who arrives after the battle is lost and bayonets the wounded
= One who arrives after the auditor and strips the bodies
= An accountant without a sense of humor
= Someone who didn’t have enough personality to become an accountant
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Lean Six Sigma & Audit Process
• Questions to pose:
– Does the work provide value to your organization?
– Does it provide value to your external auditors?
– Does it meet a required standard?
• If all three are “No” the work does not need to be done
Lean Six Sigma & Audit Process
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Anthropomorphic Nouns
“Giving money and power to government is like giving whiskey and car keys to teenage boys.”
– P.J. O’Rourke
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New Auditing Standards – Clarity Standards Overview
• Converge U.S. auditing standards with International Standards on Auditing (ISA)
• More principles-based approach to standards setting
• Effective date
– Years ended after 12/15/12
Significant Changes to New Auditing Standards
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Robert F. Watson, CPA Partner [email protected] 352-378-1331
Kevin D. Warren, CPA Senior Manager [email protected] 850-386-6184
Questions