by Mike Wood
You can read Part One here.
You can read Part Two here.
Auditing and Accreditation
What is auditing?
Auditing conjures up a range of emotions ranging from a desk top tax audit by the ATO through a Quality Assurance audit to accountants determining whether, its fish & chips or caviar for dinner.
The true purpose of an audit is to discover how the obvious and hidden components of your business match up to a standard. This is a highly technical and ever changing area and knowledge in this area needs to be kept current at all times.
It’s important to understand that you do not hide behind false standards that do no more than make you “feel good” at the time. Having your business audited to an inappropriate standard is like going on an outback adventure, where one of the key pieces of equipment is a Swiss Army pocket knife, and you buy one in a reject shop, because it looks the same.
Is your life dependent on something that looks like the real thing but its not?
Who should do the audit?
In our businesses we would never trust an internal “competent” person to do an audit of our financial situation it would be a “qualified” person.
Of course in some areas we have no choice but to use a formally qualified auditor. Therefore, why (when we have the choice) do we use qualified professionals in our business, mainly because we want to know what might “bite” us in the future and that the area your accountant is getting into is not common place and highly technical, do those running your books on a daily basis know everything there is to know about corporate and tax law.
Without a professional C&E audit of your business, is a bit like saying “we have not gone broke yet, so we won’t get an accountant to do our yearly books and tax returns”
As such make sure you get the audit professionally completed. There is no point getting a big green tick from an inappropriate person.
What are the consequences of not auditing?
The legislation is clear in that “in-action” is a culpable as “action”, as such by doing nothing or something inappropriate could be deemed as not taking reasonable steps to set your business up effectively to comply with the legislation.
The big question is; what is appropriate?
An audit comes into its own at this stage; you will know where your business sits in terms of the legislation and what must be done to get there. The compliance and failure are determined and measured at this stage and the company can clearly see the path it needs to take to become compliant.
Who should be audited?
This C&E legislation is all about transport operators though, and as a manufacturer I don’t need to worry.
WRONG, if you are a consignor or receiver of goods you are directly involved in C&E. Therefore, if you send or receive goods it is a requirement that your part in the C&E chain is checked, audited and verified to ensure that you are compliant.
Also bear in mind that in WA, legislation gets right down to “light vehicle” under 4.5 tonne, so is the courier you use doing the work legally?
How do you become accredited?
This is the easy bit, if you have done all of the above and been audited to an appropriate standard then your accreditation is a matter of course. So which is right for you? Ask us.
Internal and external auditing tools
What is an audit tool?
When we consider auditing a business, we need to look at how the business is going to be audited. If we send someone off, in a direction to use the policies and procedures within the business to determine if the business is compliant or those policies and procedures where would a person start?
An audit tool is a method of converting policies and procedures into a usable checking system. Once policies and procedures have been converted into an audit tool it then becomes a pre-set process for checking what actually happens against what the policies and procedures say should happen. An audit tool also provides a level of consistency between different auditors.
So what should an audit tool look like?
Should it have boxes and columns and check digits, should it have colours to show where things are right and things are wrong? Well the simple answer is, there is no a set standard for an audit tool. Basically, a company, group or association can set up whatever audit tool they like.
However, one off audit tools lack consistency and validity to similar businesses within the industry. As such, an independent audit tool may not be any better than just a good idea. It is preferable to align any audit tool to some form of external standard. This then allows the business to examine itself and compare that examination to other businesses in similar industries.
External audit tool
Although there are no particular standards for what an audit tool should contain, there are some specific areas that needed to be included.
In past articles, 10 primary points of compliance and enforcement have been mentioned and these points need to be included in any audit tool. From these 10 points it is an important that the relevant sub points are listed and explained.
For example: if we have a section on load restraint, we may need to break the general heading of load restraint into a series of components, e.g. palletised goods, machinery, vehicles etc. Each one of these will need some specific requirements in order for them to comply with the load restraint guide.
The points need to explain those requirements and also explain what a typical auditor would be looking for in terms of evidence that that particular item was done correctly. This explanation of evidence points may specify standards, diagrams, item numbers, and government standards etc. The explanations need to be clear enough that any person conducting the audit will know exactly what evidence there looking for.
Apart from the inclusion of a range of evidence and standards, an audit tool will also need some form of numeric assessment. It is unlikely that any item included in an audit will automatically be either completely wrong or completely right. Most items will range somewhere between right and wrong, as such it is necessary to measure the level of compliance on a percentage or similar numeric scale.
This methodology, allows businesses to focus on any critical issues post audit as nominated by the scoring methodology.
It is recommended that once an external audit tool is established, that an external audit be conducted annually. The external audit should be conducted by an independent, that can take an objective view on the business as it stands.
Internal audit tool
Now we have established an external audit tool, what does the internal audit tool look like? This is a very simple answer; it looks exactly like the external audit tool! The primary difference between an internal and external audit tool is who uses it.
It is recommended that a business conduct internal audits quarterly, which can then be verified annually by the external audit.
How do you set up an audit tool?
There is a fair bit of work to be done to establish a usable and effective audit tool, but once complete it simplifies the audit process and as a significant level of consistency across the business. If the audit tool is aligned to an external standard or auditor, then he’d also provides some comparison for the business to other businesses.
It may seem a daunting task to set up an audit tool, if in doubt seek assistance from those experienced in establishing such an audit tools.