Beyond auditing: expanding the conventional role in tough times.

• Author: Witt, Herbert
• Position: Auditingissues - Auditors management strategy

today's economic problems represent an opportunity for auditors to expand their conventional approach. Auditors can provide additional services to help clients survive economic threats as well as increase benefits of the engagement.

Managing Strategy

Auditors can ascertain the changes that management is making in adapting to downward economic trends to determine whether they contribute to the company's value. This may include expansion delays; discontinuing selected divisions or operations; and changes in the development and marketing of new products.

They also review the development of contingency plans for meeting future risks of downward trends. In some cases, such as when there is a significant decrease in the customer base, the company may have to change its methods of doing business, partner with other companies or consider mergers and acquisitions. Auditors can provide valuable assistance by reviewing financial information used in valuing proposed mergers and acquisitions, along with providing advice regarding income tax effects of such changes.

Auditors can also review company attempts to correct weaknesses in production and operations, engineering and research, marketing; accounting and finance, and information technology. These weaknesses may be noted when management determines strengths arid weaknesses as part of its strategic plan.

An example is a company that has devoted little effort to marketing, while its competitors have instituted aggressive marketing campaigns. Auditors can review the company's marketing efforts through customer analyses to determine needs and wants, advertising and sales promotion, methods of distribution, and extent of marketing research.

Reducing Costs

Auditors also can help management cut costs by conducting a cost-benefit analysis of expenditures. A useful model for this is based on a review of actions (or decisions) made in specific functional areas, following individual processes. For example, the processes examined in purchasing would be to determine need, designate specifications, select a lease or buy alternative, select a vendor and make purchasing arrangements. See Figure 1 for examples of potential cost savings in specific functional areas.

Figure 1 Cost-Saving Measures Functional Potential Cost Savings Area Purchasing * Buying less-expensive/less-complex or unneeded items * Considering the lease vs. buy selection * Obtaining more competitive bids Personnel * Reducing...