Implementing a Shared Services Model: When consolidating services, internal audit's broad knowledge of the business works to the organization's advantage.

Author:Fulton, Darrick
Position:CONSULTING
 
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Many organizations are pursuing sustainable cost reductions via a shared services model. A shared service is a centralized service that was once found in more than one department of the organization such as accounts payable, supply chain, accounts receivable, human resources, and IT. Auditors are increasingly expected to expand their traditional audit services to include consulting expertise around a shared service implementation.

While the benefits of shared services are many, the implementation of a shared services model has potential pitfalls. Though organizations may want to achieve the cost reductions associated with a shared services model, this may be a high-risk decision unless there is a well-thought-out strategy. Internal auditors can play a key role in that strategy during the implementation phases of a shared services model.

PRE-IMPLEMENTATION

Internal auditors can add value to the organization by providing consulting services before implementation of a shared services model. During the pre-implementation phase, decisions include determination of the business functions best suited for a shared service, technology platforms to improve efficiency of the shared service, and personnel decisions that will align employees with the shared services model. During this phase, management also should be developing the project charter and metrics for the shared service center. Internal audit can provide insight on various operational, financial, and regulatory risks, and evaluate management internal control design during this stage.

A primary goal for internal audit during this phase is to consult with the business to ensure an effective internal control structure is designed during the implementation. To accomplish this goal, coordination with management should focus on areas management has determined to be best suited for shared services implementation and the various risk factors that can negatively impact a successful implementation. Internal auditors with backgrounds in IT, human resources, or accounts payable may be considered particularly helpful in these discussions. IT auditors can be used to ensure IT system decisions are given appropriate due diligence.

Another consideration during the pre-implementation phase is identifying operational redundancies that can be eliminated within the processes. Current industry practices or trends regarding shared service centers also should be considered. For example, traditional financial shared...

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