The joint audit approach.

Author:Moore, Wayne G.
Position:Internal and external auditing - PC Exchange
 
FREE EXCERPT

You are an industrial paint products executive responsible for your company's pink paint manufacturing operations. Top management announces that, as part of the company's aggressive cost-cutting program, you will be required to reduce dramatically the amount of red and white paint you use to make pink paint while maintaining the same level of quality. In other words, you must continue to produce a high-quality product while reducing volume and costs. How do you feel?

Chances are that you feel like countless other executives in virtually every industry, who are being given tough mandates not that different from the one described. These new and difficult pressures are driven by worldwide business and economic forces, as more corporations turn to restructuring, reengineering, and downsizing in pursuit of a better bottom line. The profound impact of this trend is being felt in every area of corporate America -- including internal auditing.

In an effort to meet these challenges, DuPont's internal audit group and Price Waterhouse have combined forces in an effort to improve the efficiency of both audit groups without sacrificing quality or independence. We call it the joint audit approach.

* More Quality, Less Cost

When DuPont announced in July 1991 that the corporation would reduce their costs by $1 billion over the next 18 months, DuPont Internal Auditing and Price Waterhouse began to explore ways of reducing audit costs. To put it in terms of the paint manufacturing scenario, our mandate was to find the mixture of red (DuPont Internal Auditing) and white (Price Waterhouse) that would give us the least expensive, highest-quality pink paint (a joint audit of DuPont).

At DuPont, Internal Auditing specializes in evaluating the effectiveness of internal control systems and measuring how these systems contribute to organizational effectiveness. Hence, Internal Auditing's objectives and contributions generally focus on these four areas:

* Review of financial and operating information.

* Review of compliance with corporate policies, plans, and procedures.

* Safeguarding of assets.

* Examination of economy, efficiency, and effectiveness of operations, including nonfinancial controls.

DuPont's external auditors, Price Waterhouse, are independent of the organization and are responsible for attesting to whether or not the financial statements are fairly presented. They also provide information, assistance, and resources to address diverse accounting and...

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