Quality Management 012 Lecture Slides.pdf

Quality Audits

1. Week Twelve:
Quality Audits
QUALITY MANAGEMENT
DR EBENEZER ODURO ANTIRI

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•The term audit refers to the process of examining and evaluating
your business’s financial statements.
•During an audit, an auditor checks if the business’s financial
statements are up-to-date and devoid of any errors
•Performing frequent internal and external audits helps maintain the
credibility of your finances.
•Unfortunately, many business owners only realize the true value in
auditing after having to face the consequences of error-prone data.
What is an Audit?
Q U A L I T Y A U D I T S

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•There are three main types of audits:
•Internal
•External
•Government audits
Types of audits
Q U A L I T Y A U D I T S

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•An internal audit is useful for evaluating your business’s accounting
processes.
•It ensures that your business is in compliance with the relevant rules
and regulations, and enables you to produce timely reports of your
financial data.
•An internal audit is usually carried out by an accountant or an
auditor who is a part of your business.
•The main goal of this audit is to check the effectiveness of your
financial operations, understand the risk factors involved, and come
up with viable solutions to exercise better financial management.
•Internal audits are conducted on a weekly, monthly, or annual basis.
Conducting regular internal audits helps you identify the pain points
in your business operations, prevent potential fraud, and rectify
errors before they are reflected during external audits.
InternalAudit
T Y P E S O F A U D I T S

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1.Even before you plan to conduct an internal audit, it is necessary
that your management come up with an internal audit plan in
collaboration with the auditor. You will need to fix the time within
which the audit can be conducted and finalize what steps and
procedures will be followed. It is also good practice to keep your
employees informed about the audit so that they can get important
documents ready even before the audit begins.
2.During the internal audit, the designated auditor will look through
the financial documents, take notes, and have conversations with
several employees to test their understanding of your business’s
objectives, safety standards, and rules and regulations for
compliance.
InternalAudit Process
I N T E R N A L A U D I T

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3.Once the auditor has finished the investigation, management will be
informed about the results. The auditor will convey the strengths
and the pain points in your processes and advise your team on how
to implement fixes.
4.Once the discussion with management is over, the auditor will
prepare the auditor’s report, which summarizes the investigation
and has a final list of expectations that need to be amended by
management. Once all the amendments are made to the relevant
documents, the audit is officially closed.
InternalAudit Process
I N T E R N A L A U D I T

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•The main aim of an external audit is to validate your business’s financial
statements.
•The result of an external audit provides assurance to third parties that your
finances are secure and accurate.
•Most businesses consider it beneficial to perform external audits because the
auditor’s report, in this case, is an asset for that business. Unlike internal
audits, external audits are perceived to be much more reliable.
•Since the external audits are conducted by independent, third-party
accountants or accounting firms, the review process and reports presented
are unbiased. External audits are usually conducted once every financial
year.
External Audit
Q U A L I TYA U D I T S

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1.It is important to prepare your team well in advance before beginning an
external audit. Usually, each department will be assigned an audit manager,
who will be in close contact with the auditor or the auditing firm’s personnel.
Each time there are any questions or concerns, the auditor must know who
to reach out to. The audit manager must ensure that all relevant documents
are ready for quick reference for the auditor.
2.Once you have appointed an external auditor or an accounting firm to
conduct the audit, the auditor will thoroughly collect, interpret, and assess
your financial and accounting records to understand your business activities.
Some of their key responsibilities include proper planning and execution of
audit trail procedures, examining finances, and investigating business risks,
if any.
External Audit Process
E X T E R N ALA U D I T

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3.The auditor may even recreate your financial statements to check if standard
accounting principles were followed while preparing them. They may also
look at the other competitors in the field to check if your progress is realistic
or look for irregularities in your reporting.
4.Once the audit is over, they are likely to hand over a report and give their
objective opinion about your business. Their opinions and input are
necessary for rating a company’s performance, which acts as an assurance
factor for business owners.
External Audit Process
E X T E R N ALA U D I T

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•Tax audits are conducted by government organizations to ensure
that all the financial records submitted by a business for returns are
tax compliant.
•There is no specific time or date on which it is conducted.
•It is mostly conducted randomly or called for in situations of non-
compliance or fraud.
Government Audit
Q U A L I T Y A U D I T S

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1.The key task here is to keep everything organized at all times
because you’ll never know for which transaction you might get
called for. So keep your bills, receipts, agreement documents, and
more organized month by month and year by year. This will help
you answer all the questions raised by a government agent.
Government Audit Process
G O V E R N M E N T A U D I T

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2.During the audit, the agent and the taxpayer will have conversations
where the taxpayer will need to answer the agent’s question with
suitable document proof. Once the investigation comes to an end,
there are three probable outcomes.
•* The taxpayer will AGREE to make the relevant changes pointed out by the
IRS agent.
•* The taxpayer will NOT AGREE to make the changes and will instead go for
an appeal in court.
•* The two parties come to the conclusion that everything has been reviewed
and no changes need to be made.
Government Audit Process
G O V E R N M E N T A U D I T

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•Quality auditing is the systematic and independent examination of
your quality system to verify its compliance, effectiveness, and
suitability.
•It can be done internally by your own staff or externally by a third-
party auditor.
•The purpose of quality auditing is to identify strengths, weaknesses,
opportunities, and risks in your quality system and to provide
feedback and recommendations for improvement.
•Quality auditing can also help you prepare for certification,
accreditation, or recognition by external bodies.
Quality Auditing
Q U A L I T Y A U D I T S

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•Quality auditing is checking an organization's processes to make
sure they meet quality standards.
•It looks at how well the quality system works, finds areas to get
better, and checks if rules are followed.
•The main goal is to report on how things are going and make things
better and more efficient.
•Quality management is about all the steps to keep up a good level
of quality.
•This means making a quality policy, planning for quality, making
sure quality is good, and always trying to improve.
Quality Auditing
Q U A L I T Y A U D I T S

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•Quality auditing and quality management are complementary but
not interchangeable.
•Quality auditing is a tool that supports quality management by
providing objective and independent information and feedback.
•Quality management is a process that uses quality auditing and
other methods to ensure and improve quality.
•Quality auditing and quality management should be aligned and
integrated with your strategic goals and organizational culture.
Quality Auditing vs Quality Management
Q U A L I TYA U D I T I N G

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•There is no one-size-fits-all definition of quality auditing and quality
management.
•You need to define them according to your context, which includes
your industry, sector, size, scope, customers, stakeholders,
regulators, standards, and best practices.
•You also need to consider your vision, mission, values, objectives,
and policies.
•You can use frameworks, models, and guidelines such as ISO 9001,
ISO 19011, PDCA cycle, or Baldrige criteria to help you define and
implement quality auditing and quality management in your context.
Defining Quality Auditing and Quality Management
in Your Context
Q U A L I T Y A U D I T I N G

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•Quality auditing and quality management can have a positive impact
on your organization by:
•Improving customer satisfaction and loyalty
•Enhancing stakeholder
•Trust and confidence
•Reducing costs and waste
•Increasing productivity and profitability
•Fostering continuous improvement and learning
•Strengthening risk management and compliance
•Promoting innovation and excellence
•Creating a culture of quality
Benefits of Quality Auditing and Quality Management
Q U A L I T Y A U D I T I N G

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•Quality auditing and quality management can be maximized by
establishing clear and measurable objectives and indicators,
involving and engaging employees, customers, and stakeholders in
quality activities, communicating and documenting the quality
system, training and empowering staff to perform quality audits and
tasks, seeking and acting on feedback for improvement, reviewing
and updating the quality system regularly, and celebrating and
rewarding quality achievements.
•All the Quality audits are part of Quality Management system.
•Identify all the applicable type of audits based on the Organizational
products, processes and type of customers.
Tips for Quality Auditing and Quality
Q U A L I T Y A U D I T I N G

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•Prioritize the audits and make the audit plan based on the criticality
and importance of the processes.
•Typical quality audits can be Product, Process, LPA, Pokayoke
verification, PPAP etc. on the other hand, Management system
audits like ISO 9001, IATF 16949, AS 9100, ISO 17025 etc. can be
done in an integrated way, so that resources can be utilized
effectively.
•Integrating different standard requirements and covering different
QMS standards in a single audit checklist, will save lot of time,
resources and avoid the repetition of activities and verification.
Tips for Quality Auditing and Quality
Q U A L I T Y A U D I T I N G

20. Any questions?
Thanks!
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