An Internal audit is an independent and objective assurance activity that evaluates an organisation's processes, including its governance, risk management, and internal controls. The primary purpose of internal audit is to provide feedback to management on the effectiveness of these processes and identify areas for improvement.
An audit can improve performance by identifying areas of weakness or inefficiency, providing recommendations for improvement, and ensuring that processes and procedures are being followed correctly. It can also help to increase accountability and transparency, leading to more effective decision-making and overall better performance.
Audits can include measuring Key Performance Indicators (KPIs) to assess the effectiveness and efficiency of processes, systems, and controls within an organization. KPIs are typically measured using quantitative metrics such as percentages, numbers, or ratios. To measure KPIs, you first need to define your goals and objectives, then determine the metrics that will help you track progress toward those goals. Finally, you can use tools such as dashboards, spreadsheets, or analytics software to collect and analyse data related to your KPIs. As can be seen the measurement and monitoring of KPIs is a constant and iterative process, how then should KPIs be viewed in terms of a direct Audit.
Firstly, when auditing KPIs we should look at the relevance and effectiveness of the KPI. Why are we measuring the specific data in terms of business performance? What does it tell us relating to process effectiveness? How do we use the KPI outcome in terms of business improvement? Do we articulate or document the rationale and goals of each KPI to allow formal review and management (audit) of our KPIs? Are there more effective KPIs we should be measuring.
Secondly, are we measuring our success or failure? All too often KPIs are chosen based high level business outcomes, as businesses grow and KPIs are consistently being achieved then is the time for review. Meeting KPI targets should be viewed as a challenge, either raising the bar or focusing on specific problem are areas of the business will drive improvement and stave off stagnation and complacency within an established business.
Management feedback and meetings should focus on improvement, not on constant ‘green lighting’ of a measurement matrix. The time and effort used in measuring a predictable success is wasted. Quality professionals should be looking to address improvement and opportunity this will be the foundation for growth and encourage intuitive thinking within the business. It all starts with a scheduled and critical review of your KPIs within an Audit Programme.
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