In the first post in this series, we began to explore the audit spend opportunity, sharing a number of insights from a recent Procurian analysis of the topic covered in the whitepaper, The External Audit Opportunity. In this analysis, Procurian suggests that organizations should ask a number of questions to better frame and understand the audit opportunity. Some of these are those you'd expect, covering number of hours worked and SOW definition. But others are those that too many organizations probably have not spent enough time seeking answers to.
A few that stand out to us (which can really help frame the opportunity – both magnitude and specific category strategies) include the following:
- "How are the external audit needs and appropriate number of hours by external audit type identified?"
- "Do you demand that the change in external audit standards is tracked and reported, i.e. AS2 to A5? Could you reduce external audit spend by making better use of internal departments or offshore external audit resources, for time-consuming ?but low-value-add activities?"
- "Do you periodically review the impact on hours internal external audit has on the overall program and work toward further optimization? Which geographic areas need to be external audited and when, and can reviewing this ensure money is not spent unnecessarily?"
As these questions hopefully elucidate, the actual process of "sourcing" the audit category should be an afterthought. More important is managing internal expectations, needs and demand – and documenting and understanding specific current requirements. Chances are it may be possible to achieve double-digit savings on the audit opportunity not by changing firms or even prioritizing rate negotiations, but rather more effectively managing and articulating requirements in the first place (and tracking and reporting audit activity on the back-end).