AP Fundamentals: Audit Principles

The audit process can provide a multitude of insights into performance

Let’s take a moment to discuss an aspect of the job that many tend to grumble about—the audit process. Often, we treat “audit” like it’s a four-letter word, viewed as a menial task intended to look for things we’re doing wrong. But an audit is a means of providing an objective and consistent evaluation of company standards, operating procedures, and internal controls. Using both quantitative and qualitative metrics, they allow us to appraise and address a variety of performance efficiencies that shape and influence service, sales, shrink, appearance, supervision, administration, organization, security, safety, productivity, and a host of other factors that will impact the overall management and profitability of a store, facility, or even an organization.

An audit may take on a variety of shapes and sizes. The audit may help manage and maintain a safe and productive work environment. Others serve to limit exposure to certain types of loss, while still other audits offer additional supplementary functions that further enhance performance and profitability. Essentially, the auditor is being asked to determine whether or not a specific process, procedure, task, or other initiative is in compliance with specific predetermined guidelines, policies, and/or regulations.

Seeing the Bigger Picture

Analyzing the results of an audit can provide a multitude of insights into the overall operations and performance of the business. Compliance—and non-compliance—does more than provide information regarding how a specific strategy is being executed. The audit process will also provide insights about the bigger picture:

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  • The leadership in the store, facility, or organization and the way they supervise their teams.
  • Organizational skills and the overall way that operations are managed.
  • Management’s ability to plan, prioritize, and multi-task.
  • The perspective of employees and how they perceive different aspects of their job.
  • The character of management and how they perceive the importance of certain aspects of their responsibilities.
  • The sense of ownership that store management carries in making and keeping the business successful.

Strong audit scores typically occur in successful operations. They can help to highlight the company’s best performers, support operational decisions, and target members of management for potential promotability. Conversely, consistently poor performance can lead us to other conclusions.

A Tool – Not a Test

Audits should serve to make us more efficient and profitable, working together to provide a means to train and develop the entire team. It is vitally important that we approach audit functions with the appropriate understanding of our role to serve the company, the store, our associates, and our customers most effectively. That understanding should be reflected in the way that audits are constructed, the way that it is completed, and the way that it is presented. The spirit of the entire process should be one of growth and progress.

There will be challenges and opportunities, which should be addressed accordingly:

  • This is what we found…
  • This is why it’s an issue…
  • Here is how it should be corrected…
  • Establish an action plan that facilitates correction and improvement…
  • Establish a timeline to follow up on the areas of opportunity…

There should be very few—if any surprises. The purpose is to reinforce guiding principles and practices that should already be familiar to the team by evaluating compliance with known standards of performance.

While there may be a natural tendency to focus on challenges and opportunities, it is just as important to identify strengths and recognize positive performance during the review. Too often there is a failure to acknowledge positive achievements during the audit process, which as a result tends to emphasize a negative undertone. This tendency can and will influence the entire process and must be addressed to reach desired results. Our methods and mentality should reflect those of a teacher and trainer, recognizing the importance of training, education, and awareness to send a message and improve performance.

Driving Performance

An audit should do more than evaluate performance—it should also enhance performance. The auditor must learn to stir performance through training and development. Compliance is a result of information effectively learned so that it can be applied; and behavior effectively inspired so that it will be modified and maintained. While results may occasionally improve otherwise, only when both exist in concert will we see consistent success.

In that same light, it’s extremely important to recognize and communicate the difference between doing something—and doing something the right way. The process is often just as important as the end result, and it’s critical that the auditor keeps this in perspective when conducting the audit and interacting with the staff.

For example, a refund document may have an “Approval” signature, but if the document was “approved” 4 hours after the transaction took place, the policy would not have been appropriately enforced and the purpose of the “approval” will have been defeated. EAS tags may be placed on designated products, but often we have specific tagging standards that determine where on the document it is tagged and how it’s tagged to maintain consistency, improve service, limit product damage, and enhance product merchandising. Ensuring that policies and practices are correctly followed must be an emphasis of the entire process. This type of active training and awareness effort is an essential element of quality audits.

It’s no coincidence that there is a direct relationship between audit performance and inventory shrink results. Performance is fortified when a well-managed audit program is used to improve operational compliance. An audit can be a tremendous tool in helping to validate performance and bring attention to strengths and deficiencies, but it is how that information is used that will add value to the organization. We must maintain a positive, objective approach when evaluating compliance. We should recognize exceptional performance when it exists. We should not only identify opportunities for improvement but educate the store on the reasons why it’s an issue, how it can potentially impact the store, and how we can make improvements. This requires thought and creativity, not just marks on a scorecard.

Auditing is a process and should not be viewed as a single event that occurs on any given day. While it may provide a snapshot of how company policies, procedures, and/or protocols are working at any particular moment, results should also be reviewed and analyzed over time. Anyone and any store can show terrific results or lapses in efficiency at any given time—it’s how those results are received, how they are addressed moving forward, and how they are managed over time that will provide true insights.

Building a successful career in loss prevention has always been predicated on the commitment to professional growth and development. As the business moves forward change comes quickly, and our skills and abilities must evolve to meet the needs and expectations of a new professional standard. Especially when we consider the pace of change, we find that success is largely based on the refinement of the fundamental principles that anchor our skills and our decision making.
By capitalizing on opportunities to enhance our knowledge and education, we are making an investment in our own future.

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