1. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon

2.  Why Audit Departments need to focus on cost savings audits  Learn proven cost savings techniques that will dramatically impact your audit results  Discover how to foster a “can do” attitude in order to achieve cost savings  Expand your auditor’s skills on how to obtain tangible cost savings results  Examine case studies with real cost savings results Objectives

3. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Modern internal auditing, to be successful, must be grounded on management support and acceptance and on imaginative service to management..... The auditor must mount continuing campaign to sell his product to executive management and the products he sells must be of the quality that will capture and keep management’s interest Larry Sawyer....... 1973

4. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Cost Savings EfficiencyEffectiveness Assurance Consultative

5. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Top Audit Skills being Recruited Analytical & Critical Thinking Communication IT General Controls Risk Management Business Acumen Effectiveness of Financial Controls is a thing of the past Balance between Operational/Financial/Compliance

6. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon CEOs’ say: “What I really need is”: an impact player, someone who understands the business and the risks it faces. A person, who can both delve into detail and yet see and explain the big picture. Someone who understands auditing and yet doesn’t talk “audit speak”, but communicates like a business manager. someone who is a self-starter, but someone who is a finisher or better yet, a strong closer.

7. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Find a way to take part in executive- and board-level discussions of strategic risks and strategic risk management. As risk management experts, auditors can help not only identify areas of strategic risks, but also recommend how to keep these risks at bay, mitigate them, and take advantage of the opportunities they present.

8. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon The Past Decade: An Extraordinary Journey for Internal Audit 1999: “Bull Market” and Y2K 2001: Terrorism, BCP, and disaster recovery 2002: Enron, WorldCom, and Cynthia Cooper 2002-2003: Sarbanes-Oxley and PCAOB 2004-2007: SOX, SOX, and SOX 2008: Implosion of the economy 2013: Economic crisis; realignment of coverage

9. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Cost Savings Triangle Financial Pressure OpportunityGood Skills

10. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon

12. Training and Guidance

13. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon

14. Financial Pressure – Audit Department Reaction Participants from the Gain Fortune 100 survey reported increased audit activity in Cost/Expense Reduction/Containment of: 60.6%

15. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Areas Where Internal Audit Activities Have Uncovered Cost Savings and Expense Reductions

16. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon The Evolution of Internal Audit Prevention l Assist the division in enhancing internal controls l Actively promoting compliance with linternal controls Solution Reduce risk while identifying Revenue Streams & Cost Savings Facilitator of Positive Change and Internal Best Practices Detection l Report problems/ Recommend solutions Compliance checking against established policy Prevention l Benchmark performance of operating processes against best practices Active Passive Approach Scope Internal Control Business Performance Compliance Auditing Internal Control Process Reviews Operational Process Reviews Strategic Business Partner

17. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Cost Saving Skills  Strong Oral & Written Communication  Broad Industry Experience  Creativity & Attitude  Benchmarking Resources  Quantitative & Analytical Tools  Research  Brainstorming  Treat It Like Your Own Business  Common Sense

18. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Auditor’s Fears “ How can I find money on every audit? ” “ I don ’ t have time to find money ” “ I didn ’ t have to do it in my last job ” “ If management can ’ t find it, what makes you think I can ” “ I don ’ t want to make the auditee mad ” “ Why wasn ’ t it important until now ” “ Will I get a percentage of the savings? ” “ Its not my job to have cost savings ” “ They didn ’ t teach it to me in school ” “ We audited in the area before and we didn ’ t find any money. ” “ Give me cost saving audits ”

19. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Management’s excuses l “We always did it this way” l “Why fix it if it isn’t broken” l “Now is not the time, wait until I retire” l “What do I do with the extra people?” l “It will be your responsibility if it doesn’t work” l “You tell the President when we have no parts” l “I have been here 30 years I don’t need you to tell me what to do after you did a review in a month” l “We will always have money” l “We will do it but don’t report the savings” l “That is the way my boss wants it” l “We can’t do it; the system has too many bugs” l “It didn’t work elsewhere why should it work here?“

20. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Cost Savings Techniques that will Dramatically Impact Your Audit Results  Audit Charter  Training and Guidance  Audit Plan  Audit Objectives  Audit Approach  Reporting Results  Auditor Recognition

21. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Traditional Audits - Assurance -Compliance -Internal Control Cost Saving Projects - Operational Reviews -Management Support -Facilitated Services Flexible Audit Plan Optimal Balance CHALLENGE KEEPING THE BALANCE CHALLENGE KEEPING THE BALANCE

22. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Audit Objectives Improve – Quality, working conditions, procedures Increase – Revenue, production Devise - New equipment, new fixtures, new methods Combine - Operations, work processes Reduce - Costs, waste, hazards, unnecessary maintenance Eliminate - Duplication, Waste Substitute - Less costly labor, materials and tools Conserve - Time, materials

23. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon

24. 8-12% Computer/ hardware Category Savings Percentages 9-13% Computer/ software 6-13% Telecoms 5-11% Advertising media brokerage 5-15% Creative agencies 8-12% Other marketing 8-15% Commercial Print 4-8% Travel and entertainment 5-10% Professional services 5-12% Temporary labor 8-15% Office Supplies 6-8% Office Equipment 8-12% Logistics 7-11% Packaging/ containers 6-14% Paper 4-12% Chemicals 3-10% Plastics and Resins 3-12% Fuel, lubes and gases 4-10% Construction supplies 3-8% Metals 2-12% Rubber products 3-7% Capital equipment 6-9% Utilities 5-15% Maintenance, Repair and overhaul 6-10% Facilities/ equipment maintenance Smart Spending: A New Approach that Can Help You Optimize Your Procurement Spending Source: IBM Institute for Business Value and IBM Global Business Services analysis.

25. Institute of Internal Auditors – Portland Chapter January 21, 2011 / KOIN Tower / Portland, Oregon Look for cost savings … They are there.  Emphasize in department  Be realistic  Dialogue with management  Monitor  Report  Recognize