CHAPTER 6: TOOLS
Calculate the range of values
● You cannot manage what you
cannot control
● You cannot control what you
cannot measure
● You cannot measure what you
cannot define
HISTOGRAMS
❖ These are the charts that
show the frequency
distribution of numerical data
using rectangles, each of
which represents intervals.
❖ In histograms, the X-axis
represents a dimension
arranged over equal intervals
and can represent hours of
operation for a service center,
prices, odometer readings, or
similar variables.
❖ The Y-axis represents the
quantity, frequency, or other
metric being plotted against
the interval, this could be the
number of properties, visitors,
vehicles, calls, etc.
❖ So histograms could be useful
in knowing the amount of
sales revenues per hour, the
number of vehicles serviced
per hour during a workday,
the number of calls received
in half-hour increments per
shift, the odometer readings of
vehicles serviced in a garage,
and so on.
Steps in preparing histograms:
1.
(maximum-minimum)
2. Divide the range into evenly
spaced intervals
3. Count the number of
observations in each interval
4. Create the bars where the
height represents the count in
each interval
5. The Y-axis represents the
number of items fitting into
each category.
❖ Histograms are used for
continuous data, so the X-axis
and the intervals shown on it
represent a range of data and
the bars are stacked next to
each other. Bar charts on the
other hand, plot categorical
variables (i.e., categories of
data points) and gaps or
spaces between the bars
differentiate one variable from
each other.
CONTROL CHART
❖ Identifying the relevant risks
to the achievement of those
objectives, and designing
controls to mitigate those
risks.
(Controls must be monitored
and the tracking of their
performance will provide
management with valuable
information about the
strengths and weaknesses of
these controls and what
should be done to strengthen
them)
Note: Management is the one
responsible for establishing
performance standards which
should be used to monitor the
performance of processes and
programs, and also to identify
anomalies that require management
intervention.
❖ Best use when performance
standards are based on
quantitative information.
❖ A control chart is a graph
used to plot and study how a
process changes over time.
Data are plotted in time order,
in a similar fashion as run
charts.
❖ Control charts are one of the
seven basic tools of quality
and although it is widely used
by quality control specialists,
it is seldom known, and even
less frequently used, by
internal auditors.
❖ Control charts can help
auditors determine if the
process is stable and under
control. Furthermore, these
charts can be used to predict
the future performance of the
process and if the process is
not in control, an analysis of
the chart can help to identify
the source of the problem.
PARETO CHART
❖ The Pareto principle, also
known as the 80/20 rule,
posits that for many events
approximately 80o/o of the
effects are caused by 20o/o of
the causes.
❖ Pareto diagrams are designed
to organize data and can be
used to prioritize improvement
effort by focusing on major
root causes of the problems
under review. (The focus is to
focus on the root causes, and
look for cause and effect
relationships).
❖ When drawing the Pareto
diagram, draw the diagram
with the cause(s) on the
horizontal axis. Then put
points assigned on the vertical
axis. For each cause,
construct a bar with two
components: l. Number of
votes (or points) received for
that component. 2. Number of
people voting for that cause.
'When done, rank the items in
order of importance.
CAUSE AND EFFECT (FISHBONE)
❖ Help identify contributing
causes of an issue , and hone
into the root cause most
accurately.
❖ This tool is also called cause
and effect diagram or
Ishikawa diagram for the
name of the person who
invented it, Kaoru Ishikawa.
The process:
1. identify what should have
been done
2. Verify that what was done is
consistent with what should
have been done
 3. If yes, report no finding and
close workpapers
4. If no, write up a finding and
recommend that the practice
in the future be consistent
with the guidelines set in item
1 above.
When searching for the root cause of
issues, auditors are effectively
searching for the source variation,
which are often grouped into
categories. The following six
categories are often used: (6M)
1. People (Manpower)-
Individuals involved in the
process
2. Methods- how the process is
performed and the
requirements for doing it.
(May include policies,
procedures, regulations, laws,
and rules).
3. Machines- any piece of
machinery, computers, tools,
or equipment required to
perform the work.
4. Materials- Inputs used to
produce the product (Included
raw materials, parts, semi
finished goods, and paper)
5. Measurements- data used to
evaluate the quality of the
process.
6. Environment (Mother Nature)-
conditions in which the
process or activities are
performed. (include time,
location, temperature,
humidity, noise, and culture).
Note: 6M represent the major
categories the problem or cause
variation
❖ To construct the fishbone
diagram, the head of the fish
represents the condition
identified during the audit.
The major categories of
issues, as shown above, are
placed around the periphery
as arrows pointing to the
backbone of the fish. Related
items are then identified and
placed as smaller arrows
connecting the sub causes to
the major causes in a
drill-down fashion. These
smaller bones are inputs,
causes, and sources of
variation.
Example: Consider people as
the main category. The related
inputs could be high employee
turnover, insufficient number
of skilled workers, lack of
training, and poor motivation.
For each of those, further
details could be plotted.

FORCED FIELD ANALYSIS
❖ Identify the forces for and
against course of action
❖ It is a technique to list,
discuss, and evaluate the
forces that support or hinder
a decision.
❖ Help to strategize the best way
to present information by
understanding the big picture
and the pros and cons of the
recommendation.
❖ Useful to resolve conflict of
opinions, comparing pros and
cons of a decision and to
evaluate the strength and
weaknesses of an idea,
product, or project.
❖ Very effective tool to correct
the approach most people use
when advocating for change.
❖ This approach is to present
the arguments supporting the
change initiative and when
confronted with objections
and counter arguments,
restate the position, include
additional facts, and reiterate
the perceived benefits.
FLOWCHART/PROCESS FLOW
MAP/VALUE STREAM MAP
❖ Flowcharts is a diagram that
represents a workflow or
process. It shows the steps in
the form of boxes of different
shapes and the order or
sequence of events by
connecting the items with
arrows.
❖ Used to design, document,
manage, and analyze a
program or process virtually
any field by presenting the
process flow in visual form.
❖ Common operational flow
include bottlenecks, rework,
delays, excessive handoffs,
and underutilized personnel.
 ❖ When drawing flowcharts,
internal auditors often show
the As Is process. The As Is
diagram depicts the present or
current state of the process
and the auditor should
document everything in the
current state. In addition to
the activities (i.e., boxes),
decisions (i.e., diamonds) and
arrows showing the flows, it is
useful to show whenever
possible:
a. TIME- how long it takes
activities to be
performed
b. BOTTLENECKS-
represent a problem in
process because the
limited capacity and
performance of a
process causes delays
that impact cycle time.
c. PRODUCTION VOLUME-
internal auditors
examine the
background of the
program or process
during the planning
phase to understand
the context of the review
d. DELAYS
COMMON PROCESS
IMPROVEMENT AREAS
When reviewing processes, it is often
helpful to search for the following
items to determine if the following
areas present opportunities for
improvement:
1. Backlogs- represent an
accumulation of work.
- Uncompleted work to be
done
2. Cycle Time- total time from
the start to the end of a
process.
3. Rework- transactions are
returned because there are
errors, missing or outdated
information.
Several ways to capture process
cycle times:
1. Stop watch
2. System data
3. Sample
a. Accuracy
b. Completeness
c. Authorization
TAKT TIME
❖ Is the rate at which the
production operation
produces output. The term is
derived from the German
word ‘takzeit” that translates
to “rhythm”
❖ Relates to the amount of time
to perform each activity.
❖ Without takt time, there
would be inventory between
workstations and possibly
shortages of material between
others.
EIGHT AREAS OF WASTE
❖ Increase profitability and
better utilize the limited
resources that most
organizations operate with.
1. Transporting
 - Moving people, is required by the
products and customer. This
information. waste also
(movement includes using
between process) components that
2. Unnecessary Inventory are more precise,
- Storing parts, complex, higher
pieces, and quality, or
documentation expensive than
ahead of required.
requirements. 6. Defects
(the best - produced parts
inventory is zero not manufactured
inventory). as required or
3. Excess motion that don't work as
- Unnecessary intended.
movement of - Defects can arise
people, parts, or from:
machines within a. Physical
process. causes
4. Waiting b. Human
- Goods can be in causes
one of three c. Organizatio
states: being nal causes
processed, 7. Overproduction
transported, or - Occurs when
waiting. In many more goods are
processes, a large produced that is
part of an item's required by
life is spent customers
waiting to be 8. Underutilized employees
worked on or to - Organizations
be sold. employ their staff
5. Unnecessary processing for specific skills
or paperwork that these
- Overprocessing workers have.
occurs any time, These employees
more work is have other skills
done on an item too, so it is
other than what wasteful to not
 take advantage of
these skills as
well.
AFFINITY DIAGRAM/KJ
ANALYSIS
❖ Called affinity charts or the
Jiro Kawakita (KJ) method.
❖ Useful tool that can help
auditors organize ideas and
large amounts of data.
❖ Affinity diagrams work vest
when the teams is small and
you want to highlight
similarities in ideas to build
consensus and organize ideas
or items into categories or
themes.
CHECK SHEET
❖ Structured form or document
used to collect and analyze
data.
❖ A tool that can be use for
problem identification and
opportunity identification
❖ Tool for recording and
recognizing data to identify a
problem.