Audit contributes to the added value of the organization

Internal audit, a component of the value chain

Whoever has some experience as an auditor, whether Internal audit or external, will have heard at least once that auditing is only a cost center for the organization. Whether this remark is pronounced without animosity or whether it is a criticism intentionally addressed to the listener, in both cases it is wrong. All the functions of an organization contribute to the creation of added value. Auditing, like the control professions, is no exception. Creating insurmountable boundaries between the management of the organization based on the notions of profit and cost is of little use and above all leads to unproductive considerations … What distinguishes the professions is their degree of intervention and their positioning in the value chain allowing the organization to margin.

A definition of added value

Before concluding on whether or not a profession contributes to the development of added value, it is still necessary to agree on what the creation of wealth generated by an organization is. There is indeed an accounting definition of value added. This corresponds to revenue from sales less purchases and other external charges incurred to achieve revenue. If we stick to this vision of accounting, no direction within the organization could be considered as exclusively contributing value added! Each of them induces costs, including personnel costs, which are not included in the calculation of added value. Of course, it would be reductive to stay at this stage of reflection. Even if the accounting records all transactions, it does not say everything. We therefore prefer an economic approach to identify the added value, namely that it is the result of what is produced by an organization and whose value is greater than the cost of the means mobilized to allow this production. In other words, the organization creates something whose qualities exceed those contained in the resources employed for that creation and taken in isolation.

Levers and the environment for the development of added value

The development of added value depends on levers and the environment. There are many levers. It may be technical innovation, in productivity, strengthening of the sales force, more optimal access to retirement or natural resources, etc. The environment, for its part, relates to the conditions necessary for the creation of wealth. Some are external to the organization. The macroeconomic context, for example, is a determining factor for the growth of sales, and therefore of added value. In fact, we hardly create value without a buoyant market, just as security, quality infrastructure and sustainable institutions are necessary for the smooth running of business. On these imperatives, the organization alone has no means of action. On the other hand, internally,

  • The deployment of an ethic for the production of wealth in compliance with laws and regulations. It is not a question of creating in any way;
  • the management of activities based on ambitious objectives and framed by a budgetary process;
  • The implementation of internal control systems. We do not create wealth without taking risks.

The auditor contributing to an environment favorable to the creation of added value

It will be understood that internal audit has its place in the development of an environment favorable to the production of added value. Ethics is a recurring audit subject with regard to its impact on the governance of the organization. Then, the management of activities leads to an assessment of the effectiveness and efficiency of the resources employed compared to the objectives assigned. The internal auditor is also concerned here, since auditing is as much about ensuring that the mechanisms implemented within the organization are effective, even efficient, as it is about checking the compliance of operations. Finally, regarding the control of the risks taken to create wealth, the auditor is in his garden! Since then, difficult to reduce internal auditors in Dubai to a cost center without recognizing the slightest contribution to the development of its organization. On the other hand, the auditor will be careful not to intervene on the levers allowing an increase in business. Without this precaution, his independence, a sine qua non for the exercise of his profession, will be impaired.

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