6 - Lecture - The 8 Es in Auditing
6 - Lecture - The 8 Es in Auditing
Operations
Auditing
THE EIGHT (8) E
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Effectiveness Ethics
Efficiency Equity
Economy Ecology
Excellence Emotion
The 8 Es – Effectiveness
Effectiveness is the process of evaluating the degree to which the
organization, program, or process is achieving its goals and objectives
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The 8 Es – Effectiveness
Mission and vision – drives employees action towards its achievement
This should be clear and communicated to all employees, providing a sense
of direction, motivating, and sparking ambition towards its achievement
Long-lasting and providing consistency to the long-term aspirations and
actions of the organization
The 8 Es – Efficiency
Efficiency relates to the use of inputs and other resources toward the
achievement of goals and objectives in some form of productive activity
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The 8 Es – Efficiency
In terms of employees:
Recruit individuals that meet present and future requirements
Assign in roles where they can use their skills best
Give freedom, flexibility, resources, and encouragement
Create a workplace that expects high results
Reward achievement of goals
In terms of technology:
Having modern machines with capacity to work effectively
Training employees to use the organizations technology
effectively
The 8 Es – Economy
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The 8 Es – Excellence
Excellence is the performance of all work with high quality
Organizations are increasingly pursuing a strategy to gain differentiation based
on quality (vs. merely relying on lower costs)
Quality should be measured to determine if it is achieved
“People do what is measured, repeat what is rewarded, and stop doing what is
punished”
Quality should be present in dealing with both internal and
external customers – “anyone who receives something that you
produce is your customer”
The 8 Es – Ethics
Ethics are the rules of behavior based on ideas about what
is morally good and bad; it deals with what is good and bad behavior, what
is morally right or wrong, and moral duty and obligation
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The 8 Es – Ethics
The auditor should have a familiarity with the
underlying concepts that define ethical thought,
and apply that knowledge to review and
recommend improvements
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Some limitations/challenges:
Use of hiring standards
Payment of just the minimum wage
Pluralism and ethical relativism – what is considered moral or ethical in one culture may
not be so in another
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Utilitarian analysis What is the greatest good for the greatest number?
The 8 Es – Equity
Equity relates to the treatment of others with dignity and respect –
fairness, reciprocity, and impartiality
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The 8 Es – Equity
When considering equity, the Internal Auditor should consider:
Does the organization display the necessary care to develop and maintain productive
relationships?
Does the organization, through its policies and practices, establish trust through openness?
Are there mechanisms in place to make sure, that in theory and practice, the concepts of
interdependence and collaboration are promoted and rewarded?
Does the organization recognize the importance to nurture others and show compassion,
while creating an expectation for hard work and discipline?
Does the organization show respect toward its stakeholders and encourage dialog with
them, rather that trying to exert power over them through opportunistic practices?
The 8 Es – Ecology
Over the years, customers, employees, local communities,
regulators, and other stakeholders increasingly expect organizations to act
responsibly towards the environment
Beyond compliance, ecological awareness and stewardship can also have a
positive impact on the organization’s profitability – lessen costs and
creating better/innovative products
“Sustainability is a mother lode of organizational and technological
innovations that yield both bottom-and-topline returns – some businesses
treat sustainability as innovation’s new frontier
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The 8 Es – Emotion
Emotion relates to the emotional attachment and involvement that highly engaged
employees show while working and interacting with others. This is an important
element that the Internal Auditor should examine as it can enhance operational
effectiveness when present.
When employees are emotionally invested in the organization and their work, they
tend to work beyond the minimum requirements – they go the extra mile and strive
in their efforts to delight customers
Emotional identification with the organization’s values, mission, vision, and
objectives is motivating. Feeling that others in the organization are pursuing similar
goals creates a stronger sense of community that binds employees to one another
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Reference:
Murdock H., Operational Auditing: Principles and Techniques for a Changing World (Second Edition)
www.Investopedia.com
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