Data Analysis Tools Provide Internal Audit Insight on Potential Risks in Obara Group’s Global Network

Client Story Data Analysis Tools Provide-IA Insight on Potential Risks

Protiviti IT Governance & Risk Management
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Company Headquarters — Japan
Number of Employees in Company — 1,622 ​
Industry — Manufacturing
Annual Revenues — US$444 million (as of September 30, 2015)
Number in IA Function — 1
​Number of Years IA Function Has Been in Place — 15+
IA Director/CAE Reports to — President

I would say that the use of data analytics is a strong force in my audit technique. Not only does it help me detect fraud and other risks and control issues – and provide clear evidence of those problems – it also helps me to learn and better understand what is happening in the business.”

- Mari Yonezawa, Chief Audit Executive


 

Obara Group Inc. consists of two technical groups: one specializes in manufacturing resistance welding equipment and systems for the automotive industry and the other produces flat-surface polishing equipment for electronic and precision industries, such as silicon wafer manufacturing. Obara Group is based in Kanagawa, Japan, a prefecture just south of Tokyo.

The company began in 1958 as Obara Metalworks Co. Ltd., a manufacturer of electrodes for resistance welding. That business eventually expanded into a global network of companies operating as Obara Corporation, listed on the Tokyo Stock Exchange. In 2011, the organization became a pure holding company and changed its name to Obara Group.

Today, Obara Group has 28 subsidiaries and branches located in 17 countries around the world and employs more than 1,600 people. While Obara Group is a global and complex organization, its internal audit department currently employs just one full-time staff member: Mari Yonezawa, the chief audit executive (CAE). She reports directly to the company’s president, Yasushi Obara.

Yonezawa joined the department in 2007 to help Obara Corporation prepare to meet J-SOX compliance requirements[1].  Not long after she started working at the company, the CAE at the time – Yonezawa’s manager and the only other full-time employee in the function – was transferred to China to head Obara China’s quality control department. 

Yonezawa has been a team of one in the function ever since, and she says she doesn’t mind the arrangement. “There are advantages to working solo,” she says. “I have time to think and to  study data.” 

Yonezawa rarely conducts audits alone, however. Depending on the type and scope of the auditing engagement, she will invite a “companion auditor” from within Obara Group – such as a corporate auditor or an accounting manager – to lend “a second pair of eyes” to the process. Yonezawa says she fully briefs the companion auditor prior to the audit by sharing her data analysis and other information she has prepared.

Employing Practical Technology Tools to Increase Efficiency

Obara Group is “a very traditional Japanese company,” according to Yonezawa, and until recently its internal audit processes were still “very paper-based.” When Yonezawa assumed leadership of the internal audit function, and was tasked with auditing all 28 subsidiaries and branches of Obara Group, she took immediate steps to start shifting the function away from more traditional and cumbersome processes and to begin embracing more technology tools.

Yonezawa implemented Computer-Assisted Auditing Techniques (CAATs) soon after becoming CAE. She later introduced Audit Command Language (ACL) software for data analysis into the internal audit function. Two of the many “considerable benefits” Yonezawa says she has realized from using data analytics are shorter audits due to better up-front preparation, and the ability to show auditees the facts clearly. “The figures tell everything,” she says.

“I would say that the use of data analytics is a strong force in my audit technique,” she adds. “Not only does it help me detect fraud and other risks and control issues – and provide clear evidence of those problems – it also helps me to learn and better understand what is happening in the business. For example, I can see what steps sales teams are taking in their activities.”

Yonezawa has taken the initiative to develop her data analysis skills by participating in training opportunities outside of Obara Group. She says she also gains valuable insights and tips from her peers in the industry who are using the same technology. However, it is her observation that many businesses in Japan have been slow to embrace data analytics tools.

“I would like to see more companies in Japan use data analytics – not just for internal audit, but generally, in their business,” she says. “Many large companies in Japan are still focused on traditional auditing approaches. They want to see documents and binders.”

Making a Plan to Overcome Communication Challenges

While Yonezawa says that being the only full-time employee in Obara Group’s internal audit function is “working well” for now, she will consider expanding the internal audit organization in the future if there is a need to do so. When she does recruit more talent into the function, Yonezawa says she will be looking for internal auditors who have solid data analytics, language and communication skills.

“Communication skills are really most important,” she says. “Internal auditors are not always welcome in the business because of the nature of what they do. If auditors have strong communication skills, they can build good relationships, and audits will go more smoothly.”

She adds, “I think this is why women make good auditors. We tend to be effective communicators.”

There is one significant communication challenge that Yonezawa says she needs additional help to overcome, however: the language barrier she faces when auditing in non-English-speaking countries, such as China and Korea. “I cannot speak Chinese or Korean,” she says. “So, if I perform an internal audit in those countries, I always need a translator or a software translation tool. Translations take time and undermine efficiency.”

Yonezawa is working on a plan to address this hurdle. She explains, “At the moment, some of the subsidiaries in China and Korea have their own internal auditors. They are my first interface when I audit these companies; they help me to communicate with department people. So, I would like to collaborate more with these teams. More than that, over time I would like to strengthen ties with all internal audit functions in Obara Group.”

Underscoring the “Audit Opportunity”

Since taking charge of Obara Group’s internal audit department, Yonezawa has made many changes, including the adoption of new technology, to make the function nimbler and more effective. But she is also focused on changing perceptions about internal audit that some people in the broader organization may hold – namely, that the function serves as a “policeman.” 

Yonezawa says she promotes internal audit’s role and value as a partner to the business by positioning every audit as an opportunity for improvement. “When I send out an audit notice, I always tell the management of the company that I am going to audit, ‘Please utilize this audit opportunity. Please involve your people from the beginning,’” she explains. “I tell them that they can utilize my audit to help their staff review their jobs and to learn the business again.”

Before Yonezawa conducts audits, she says she will often ask the president of the company to be audited what topics to explore in depth during the audit. “If I can perform an audit that helps to provide the information management seeks, it is more likely that the business will be receptive to the audit recommendations,” she says. “Internal audit is not here to find fault, but to help the business to improve – to find a better way.”

 

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[1] For more on the J-SOX legislation, see “Frequently Asked Questions About J-SOX,” J-SOX Insights, Protiviti, 2006