Fishbone diagram: Application of root cause analysis in internal audit planning

https://doi.org/10.35912/ijfam.v5i3.1498
Published: Dec 5, 2023

Abstract:

Purpose: This study applies a fishbone diagram to analyze the root cause of problems in the internal audit planning of J Corp, an Indonesian state-owned enterprise.

Research methodology: A qualitative approach was employed to conduct a case study at the internal audit unit of an Indonesian state-owned enterprise. Research data were gathered from the results of focus group discussions with internal auditors, the analysis of the company’s standard operating procedure for internal auditing, and the observation of the workflow of internal audit planning. These data were then analyzed to identify the root causes of these problems.

Results: Six key factors were identified that cause poor internal audit planning at J Corp. These are policies, processes, people, plants, programs, and products. To overcome these problems, this study provides several suggestions that can be implemented in the internal audit unit of J Corp.

Limitations: This study is limited by the nature of the business and environment of J Corp, which affected the problems arising in the process of its internal audit planning; hence, the need to understand the entity to replicate this method for future research.

Contribution: This study could be directly beneficial for internal auditors at J Corp to immediately improve the business process of internal audit planning. Furthermore, this study could contribute to future studies in which researchers or practitioners could replicate this method in another context.

Novelty: The fishbone diagram was used to analyze the root causes of problems in the process of internal audit planning. Studies on the improvement of internal audit planning have been limited.

Keywords:
1. Fishbone Diagram
2. Root Cause Analysis
3. Internal Audit
4. Planning
Authors:
1 . Novan Bastian Dwi Ardha
Accounting Department, State Polytechnic of Malang, Indonesia
2 . Nur Indah Riwajanti
Accounting Department, State Polytechnic of Malang, Indonesia
3 . Zainal Abdul Haris
Accounting Department, State Polytechnic of Malang, Indonesia
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How to Cite
Ardha, N. B. D., Riwajanti, N. I., & Haris, Z. A. (2023). Fishbone diagram: Application of root cause analysis in internal audit planning. International Journal of Financial, Accounting, and Management, 5(3), 297–309. https://doi.org/10.35912/ijfam.v5i3.1498
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Issue & Section
Vol. 5 No. 3 (2023): December
Articles
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References

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  1. Ajao, O. S., Olamide, J. O., & Temitope, A. A. (2016). Evolution and development of auditing. Unique journal of business management research, 3(1), 032-040.
  2. Anderson, U. L., Head, M. J., Ramamoorti, S., Riddle, C., Salamasick, M., & Sobel, P. J. (2017). Internal auditing: Assurance & advisory services: Institute of Internal Auditors Research Foundation.
  3. Babayeva, A., & Manousaridis, N.-D. (2020). The Effects of Digitalization on Auditing-A Study Investigating the Benefits and Challenges of Digitalization on the Audit Profession.
  4. Berisha-Namani, S. M., & Qehaja, M. S. A. (2013). Improving Decision Making with Information Systems Technology–A theoretical approach. ILIRIA International Review, 3(1), 49-62.
  5. Best, M., & Neuhauser, D. (2008). Kaoru Ishikawa: from fishbones to world peace. BMJ Quality & Safety, 17(2), 150-152.
  6. Birkmeier, D. Q., Klöckner, S., & Overhage, S. (2010). An empirical comparison of the usability of BPMN and UML activity diagrams for business users.
  7. Botezatu, C., Condrea, I., Oroian, B., Hri?uc, A., E?cu, M., & Sl?tineanu, L. (2019). Use of the Ishikawa diagram in the investigation of some industrial processes. Paper presented at the IOP Conference Series: Materials Science and Engineering.
  8. Erlina, E., Nasution, A. A., Yahy, I., & Atmanegara, A. W. (2020). The role of risk based internal audit in improving audit quality. Erlina, Abdillah Arif Nasution, Idhar Yahya and Agung Wahyudhi Atmanegara, The Role of Risk Based Internal Audit in Improving Audit Quality, International Journal of Management, 11(12).
  9. Fabi?-Domaga?a, J. (2017). Application of Ishikawa diagram for failure analysis of a car water pump. Technical transactions, 114(8), 193-198.
  10. Gupta, V., Jain, R., Meena, M., & Dangayach, G. (2018). Six-sigma application in tire-manufacturing company: a case study. Journal of Industrial Engineering International, 14, 511-520.
  11. Handoyo, B. R. M., & Bayunitri, B. I. (2021). The influence of internal audit and internal control toward fraud prevention. International Journal of Financial, Accounting, and Management, 3(1), 45-64.
  12. Harahap, V., & Novita, N. (2022). Control Self Assessment (CSA) In Improving Company Performance. Jurnal Akuntansi, Keuangan, Dan Manajemen, 3(3), 207-223.
  13. Heldifanny, R. A., & Tobing, R. P. (2019). Evaluation of Risk-Based Internal Audit Plan Implementation in The Era of Technology Disruption: Case Study at University X. Paper presented at the 3rd Asia-Pacific Research in Social Sciences and Humanities Universitas Indonesia Conference (APRISH 2018).
  14. IIA. (2017). International Standards for the Professional Practice of Internal Auditing. Retrieved from https://www.theiia.org/en/content/guidance/mandatory/standards/international-standards-for-the-professional-practice-of-internal-auditing/
  15. IIA. (2020). Developing a Risk-based Internal Audit Plan. Retrieved from https://www.theiia.org/en/content/guidance/recommended/supplemental/practice-guides/developing-a-risk-based-internal-audit-plan/
  16. Ilham, R. N., Arliansyah, A., Juanda, R., Sinta, I., Multazam, M., & Syahputri, L. (2022). Application Of Good Corporate Governance Principles In Improving Benefits Of State-Owned Enterprises (An Emperical Evidence From Indonesian Stock Exchange At Moment Of Covid-19). International Journal of Economic, Business, Accounting, Agriculture Management and Sharia Administration (IJEBAS), 2(5), 761-772.
  17. Johansson, L.-O., Wärja, M., & Carlsson, S. (2012). An evaluation of business process model techniques, using Moody’s quality criterion for a good diagram. Paper presented at the BIR 2012: Emerging Topics in Business Informatics Research 2012, Nizhny Novgorod, Russia, September 24-26, 2012.
  18. Kuncara, W. A. (2022). The influence of Whistleblowing System and internal control on fraud prevention at PT Pos Indonesia (Persero) Bandung City. International Journal of Financial, Accounting, and Management, 4(2), 101-113.
  19. Laudon, K. C., & Laudon, J. P. (2014). Management information systems: Managing the digital firm (13th ed.): Pearson Educación.
  20. Liliana, L. (2016). A new model of Ishikawa diagram for quality assessment. Paper presented at the IOP Conference Series: Materials Science and Engineering.
  21. Mahzan, N., & Lymer, A. (2014). Examining the adoption of computer-assisted audit tools and techniques: Cases of generalized audit software use by internal auditors. Managerial auditing journal.
  22. Nugraha, R., & Bayunitri, B. I. (2020). The influence of internal control on fraud prevention (Case study at Bank BRI of Cimahi City). International Journal of Financial, Accounting, and Management, 2(3), 199-211.
  23. Nyarombe, F., Gideon Musau, E., & Kavai, I. (2015). The effect of risk based audit approach on the implementation of internal control systems: a case of Uasin Gishu County.
  24. Patience, K., Moses, A., Bosco, T. J., & David, K. J. (2022). The impact of internal controls on SACCO performance in Rukiga, Uganda. Annals of Management and Organization Research, 3(4), 289-303.
  25. Prayoga, M. H., & Purwanti, D. (2020). Case Analysis Of Revenue Recognition Fraud Of Pt Garuda Indonesia (Persero) Tbk In 2018. Riset: Jurnal Aplikasi Ekonomi Akuntansi dan Bisnis, 2(2), 289-306.
  26. Samagaio, A., & Diogo, T. A. (2022). Effect of Computer Assisted Audit Tools on Corporate Sustainability. Sustainability, 14(2), 705.
  27. Setiawan, I. (2020). Bedah kasus gagal bayar dan kerugian PT. Asuransi Jiwasraya (Persero). Jurnal Akuntansi Dan Bisnis Indonesia (JABISI), 1(1), 34-41.
  28. Shank, T., Paul Hill, R., & Stang, J. (2013). Do investors benefit from good corporate governance? Corporate Governance: The International Journal of Business in Society, 13(4), 384-396.
  29. Silva, A. S., Medeiros, C. F., & Vieira, R. K. (2017). Cleaner Production and PDCA cycle: Practical application for reducing the Cans Loss Index in a beverage company. Journal of cleaner production, 150, 324-338.
  30. Simanová, ?., & Gejdoš, P. (2015). The use of statistical quality control tools to quality improving in the furniture business. Procedia Economics and Finance, 34, 276-283.
  31. Smidt, L., Van Der Nest, D., & Lubbe, D. (2014). The use of sampling and CAATs within internal audit functions in the South African banking industry. Paper presented at the 2014 9th Iberian Conference on Information Systems and Technologies (CISTI).
  32. Wohed, P., van der Aalst, W. M., Dumas, M., ter Hofstede, A. H., & Russell, N. (2006). On the suitability of BPMN for business process modelling. Paper presented at the Business Process Management: 4th International Conference, BPM 2006, Vienna, Austria, September 5-7, 2006. Proceedings 4.