One of the challenges internal auditors encounter when analyzing a finding is identifying the root cause of the problem. After all, unless the source is identified and corrected, it is likely the recommendation won’t correct the problem and the issue will recur.
The Cause and Effect Diagram, also known as the Fishbone Diagram (for the shape of the completed diagram) and Ishikawa Diagram (for the name of Kaoru Ishikawa, who invented it), serves as a very useful and structured visual tool to identify the root cause of problems, sort ideas into useful categories, and help its users develop more effective corrective actions.
Uses of Cause and Effect Diagram
The Cause and Effect Diagram serves as a very useful supplement to the CCCER (Criteria, Condition, Cause, Effect, and Recommendation) Model used by many internal auditors to document internal audit findings. The Condition, or problem statement, is placed as the head of the fish, and the bones represent the Causes. Using the Cause and Effect Diagram helps internal auditors make recommendations more valuable, precise and useful to audit clients.
Fishbone Diagrams are ideal for participative exercises, where auditors can engage the rest of the team or client employees to identify the root cause of issues and brainstorm solutions. By collecting and evaluating the ideas of several people, internal auditors can obtain better information and involve those affected in remedying the issues identified.
Typical Fishbone Diagram Causes/Categories
How to Prepare a Cause and Effect Diagram
- Draw the general shape of a fish, and place the problem statement (i.e. effect) at the head of the fish. Be as specific as possible about the issue and avoid phrasing the problem as a solution (e.g. “The department needs to reduce employee turnover,” “The organization needs to improve the quality of its bank reconciliations”).
- Identify and agree on the four to six general categories of issues that contribute to the problem statement and place them around the periphery as arrows pointing to the backbone of the fish. Typical categories include policy, procedures, people, and technological factors. See the table for a list of common categories. These items only represent major categories that cause variation, but other categories can be used as well. When preparing the Cause and Effect Diagram, items can be chosen from either column on the table. The list of typical categories can be longer than six items, and in some cases, it is categorized based on the type of organization or environment where the effect is being analyzed. As shown on the table, the list is often slightly different when the exercise is performed in an industrial vs. a service environment.
- Brainstorm items related to the major categories and place them as smaller arrows connecting the sub-causes to the major causes in a drill-down manner. Leave enough space between the major categories so detailed causes can be added later.
- For each major category, ask, “why does this happen”? and the answers are written as a branch from the appropriate category. Causes may appear in different places if they relate to more than one category. These smaller bones represent more detailed causes, contributing factors, or sources of the problem. Repeat the process by asking “why does this happen?” and write subcategories that branch off the cause branches until all ideas are exhausted. By repeating the process, you generate more and deeper levels of causes, and by organizing these sub-causes branching off the causes, a more detailed perspective is developed.
- Identify the top two or three items that have the biggest influence on the effect. This can be done through consensus or by using a multi-voting technique, like asking each team member to identify the top two or three items, then tallying those results.
- Brainstorm two or three corrective actions to remedy each of the top two or three items. This can also be done through consensus or multi-voting technique.
When done drawing the diagram, it should become clearer to the audit team and client why the issue exists, which items are most influential in causing the problem, and some ideas to correct the problem itself. I have found this tool, and especially Steps 5 and 6 very useful moving the analysis beyond problem identification and into solution mode.
Using the Fishbone Diagram during Internal Audits
The Cause and Effect Diagram can be drawn on a whiteboard, flipchart paper, or with PostIt® notes. It helps to keep auditors focused on the problem and searching for its causes, rather than focusing on symptoms, and as a brainstorming exercise, it encourages everyone on the team to share their opinion.
The Five Whys method is often used with the Cause and Effect Diagram by continuing to ask “why” until the root cause becomes apparent, but the Cause and Effect Diagram is more structured. It is also versatile and as a participative tool it makes it possible for auditors and audit clients to work together to find the root cause of issues and identify solutions to it. Also, since Fishbone Diagrams are visual, they are easy to understand, construct, discuss and use.