What Is Lean Methodology Accounting Essay

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1.0 Introduction

In today's challenging and competitive business environment, all types of entities varied from manufacturing, food and beverage industry to service providers will need to grow and find ways to achieve profit maximization as well as contributing to the social and country's economics. Therefore, the management team plays important roles in determining the best strategic management which can be used to help improve the business processes as a whole. Among those common and popular ones are Business Process Modelling (BPM) which helps to improve efficiency and quality of an entity, Kaizen which consists of continuous improvement techniques, Six Sigma, SWOT (Strengths, Weaknesses, Opportunities and Threats) analysis and balance scorecard which is applied by food and beverage companies such as McDonald's Corporation. Despite these, many of the developing companies are operating using the lean methodology to sustain in the business world.

2.0 What is Lean methodology?

Lean philosophies were originated from pioneering manufacturer of Toyota cars which was known as Toyota Production System (TPS). Lean is basically a production practices which put a lot of emphasis on overheads of resources for any objectives besides the creation of value for end customers to be wasteful and thus a target for elimination. In another word, lean can be regarded as a management way on getting the right place at the right time in the right quantity to achieve ideal work flow while minimizing waste or waste zero defects and being flexible as well as utilising empirical methods. Lean focuses on customer values which are essential to management team of an entity. Hence, this team should work on the perspective of the customer. Lean helps to suppress costs to maximise profits in order for the entity to achieve competitive advantage.

3.0 Company background

KPMG has recently implemented the lean concepts to improve business processes. Undoubtedly, the goals are to further increase productivity and effectiveness throughout the company. KPMG is an international firm which provides professional audit, tax and advisory services to variety of business corporations. KPMG is a Swiss foundation headquartered in Netherland and has a global network of 146 independent KPMG firms.

KPMG in Malaysia has been established since 1928 and is considered one of the oldest KPMG firm in Malaysia as well as in the Asia Pacific region. This firm is operating in correlation with KPMG Desa Megat & Co. In Malaysia, this firm has approximately 1,700 employees from various departments located across ten offices nationwide. KPMG has been standing strong and known as one of the big four audit firms available in Malaysia.

KPMG's vision is to be recognized as the leaders in the market they serve due to their knowledge of swift developments and issues in the markets, industries and sectors of their clients operating. Besides that, KPMG aim to have the best reputation in their exclusive industry. Furthermore, KPMG's mission is to turn the knowledge grasped into value for the benefit of clients, people and capital markets. KPMG adds value to their client engagement because of its experiences, knowledge, skills and vision in addition to mission of the firm.

In KPMG, there are three professional departments. These are audit, tax and advisory. In the field of audit, employee of the firm whom are known as auditors are enormously trusted in the independent audit of company finances. KPMG uphold the highest standards of integrity and support the auditors with significant resources and appropriate technology.

On the other hand, the tax team are established to meet client needs and demands. The team work hand in hand with clients to achieve effective tax compliance such as tax relief, exemption as well as computation, manage tax risks besides organizing their associated costs according to the Income Tax Act 1967 in Malaysia. This will help the business a distinct competitive advantage.

Last but not least will be the advisory professionals who help organizations to alleviate unforeseen or future risks, improve business performance, cope with governance challenge and create values. These professionals provide proficient consultation that is able to deal with immediate issues and plan for long term basis.

In general, KPMG combines multi - disciplinary approaches with deep, practical and experience industry knowledge to help clients meet challenges and respond to opportunities available in succeeding in the new economy. KPMG has a high commitment to strive for the highest quality services.

4.0 Ways to improve processes using lean

Despite KPMG as an audit firm, the company has implemented lean concepts among the employees in their everyday job scope to improvise several areas that can be regarded as wastes.

4.1 Communication with clienteles.

Auditors should perk up communication skills with clients. This is critical to understand what the client desires. Client here doesn't not only refer to external but also the internal ones such as employees of the organization. Internal clients should be well engaged and prepared in their tasks assigned in addition to helping the firm to achieve the goals.

4.2 Defects detected

Defects in an audit firm will be delays. This will happen when the reviewer, usually the Senior Manager or Director of the firm trying to juggle time to make necessary corrections done before completing the return and answering to all enquiries. This defect certainly can be reduced through proper and careful preparation of audit as well as supplying true and accurate information from the financial department of the client's company.

4.3 Avoiding over production

Here, jobs engaged were ineffectively emphasised. Excessive time and resources were used during the heart of peak season to work on important clients but filed extensions or unable to produce information. Auditors should instead focus on other waiting clients as each entity has the similar year end or other incomplete tasks such as pursue for a complete review in order to hand in to the client.

4.4 Elimination on process of waiting

Waiting phase is an indicator of bottleneck occurring in the firm. Predominantly, this is found to happen in several steps including first review. Therefore, managers, senior managers and directors should work more efficient and effectively to eliminate waiting period by managing proper time for reviewing the accounts before signed off by partners as well as attending meetings and pay a visit to client's organization nationwide.

4.5 Utilizing people's talents in the firm

Employing in an audit firm needs up to date information especially on accounting and tax systems, knowledge on domestic and global economics, latest implemented rules and regulations applied by the government and others. Hence, young team members such as interns and fresh graduates should be given trust and opportunity to work on audits. In addition, employees must be sent to attend seminars regarding their job scope to ensure they managed to comprehend the knowledge before delivering to clients. Consequently, KPMG also organized heaps of seminars or talks on related financial subject.

4.6 Avoiding misplace of account sheets

To avoid bottlenecks, managers and directors usually will result in bringing back documents to review or amend. These documents are all in the form of account sheets completed with data. Thus, there is a risk of documents misplaced at home or during the process of transportation. In order to prevent this from occurring, management team should look closely to provide suitable way to document all the private and confidential financial data.

Eradicate excess processing

Occasionally, auditors had been spending excessive time outside the scope of engagement such as updating book keeping and amending mistakes from the client. Firm wasn't meeting client expectations of the scope of engagement and led to a lot of started and partially completed work.

5.0 Conclusion

As a conclusion, lean notions are essential to all types of entities. This concept is useful especially in eliminating waste and improving quality. Moreover, it can reduce time and eventually reduces total costs which help to maximise the aim of every business, maximise profits. Nevertheless, the lean concepts can be quite complex which comprises numerous elements. Among them are lean as a fixed state or goal, a continuous change process, a set of quality improvement tools and recognized lean as a philosophy. There is always room for improvement in everything we do. Hence, lean is a concept of continuous product and process improvement as well as elimination of non-value added activities.

6.0 Recommendation

Based on the implementation done, it is ascertained that lean is applicable in every processes and business. It is a way of thinking and acting for an entire organization to improve positively. Overall equipment effectiveness (OEE) is a set of performance metrics that fit well in a lean environment. Management leaders play important role as well to produce quality audit product based on their knowledge, skills and experiences.

Besides lean methodology, KPMG can also attempt to practice other quality improvement tools such as Six Sigma and Kaizen which are widely used in business entities. There are five S's known as Sort, Straighten, Shine, Standard and Sustain exercised by multinational companies.


Numerous websites had helped me to complete this task one. These include :-

1) http://www.kpmg.com

2) http://www.top10malaysia.com

3) httlp://www.businessbulls.com

4) http://www.gembutsu.com

5) http://www.journalofaccountacy.com

6) http://www.lean.org

7) http://www.reliablelant.com

8) Stephen P.Robins and Mary Coutler, Management (eleventh edition), published in 2010

9) Thomas S. Bateman and Scott A. Snell, Management (tenth edition), published in 2011

10)Sayer N J and Williams B, Lean for Dummies, published in 2012

11)Christopher K Ahoy, Customer Driven Operations Management, (1st edition), published in


Question 2


Sustaining a business during the ups and downs of an economy is certainly not an

easy task to accomplish. Business entities operated with an aim to compete competitively in the specific market so as to achieve maximise profit. As a result, many organizations have implemented various quality improvement tools and methodologies to enhance qualities and improve efficiencies in the organization. In this contemporary modern business environment, a lot of organizations ought to strive for the best to acquire the International Standards Operation (ISO) certificate. This acquisition would help to gain trust and recognition for their fine qualities from consumer at large.

Total Quality Management (TQM) would be another strategic management vehicle adopted generally for continuously improving quality of processes, end - products and services. TQM is an approach to long-term success through customer satisfaction.

Benefits of basic quality tools

Basic quality tools are essential and widely used by all types of organizations as these

consist of numerous benefits advantageous to the organization. Among the basic quality tools are Ishikawa or fish bone chart, check sheet, control charts, histogram, Pareto chart, scatter diagram and stratification. These are also known as "The Basic Seven".

2.1 Sustain in the market

These tools are vital for the organization to keep on developing and improvising products and services. Consequently, this will help the organization to possess competitive advantages and sustain in the market industry it specialises in.

Enriching qualities and diminish defects

Basic tools are considered as a management means of enhancing qualities of the

diversified products or services provided. In addition, organizations will begin to reduce waste or cultivate zero defects objective in every department throughout the organization. The participation of both internal (employees) and external (manufacturers and suppliers) are necessary to achieve this.

Capitalization on profits

As soon as organization starts to reduce defects such as wastes, without doubt the

organization would be able to maximise profits. Furthermore, it is unnecessary to employ quality check personnel as the management tools had managed to curb excessive wastage and improving qualities. Employees of the entity may enjoy higher salary or better work privileges.

2.4 Improve operational excellence and speed to market

Through basic quality tools, this will create operational excellence. In today's globalization economy, customers are looking forward for excellent products and services, less expensive and of course manage to penetrate in the market.

2.5 Improve employee morale

Employees are the main asset of a business entity. Therefore, their moralities are

essential to reflect first impression on the company as well as products or services provided. By practicing appropriate basic quality tools, employees will receive immediate feedback on their performance at work. This will lead to noticeable improvement such as engage in their job. In return, this will reduce employee turnover.

2.6 Customer satisfaction

Since the organization managed to provide better services to the clients, undoubtedly

they will be contented to engage for the same service again. Clients will spread good words by mouth and eventually market out good reputation for the company.

Tools implemented in KPMG

KPMG is an audit firm standing at the fourth position in the auditing industry.

However, KPMG's vision is to be recognized as the leaders in the market they serve due to their knowledge of swift developments and issues in the markets, industries and sectors of their client operating. Therefore, KPMG had implemented numerous quality tools for them to achieve their vision.

3.1 Benchmarking

KPMG applied benchmarking in the organization so as to be the leader in this industry. KPMG had taken Ernst and Young, the current market leader in audit industry as the firm's role model. KPMG is convinced to achieve their vision within the next three to five years.

3.2 Lean

This system has been nurtured among the employees of KPMG to enable a continuous improvement to achieve corporate goals. Lean is a management practice targeting on eliminating waste. HOW?

3.3 Kaizen

The concept of Kaizen was originated from Japan. This idea describes an environment where KPMG and internal as well as external employees proactively work hand in hand to improve the processes of accounts and services. There are also known as the 5S which consist of sort, straighten, shine, standard and sustain.

3.4 Total Quality Management (TQM)

As a professional audit, tax and advisory firm, KPMG executes total quality management in everyday's operation throughout the whole firm. Total quality management is a culture and behaviour of providing clients with satisfying services.

3.5 SWOT analysis

Management team of KPMG had used the SWOT analysis to identify their primary and secondary strategic issues which its organization faces. Strengths and Weaknesses can be collected through their internal resources while Opportunities and Threats are the externals and macro environment.

The strength of KPMG is being extensive global reach and provides a wide range of services sustaining revenue momentum. In addition, KPMG also has the ability to integrate member firms bringing stakeholder credence. However, the weaknesses are client concentration could adversely impact audit fees imposed and inefficiency and ineffectiveness in workflow due to poor management and lack of quality control will cause diminution to the audit firm. Besides that, KPMG could benefit from the growth prospects in emerging markets. In addition, early adoption of International Financial Reporting Standards (IFRS) could spur demand for accounting and auditing services. Nevertheless, every business entity will face threats. For KPMG, the crucial threat is global economic slowdown which causes clients to engage with other firms who are offering much lower audit fees.

3.5 Ishikawa or fish bone chart

Besides that, KPMG also identifies many possible causes for an effect or problem as well as sort ideas into useful categories through Ishikawa. It has a fish bone illustration. This tool encourages all employees of the firm to participate and bring relevant factors from diverse departments. Reason behind this is to prevent the management from making hasty or half-baked decisions.


After KPMG had implemented various quality tools, it is undeniable that these tools

succeeded in crafting solutions to stimulate better performances in everyday's job. These positive outcomes were proven after two months of observations from the management team.

4.1 Positive feedback from clients

As the tools had helped to increase effectiveness among the employees and a smoother job process in the audit firm, numerous positive feedbacks had been received by the managers from various important clients of the firm. These feedbacks had become an encouragement and motivator for the auditors strived to perform their best.

Decrease in chargeable hours

Auditors who are efficient in carrying their jobs always produced better quality of

work. Hence, by practicing the quality tools, there is a proven of decrease in chargeable hours. This means auditors spent lesser hours in client's company or amount of time utilised on the audit but maintaining the quality of work with zero mistakes.

Shorter waiting time to clear review notes

On the other hand, managers and directors also overcome issues on backlog or

incomplete of review notes before proceeding to the next processes. By using suitable tools, managers are capable to shorten the time of review from two weeks to four days. All audit documents at the preliminary round should be thoroughly reviewed to avoid obstacles in the workflow. Therefore, reviewing notes can be considered as a time consuming tasks which is necessary to be carried out.

Ability to produce billing for clients

Despite the heavy workload especially during the accounting year end which is

known as peak season, senior auditors and managers are able to submit all necessary documents for the purpose of billing. For example, hours spent with the client, petrol claims and allowances. These will increase profitability of the audit firm whereby the finance department of KPMG is able to process and produce the billing as the same time of presenting audit reports to the clients.

5.0 Applications of lessons to enhance quality and processes

Business improvement tools are indeed an important and knowledgeable course subject. Applications of this knowledge will help individual and organization to improve simultaneously. Therefore, this erudition had been practiced continuously in workplace.

The author had practiced lean methodology in the workplace and this had developed a positive working environment. With a joyful environment, it is a definite that the author managed to work better and engaged with the job allocated. However, this practice has to be a continuing process.

Besides that, the author also used the SWOT analysis and Ishikawa knowledge to help the management team to analyse the constraints and challenges faced by the company. Occasionally, there might be problems faced by company but weren't perceived by the upper management.

6.0 Conclusion

As a wrap up, the International Standard Operations (ISO) is an important recognition and many corporate leaders are making efforts to gain this prestige accreditation. This recognition is indeed a value added to the reputation of the company as well as products and services offered. Therefore, a way to stimulate competitive advantages within the industry.

On the other hand, implementing basic quality tools are necessary to improve the efficiency and effectiveness of workflow in the competitive business working environment. Total Quality Management (TQM) should be adhered to achieve or retain the best quality. This is to make sure the organisation able to go for extra miles to please the employees and clients.

Business improvement tools consist of all the necessary skills and methodologies that can be transferred and utilised in other industries. The wisdom acknowledged is indeed beneficial ones. Furthermore, this can be an advantage or extra proficiency to get hired by business entities.

7.0 Recommendation

For recommendation, KPMG should continue to apply these quality tools in their audit firm to achieve their vision and missions. Moreover, this can help the firm to stay competitive and maybe lead the other firms in the auditing industry. Besides that, KPMG can also attempt to apply other quality tools to determine the variances and opportunities for better improvement and performances.