Operational Audit

Group 1

OPERATIONAL AUDITING

Operational auditing refers to the auditor’s study of business operations for the purpose of making recommendations about economic & efficient use of resource, effective achievement of business objectives and compliance with company policies. It is also known as Management audits or Performance audits.

• Operational - implies a focus on operations, as opposed to financial position

• Management - implies that the information obtained in the audit process is useful to management in decision making

• Performance - implies an evaluation of the performance of persons or units in executing the entity’s objectives

TYPES OF OPERATIONAL AUDIT

• Functional - a mean of categorizing the activities of a business

• Organizational - deals with an entire organizational unit

- how efficiently and effectively functions interact

• Special Assignment - arise at the request of management

OBJECTIVES OF OPERATIONAL AUDIT

• Assessments of the unit’s performance in relation to management’s objectives or other appropriate criteria.

• Assurance that its plans (as set forth in statement of objectives, programs, budgets, and directives) are comprehensive, consistent, and understood at the operating levels.

• Objective information on how well its plans and policies are being carried out in all areas of operations and on opportunities for improvement in effectiveness, efficiency, and economy.

• Information on weaknesses in operating controls, particularly as to possible sources of waste.

• Reassurance that all operating reports can be relied on as a basis for action.

Scope of Operational Audit

• Economy and efficiency audits

• Program audits

• Compliance audit

DISTINCTION BETWEEN OPERATIONAL AUDIT AND FINANCIAL AUDIT

Operational Auditing

• Effectiveness, efficiency and economy

• Future-oriented

• Reports...