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    Notes in Operations Auditing

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    Jenny Kimmey
    Operational audit assesses conformity to procedures and methodologies. Specialized auditors conduct the audit and submit a report of findings and recommendations to improve implementation and compliance. The goal is to improve efficiency, effectiveness and customer satisfaction. Internal auditing adds value and improves operations by bringing a systematic approach to evaluate risk management, controls, and governance processes. It helps the organization achieve its objectives through independent and objective assurance and consulting. Operational auditing and internal controls are related. Operational audits evaluate the efficiency and effectiveness of internal controls and make recommendations to management.

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    Notes in Operations Auditing

    Uploaded by

    Jenny Kimmey
    5K views4 pages
    Operational audit assesses conformity to procedures and methodologies. Specialized auditors conduct the audit and submit a report of findings and recommendations to improve implementation and compliance. The goal is to improve efficiency, effectiveness and customer satisfaction. Internal auditing adds value and improves operations by bringing a systematic approach to evaluate risk management, controls, and governance processes. It helps the organization achieve its objectives through independent and objective assurance and consulting. Operational auditing and internal controls are related. Operational audits evaluate the efficiency and effectiveness of internal controls and make recommendations to management.

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    Operational audit assesses conformity to procedures and methodologies. Specialized auditors conduct the audit and submit a report of findings and recommendations to improve implementation and compliance. The goal is to improve efficiency, effectiveness and customer satisfaction. Internal auditing adds value and improves operations by bringing a systematic approach to evaluate risk management, controls, and governance processes. It helps the organization achieve its objectives through independent and objective assurance and consulting. Operational auditing and internal controls are related. Operational audits evaluate the efficiency and effectiveness of internal controls and make recommendations to management.

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    © All Rights Reserved
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    5K views4 pages

    Notes in Operations Auditing

    Uploaded by

    Jenny Kimmey
    Operational audit assesses conformity to procedures and methodologies. Specialized auditors conduct the audit and submit a report of findings and recommendations to improve implementation and compliance. The goal is to improve efficiency, effectiveness and customer satisfaction. Internal auditing adds value and improves operations by bringing a systematic approach to evaluate risk management, controls, and governance processes. It helps the organization achieve its objectives through independent and objective assurance and consulting. Operational auditing and internal controls are related. Operational audits evaluate the efficiency and effectiveness of internal controls and make recommendations to management.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
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    At a glance
    Powered by AI
    The key takeaways are that operational auditing evaluates the effectiveness, efficiency and economy of operations under management's control and aims to improve implementation and compliance with procedures. It also identifies nonconformities to recommend corrective actions.

    The different types of operational audits discussed are functional audit, organizational audit and special assignments.

    The objectives of internal auditing are to help the organization accomplish its objectives by evaluating and improving risk management, control and governance processes in a systematic and independent manner.

    OPERATIONAL AUDIT

    Operational Audit is a methodology for assessing the conformity of implementing the


    procedures and methodologies set forth in the department’s instructions, regulations or
    documents.
    Operational audit is performed by specialized auditors. Upon completion of the auditing
    process, a report of findings with recommendations is submitted. Operational audit contributes to
    improving implementation, complying with the government organizations’ procedures and
    providing the management with points of nonconformity so that corrective and preventive
    actions can be taken, thereby improving the efficiency and effectiveness of operations and
    increasing customers’ satisfaction.
    The systematic process of evaluating an organization’s effectiveness, efficiency &
    economy of operations under management’s control & reporting to appropriate persons the
    results of the evaluation along with recommendations for improvements.
    Notes:
    Operational audit = management auditing = performance auditing
    Systematic process  logical, structured, organized series of steps/procedures. Proper
    planning, obtaining & objectively evaluating evidence.
    Evaluating operations  based on some established or agreed upon criteria, e.g.
    performance standards
    Effectiveness, efficiency, economy  focus on future

    Effectiveness versus Efficiency


    Effectiveness refers to the accomplishment of objectives.
    Efficiency refers to the resources used to accomplish those objectives

    Phases in Operational Auditing


    ~ Planning
    - Having a preliminary preparation/risk assessment – gather background information
    about the entity’s operation.
    ~ Evidence accumulation and evaluation/risk response
    - You will gather evidences to support the financial statement and other documents
    that are useful in performing the audit.
    ~ Reporting and follow-up/Audit Report
    - Completion, and giving auditor’s opinion

    Impact of operational audit on increasing customers’ satisfaction


    ~ Operational Audit
    ~ Identify points of nonconformity in procedure implementation
    ~ Corrective actions by the management
    ~ Increased efficiency and effectiveness
    ~ Increase customer satisfaction

    Why Operational Audit?


    - Identify poor work practices in order to improve them.
    - Verify that employees implement operations in conformity with instructions and
    regulations, which guarantees achieving the desired effectiveness and efficiency.
    - Assist in the evaluation of quality control procedures adopted in the organization.
    - Evaluate implementation processes in the organization.

    Types of Operational Audits


    Functional audit
    - concentrates on activities of the business, e.g. billing function, production, accounting, IT
    - Allows specialization, but fails to take into account interrelated functions

    Organizational
    - Organizational unit, e.g. branch, subsidiary, dept., unit, center
    - Concentrates on organizational structure, coordination of activities

    Special assignments
    - Determining the cause of ineffective IT system, fraud investigation

    INTERNAL AUDITING
    It is an independent, objective assurance and consulting activity designed to add value
    and improve an organization’s operations.
    It helps an organization accomplish its objectives by bringing a systematic, disciplined
    approach to evaluate and improve the effectiveness of risk management, control, and governance
    processes.
    - Helping the organization accomplish its objectives
    - Evaluating and improving the effectiveness of risk management, control, and governance
    processes.
    - Assurance and consulting activity designed to add value and improve operations.
    - Independence and objectivity
    - A systematic and disciplined approach (specifically, the engagement process)
    Notes:
    Broader objectives than external auditing  more flexible to meet company’s needs.
    Internal  within the organization. Sometimes can be outsourced.
    Independent & objective  free of bias
    Systematic, disciplined  follow professional standards
    Helps an organization accomplish its objectives  aids/benefits an organization, guided
    by organization’s goals/objectives

    Institute of Internal Auditors’ Code of Ethics & Rules of Conduct


    Integrity  The integrity of internal auditors establishes trust and thus provides the
    basis for reliance on their judgment.
    Objectivity  Internal auditors exhibit the highest level of professional objectivity in
    gathering, evaluating, and communicating information about the activity or process
    being examined. Internal auditors make a balanced assessment of all the relevant
    circumstances and are not unduly influenced by their own interests or by others in
    forming judgments
    Confidentiality  Internal auditors respect the value and ownership of information they
    receive and do not disclose information without appropriate authority unless there is a
    legal or professional obligation to do so.
    Competency  Internal auditors apply the knowledge, skills, and experience needed in
    the performance of internal auditing services.

    Relationship of Internal and External Auditors


    The external auditor is responsible to financial statement users.
    The internal auditor is responsible to management.

    Notes:
    Audit risk model & materiality
    - External auditors rely on internal auditors through the use of the audit risk model
    - Internal auditors reduce the CR  reduce substantive testing if effective
    Relationship between Operational Auditing & Internal Controls
    Internal control evaluation – to evaluate efficiency & effectiveness, make
    recommendations to management.
    Scope – concerns any control affecting efficiency & effectiveness, e.g. policies,
    procedures

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