Introduction to Operational Audit

Introduction to Operational Audit

The operational audit refers to the audit service in which the auditor will focus more on the review on the systems, key processes, internal control as well as the procedures. The primary purpose of doing so is to improve the company’s effectiveness, efficiency and productivity.

Besides, operational audit aims to detect any leak of the key control as well as the processes which cause the company to spend its resources unnecessarily. Then, the auditors will give suggestions to the customer to make an improvement.

The operational audit is included in the internal audit (Also see The Audit Objective of External and Internal Audit ), and its primary goal is to add value to the business by offering professional services. Having high discipline and being systematic will also ensure that the operational audit will add value to the firm.

Who Can Conduct Operational Audit?

While the companies may engage an audit firm in Johor Bahru to perform an external audit, it is the responsibility of the internal auditors to conduct the operational audit. This is because assessing the effectiveness and the efficiency of the operation and internal control is part of the internal auditors’ job. Usually, the in-house auditor will conduct their assessment on three vital types which is the operational audit, financial statements audit, as well as the compliance audit.

Types of Operation Which Require Operational Audit

The internal auditors may conduct an operational audit in numerous areas. Before they start reviewing, they need to determine the areas which they can audit, and the procedures involved by acquiring inputs from the company’s management.

For instance, the head of operation may voice out some issues about the incorrect information that the salespersons have provided to their clients. The finance director may raise his concerns associated with the discrepancy between the goods delivery notes and the invoices.

In such situations, the auditors may have to review the processes of running the sales and issuing invoices. Also, they can identify the operations or procedures (Also see Audit Procedures for Small Businesses) that they can audit on their own by getting a better understanding of the entire situation of the company first.

Next, the auditors may determine the relevant departments and key processes. As soon as they have identified these issues, they should start assessing the risks (Also see Introduction to Audit Risks) that are associated with the processes and controls. 

The Process of Operational Audit

Most of the processes are the same as other audits that the internal auditors will conduct. These consist of planning, execution, reporting, as well as follow up.

  1. Planning

The auditors need to understand the business and its operation well before they start assessing and aiming the key operations that they should audit.

  1. Execution

The auditors should validate the operation and key control that are involved in the process of obtaining the vital documents. They should also observe the performance of the key control and look into certain documents such as the goods delivery notes and the sales invoices.

  1. Reporting

As soon as the department has validated the controls and key operation, it needs to prepare a report and submit it to the audit committees.

  1. Follow up

Like other internal audits, the auditors need to follow up whether the relevant department or the management have mitigated the problems based on the key findings and the suggestions.

Contact Us!