GENESIS OF OPERATIONAL AUDIT
Definition of Operational Audit
Nature of the Operational Audit
Objectives of the Operational Audit
Need for an Operational Audit
The Operational Audit is the independent assessment of all the operations of a company, in an objective and systematic analytical way, to determine if acceptable policies and procedures are carried out; if the established norms are followed; if resources are used efficiently and economically, and if the objectives of the organization have been achieved in order to maximize results that strengthen the development of the company.
The operational audit can be as broad as its scope. It includes both simple compliance audits and more complex program and mission audits.
In summary, the scope of the administrative audit includes:
• The reliability and integrity of the information.
• Compliance with policies, plans, procedures, laws and regulations.
• Safeguarding assets.
• The economical and efficient use of resources.
• The achievement and fulfillment of the objectives and goals established for the operations or programs.
An appropriate definition of an operational audit will comprise an independent assessment of all operations of a company:
For example: An independent assessment of the various operations and controls within an organization to determine whether acceptable policies and procedures are in place, established standards are followed, resources are used efficiently and economically, and whether the objectives of the organization have been reached.
The operational audit was born out of the management's need for it and the internal auditor's ability to satisfy this need.
The term “operations2 as a designation of non-financial activities and functions appeared in the Declaration of Responsibilities of the Internal Auditors, published by the IIA. The 1947 statement said that internal auditing "dealt primarily with accounting and financial matters, but that it would also be appropriate for it to deal with matters of an operational nature."
The 1957 Declaration guided this concept toward a broader audit by stating:
"Internal audit is an independent assessment activity within an organization, for the review of accounting and financial activities, as well as other operations."
The 1971 version adopted the final concept when it mentioned that the internal auditor is simply responsible for "the review of operations as a service to management."
Thought System
Operational auditing is essentially a way of thinking, a method of focus. With this concept there is no differentiation between financial and operational auditing, strictly speaking. One can focus any audit on any area, whether from a financial or accounting point of view, or from an operational or managerial point of view.
In sum, it can be said that the same issue can be seen by the auditor originating a traditional financial examination, or it can be seen by a manager (or an auditor oriented towards management issues) resulting in an operational audit.
Relationship with Internal Audit
The operational audit is no different from the internal one; It is an amera application of modern internal auditing techniques to all the activities of a company, and it is characterized (in both areas, financial and operational) by the focus and the audit orientation.
The operational audit logically evolves towards the auditor by the initial delegation of responsibility for the protection of the interests of the company.
This is close to the application of analysis and evaluation techniques of non-financial activities by internal auditors.
Operational auditing is defined by these rules:
• Auditors should do their jobs personally as a manager would if the time was available.
• Auditors should assume that they are the owners of the business, that they own the profits, and before recommending a change or criticizing an operation, they should ask themselves what they would do if the business were really theirs.
The operational audit is, therefore, a way through which internal auditors approach their work, analyze the matters within their competence and consider the results. To do this they must adopt the techniques and approaches from the perspective of a director.
The objectives of the performance audit vary between organizations; They can be established by the degree of acceptance of management, by track record, by the training and education of the auditors, or by the fundamental philosophy of the auditing organization.
The objectives of the performance audit vary between organizations; They can be established by the degree of acceptance of management, by track record, by the training and education of the auditors, or by the fundamental philosophy of the auditing organization.
The different objectives are the following:
to. Control Evaluation A widely accepted view of operational auditing is that it is directed toward control rather than performance, in which it avoids technical involvement.
b. Performance Evaluation Internal auditors have traditionally been considered auditors of controls. As such, they are familiar with the controls over any business operation.
c. Management Assistance The main objective of the operational audit - management-oriented audit - is to assist managers and directors at all levels of the company. Criticism of management is less important than helping it to improve it.
The operational audit is optional. However, it is customary to do it taking into account the following factors:
• By competition; In order for a company to be competitive in the commercial field, a more specific audit must be carried out so that it can locate or detect its abilities and threats and thus be able to overcome them through the information of the auditor indicating recommendations and thus make this company have many opportunities and be competent against other companies and has the strength to meet your individual needs.
• By senior business management; The senior management of the company has the need to determine areas of greater sensitivity and contribute to greater efficiency in operations, the purpose of which is to ensure efficient, effective and economic fulfillment of business objectives.
The Importance of Operational Auditing
The operational audit is important because it is the instrument of subsequent control over the administration in general.
It has a more important meaning for the public sector since normally the private sector has an automatic instrument that determines its efficiency and effectiveness.
This instrument is the measurement of the Net Profit, the income and Expenses of the company are closely related, if the company produces effectiveness it is efficient, otherwise corrective measures will be taken.