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  • Objectives and Phases of Operational Audits

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    Jacqueline Ortega
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    The document discusses the objectives and phases of operational audits. It states that defining clear objectives is essential to ensure success. The objectives of an operational audit can be driven by new rules, poor performance, compliance issues, or anomalous revenues and expenses. Operational audits follow the traditional audit phases of planning, fieldwork, and reporting. Planning involves risk assessment, scoping, and budgeting. Fieldwork includes interviews, documentation, testing, and providing status updates. Reporting communicates the results, and follow-up ensures management addresses recommendations.

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    The document discusses the objectives and phases of operational audits. It states that defining clear objectives is essential to ensure success. The objectives of an operational audit can be driven by new rules, poor performance, compliance issues, or anomalous revenues and expenses. Operational audits follow the traditional audit phases of planning, fieldwork, and reporting. Planning involves risk assessment, scoping, and budgeting. Fieldwork includes interviews, documentation, testing, and providing status updates. Reporting communicates the results, and follow-up ensures management addresses recommendations.

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    831 views12 pages

    Objectives and Phases of Operational Audits

    Uploaded by

    Jacqueline Ortega
    The document discusses the objectives and phases of operational audits. It states that defining clear objectives is essential to ensure success. The objectives of an operational audit can be driven by new rules, poor performance, compliance issues, or anomalous revenues and expenses. Operational audits follow the traditional audit phases of planning, fieldwork, and reporting. Planning involves risk assessment, scoping, and budgeting. Fieldwork includes interviews, documentation, testing, and providing status updates. Reporting communicates the results, and follow-up ensures management addresses recommendations.

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    OBJECTIVES AND

    PHASES OF
    OPERATIONAL AUDITS
    Defining the objectives of any engagement is an essential step
    to put it on the right footing for success. Not having clearly
    defined objectives will result in wasted time and money,
    frustration for all involved, and damage the reputation of the
    internal audit function.
    KEY OBJECTIVES OF OPERATIONAL AUDITS
    The objectives of the review will depend on several factors. First of all, we must determine whose
    objectives the engagement is intending to address. Internal audit should be careful not to define the
    objectives unilaterally.

    The objectives for the review could be driven by

    • New rules. Rules can be established internally (e.g., policies and procedures) or
    externally (e.g., new or updated laws and regulations), or a combination (e.g., a
    contract signed by the organization and one or more external parties).

    • Poor performance. Inefficiencies, waste, rework, or complaints from customers and


    vendors may trigger management involvement, resulting in their request to have the
    matter reviewed by internal audit.
    KEY OBJECTIVES OF OPERATIONAL AUDITS
    The objectives of the review will depend on several factors. First of all, we must determine whose
    objectives the engagement is intending to address. Internal audit should be careful not to define the
    objectives unilaterally.

    The objectives for the review could be driven by

    • Compliance issues. These can be the result of internal quality control initiatives
    that identify anomalies. In the case of regulators and inspector reviews that
    identify instances of noncompliance at other organizations, the internal audit
    department may investigate conditions at their organization to determine if a
    similar problem exists at home, help to monitor the situation, and verify that
    follow-through on corrective actions take place in anticipation of future additional
    compliance reviews by external parties
    KEY OBJECTIVES OF OPERATIONAL AUDITS
    The objectives of the review will depend on several factors. First of all, we must determine whose
    objectives the engagement is intending to address. Internal audit should be careful not to define the
    objectives unilaterally.

    The objectives for the review could be driven by

    • Anomalous revenues or expenses. While increases in sales is always welcome


    news, if these figures appear dubious, internal audit may review the related
    transactions to verify they are all legitimate, they have been recorded in the correct
    amount, and posted during the correct period. Similarly, unusually high or low, or
    otherwise questionable expenses, are likely to result in the request for a thorough
    review.
    PHASES OF THE OPERATIONAL AUDIT

    Like traditional audits, operational audits are


    also structured in the traditional planning,
    fieldwork, and reporting phases. These provide
    a simple, effective, and time-tested approach to
    organizing, performing, and communicating the
    results of the work done.
    PHASE 1: PLANNING

    • Risk Assessment;
    • Scoping;
    • Budgeting;
    • Defining the population of interest; and
    • Announcing the audit
    PHASE 2: FIELDWORK
    The phase when most of the testing is performed.
    It includes:

    • Interviewing
    • Documenting
    • Applying testing methodologies
    • Managing Fieldwork
    • Providing status updates
    FIELDWORK
    TYPES OF AUDIT EVIDENCE OBTAINED FROM AUDIT PROCEDURES
    • Testimonial.
    • Observation.
    • Document Inspection.
    • Recalculation.
    • Reperformance.
    • Professional Skepticism.
    • Workpapers.
    • Flowcharts.
    • Internal Control Questionnaire.
    PHASE 3: REPORTING
    It is the communication of results.
    PHASE 4: FOLLOW-UP

    • Follow-up is a process by which internal auditors evaluate the


    adequacy, effectiveness, and timeliness of actions taken by
    management on reported observations and recommendations.

    • This process also includes determining whether senior management


    and/or the board have assumed the risk of not taking corrective action
    on reported observations.
    THANK YOU!

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