Operational Audit Presentation AD

8/22/2019 Operational Audit Presentation AD

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Evaluation made of management's performance and conformitywith policies and budgets.

The organization and its operations are analyzed, including

appraisal of structure, controls, procedures, and processes. An operational audit is a comprehensive form of an internal audit.

This type of audit attempts to improve the efficiency and theeffectiveness of the internal operations.

What is the Objective (Generally)

The objective is to appraise the effectiveness and efficiency of adivision, activity, or operation of the entity in meetingorganizational goals


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-Understand the responsibilities and risks faced by anorganization;

-Identify, with management participation, opportunities forimproving control;

-Provide senior management of the organization with a detailed understanding of the Operations. Normally, this involves the following Five steps


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The process normally begins with an introductory meetingto inform the unit's senior management that an audit willtake place, to explain the process, and to gather backgroundinformation.

Following the introductory meeting, the auditor performs apreliminary gathering of information using various sourcesof information (for example, the unit's web site) to identifythe possible components and concerns. At the end of thisstage, a binder is prepared and is used in the risk

assessment meeting with the auditees.


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The Field Survey involves meeting the key managers of theCompany or faculty or unit to be audited. One objective ofthe Field Survey is to obtain confirmation of the componentsand major concerns of the company

project.


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The auditor begins to develop his audit program bymeeting with the managers of the high-risk areas toidentify the key management objectives and the keycontrol activities performed. After these meetings, theauditor documents the key management objectives andthe key controls.


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.

This is usually the most time consuming step in the auditand it is important for all information to be carefully recordedand documented in order to be able to refer to it after thephysical audit has taken place. If the audit application step is

done effectively, the reporting and follow-up step is mucheasier to perform.


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This is perhaps the most critical part of the operational audit. A goodaudit report will effectively communicate the recommendations andconclusions to management. The report will be supported by all thedocumented facts, findings, and opinions that were gathered during theaudit application. The reporting step should include a follow up step todetermine what if any action needs to take place in order to improve theoperations of the company.

The draft report uses the following standard structure: Purpose Scope Results

Audit Opinion Recommendations The report review and discussion process is designed to arrive at agreed

action plans to resolve identified issues. Any management-accepted risksand differences of opinion are also reported.


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FINANCIAL AUDITOPERATIONAL AUDIT

A financial audit, or moreaccurately, an audit of financialstatements, is the review of thefinancial statements of a company orany other legal entity, resulting inthe publication of an independentopinion on whether those financialstatements are relevant, accurate,complete, and fairly presented

Standards- ISA InternationalStandards on Auditing

The objective of an audit offinancial statements is to enable theauditor to

express an opinion whether thefinancial statements are prepared, inall

material respects, in accordancewith an applicable financial

reporting framework.

An operational audit is a morecomprehensive form of aninternal audit. This type of

audit is attempts to improvethe efficiency and theeffectiveness of the internaloperations. Its objectives varya lot and are determined bythe management of thecompany, based on their own

scope Standards -Not governed by

ISA (International Standardson Auditing)


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Operational audit focuses on the appraisal of the effectivenessand efficiency of a division, activity or an operation of anorganization in order to determine whether it meets managementobjectives and achieves other established criteria. The operationalaudit helps you judge the level of control a management exerciseson various organizational activities, functions or business unitsand provide an insight into management achievement in terms ofperforming its responsibilities and mitigating the risks associatedwith the business operations. If Conducted regularly anoperational audit will eliminate the risk of encountering cash

shortages and assist companies facing operational issues thatcould easily have been avoided through proper planning, andimprove business productivity. The earlier an operational audit isinstituted in a business entity, the better it is for the health of thebusiness.


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Production Areas Sales Issues Marketing and Promotion

Low Low Low

Medium Medium Medium

High High High

N/A N/A N/A

Advertising and Branding Customer Service

Low Low

Medium Medium

High High

N/A N/A


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Operational Audit

Checklist Descriptions

Production Areas

Of critical importance tomanufacturing and product-creation companies, the productionfunction details form a major

section of the audit. Checklist itemsoften include relationships withsuppliers and staff, inventorymanagement and control,alternate sourcesof raw materials,

and all items involved in productcreation, ongoing maintenanceprocedures, production-employeetraining programs, processingprocedure documentation, use of

best available technology, andenvironmental protection policies.


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Operational Audit


Sales Issues

Sales departments requireexamination of all facets of thiscritical function. Operational

audit checklists typicallyinclude analyzing thecompany's competition andcustomers, product pricing,sales channels, sales

philosophies, and salespersonnel. If the companyconducts electronic (ortelephone) sales along with orin lieu of the brick-and-mortar

variety, their back-office or call-center operations will appear onoperational audit checklists.


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Operational Audit


Marketing andPromotion

Marketing and promotionactivities occupy importantpositions on operational auditchecklists. Quality and

effectiveness of websites is usuallyexamined in detail. It is sometimeschallenging for internal or externalauditors to comment on howattractive the site is, but quality,

ease of navigation, and timelinessof content can be evaluated. Otherpromotional activities, likecommunity involvement,charitable efforts, and other for-

profit or non-profit partnershipsthat promote the organization areviable checklist items.


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Operational Audit


Customer Service

Customer service checklist itemsinclude quantity and quality ofcustomer service personnelresponses, feedback to determine

customer satisfaction levels,timely customerquestion/problem follow-up, andlevel of company understanding ofits customer base. Identifying areas

needing improvement maygenerate further detailed checklistitems to evaluate specificoperational enhancements thatcould increase customer

satisfaction.


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Status :

Operational Audit Checklist

Grades :

Declining visitor arrivals,low occupancy

( poor economy)

Production Issues N/A

Sales Issues Low

Marketing Medium

Advertising Medium

Customer Service High


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OPERATIONAL AUDITASSESSMENT: TO BECOME PROFITABLE

Better understanding ofcompetitors

Retraining of salesPersonnel

Competitive pricing

Revamping of Marketingand advertising


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Status : Increased Gas and fuel

charges (Global)

Led to increased priceof Gas

Customerdissatisfaction


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Operational AuditChecklist Grades

Production IssuesMedium

Sales Issues Low

MarketingMedium

AdvertisingMedium

Customer Service low


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TO BECOME PROFITABLE

Operational AuditAssessment:

Better understanding ofcompetitors ( What is

Shell doing)

Retraining of salesPersonnel (Educate Staff)

Reengineered ofMarketing and advertisingprograms


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Status Government hasreduced budget & fewer

Teachers available toteach


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Operational AuditChecklist Grades :

Production Issues N/A

Sales Issues N/A

Marketing low

Advertising& Branding low

Customer Service low


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TO BECOME PROFITABLE

Operational AuditAssessment:

- Improved local Communityinvolvement

( may increase the number ofstudents)

-retraining of School Officialin managing Parents

- Perhaps employ part timeteachers


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For all organizations to be successful, it is essential toconduct some form of audit at regular intervals. Anincreasing number of organizations, whether private orpublic, big or small, have been deploying various auditingservices, such as value-for-money auditing, efficiency

auditing, performance auditing, management auditing andmost of all operational auditing, over the past few years.Although these various terms may appear vastly different,their ultimate goal is the same - to boost the operationalefficiency and effectiveness of an enterprise.

Operational auditing itself is not new but the operational

auditing methodologies of today's world class organizationsare. And in order for a company to remain profitable Iwould strongly suggest the implementation of acomprehensive detailed financial analysis, such as anOperational Audit.

Documents

Operational Audit Presentation AD