OPERATIONAL ROLE OF IA

OPERATIONAL AUDIT

A comprehensive and constructive review of organizational structure or components thereof that is the method of operation and use of physical facilities.

It examines whether the operations are performed in accordance with the established policies and towards the achievements of the goals set.

Also known as an audit which results in a statement of opinion by an auditor with regard to the performance and to identify areas in which additional investigations may yield improvement.

A systematized appraisal of performance.Purpose is to inform the management whether or not the policies are being

accomplished and whether there is scope for effective accomplishment of the policies, objectives, or goals.

MAIN FEATURES OF OPERATIONAL AUDIT

1. Operational audit is a specialized management information tool.

2. Operational audit is mainly verification and problem identifying tool.

3. Operational audit is based on evidences.

4. Operational audit makes a review of the organizational structure of the company, department or unit and the related job description.

PHASES OF OPERATIONAL AUDIT

a) Choosing the aea of audit

b) Preparation of audit programme

c) Investigation and analysis

d) Evaluation of adherence to policies and objectives

e) Report and recommendations

FACETS OF OPERATIONAL AUDIT IN A CONSTRUCTION PROJECT

1. Preparation of a plan comprising of audit objectives, schedule of construction and authorization for commitment resources

2. The scope of operation audit will extend to such activities, like review of physical progress, material provisioning, manpower planning, utilization, etc.

3. Preparation of budgets involving financial commitments of each activity, assessment if the budgeted amount after each stage of completion of the project, comparison with the actual expenditures incurred, determination of funds available and further budget support required

4. Each activity should be properly evaluated and the activities in the completion of the project should be properly sequenced and balanced so that the resources are utilised in an optimum manner.

5. Procedural details that can be subjected to operational audit are as under:

o Verification of procedure for receiving, approval and reasonableness of consumption of materials

o Recording and approval of civil work measurementso Authorization for alteration/redoings in constructionso Evaluation of the cost and time of each activity , resource allocation as

compared with the approved PERT charto Procedure for examining the quality of work or construction doneso Procedure for accounting of materials site

1. OPERATIONAL AUDIT IS A SPECIALIZED MANAGEMENT INFORMATION TOOL

• In a large company, the executive has too many responsibilities and as such has too little time to gather information or identify the problem areas

• The performance reported are historical in nature and even with extrapolations they fail to provide insight into particular problems

• Controls do give notice of failure or irregularity but they are so specific that they fail to completely as barometers of environmental conditions

• Specific studies, if any, conducted to gather information are time consuming and costly. Operational audit does away with such deficiencies and provides knowledge that things are proceeding according to plan and accepted standards