Examining your business' internal processes on a regular basis ensures that all operations are running as efficiently as possible. Auditing can improve sales figures and reduce operational costs, making a business more competitive. Here's a look at how the process works and why an operational audit can be beneficial.
What is an Operational Audit?
An operational audit refers to the process of evaluating a company's operating activities – both on a day-to-day level and a broader scale. While other types of audits might look solely at a single department or the company's finances, an operational audit delves deeper. It serves as a detailed look at all of the internal departments and processes that make up a business's operations. Whereas a regular audit evaluates financial statements, an operational audit examines how a company conducts its business, with the aim of increasing overall effectiveness.
Operational audits could be conducted by outside specialists or an internal audit team.
Reasons to perform an Operational Audit
The aim of an operational audit is ultimately to optimize efficiency. By auditing the business's internal policies and procedures, the company can identify trouble spots and operate more effectively. The outcomes gleaned from the audit are most useful to the management team, who can take these recommendations on board to streamline future processes. Here are three of the primary outcomes of a successful operational audit:
- Maximize efficiency: Gain a greater understanding of how future policies and procedures can boost effectiveness.
- Understand risks: Businesses run many operational risks, ranging from health and safety issues to cyber threats. A full operational audit identifies risks like these, as well as potential problems related to fraud and compliance.
- Finetune internal controls: By examining each step of the operational process, an audit can dive deeper into the impact of any changes to internal controls.
Operational Auditing Benefits
There are many reasons to consider an operational audit. When performed by an outside party, it provides a business with an objective overview of company operations. These can yield new insights leading to improved sales, quicker production processes, and streamlined systems. Identifying risks ahead of time can future-proof the business against damages.
Phases of Operational Audit
There are five phases of our audit process: Selection, Planning, Execution, Reporting, and Follow-Up.
Selection Phase
Internal Audit conducts a University-wide risk assessment near the end of each calendar year. We develop the audit plan for the subsequent year based on the results of this assessment and the department’s available resources. The Chancellor and the Fiscal Affairs and Audit Committee of the Kansas Board of Regents review the audit plan before it is executed.
Planning Phase
During the planning phase of each project, the Internal Audit staff gather relevant background information and initiate contact with the client. Auditors meet with University leadership and clients to identify risks and determine the objectives and scope of the audit as well as the timing of fieldwork and the report distribution.
Execution Phase
Once the audit is planned, fieldwork is executed by the Internal Audit staff. Clients are kept informed of the audit process through regular status meetings. We discuss audit observations, potential findings, and recommendations with the client as they are identified.
Reporting Phase
A summary of the audit findings, conclusions, and specific recommendations are officially communicated to the client through a draft report. Clients have the opportunity to respond to the report and submit an action plan and time frame. These responses become part of the final report which is distributed to the appropriate level of administration.
Follow-Up
Internal Audit follows up on all audit findings within one year of when the report was issued.
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