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Assignment 1 - Operations Audit

An operational audit differs from an internal audit in its focus and purpose. An operational audit examines business operations and processes to identify opportunities for improving effectiveness, productivity, and cost efficiency, while an internal audit investigates past issues and ensures compliance. Some key advantages of an operational audit include identifying risks and opportunities for improvement, enhancing business effectiveness, providing an objective perspective, and establishing goals to motivate employees. Potential disadvantages include requiring changes that affect productivity and incur costs, as well as the time commitment of the audit.

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Lyca Mae Cubangbang
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81 views3 pages

Assignment 1 - Operations Audit

An operational audit differs from an internal audit in its focus and purpose. An operational audit examines business operations and processes to identify opportunities for improving effectiveness, productivity, and cost efficiency, while an internal audit investigates past issues and ensures compliance. Some key advantages of an operational audit include identifying risks and opportunities for improvement, enhancing business effectiveness, providing an objective perspective, and establishing goals to motivate employees. Potential disadvantages include requiring changes that affect productivity and incur costs, as well as the time commitment of the audit.

Uploaded by

Lyca Mae Cubangbang
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1. How does Operational Audit differ from Internal Audit?

Operational audits are audits that focus on the effectiveness, productivity, and cost
efficiency of the operations of the business. While, Internal audits focus on what has
happened already.
An operational audit acts similarly to an internal audit because an internal auditor
conducts the process. Though they both look at internal processes, there are still some
differences between the two. Typically, a business may conduct an internal audit when
something goes wrong within its processes and procedures. The internal audit will examine
the mistake and what allowed it to occur. Then the company can focus on improving its
processes to ensure the error does not happen again. An internal audit assesses success by
seeing whether the process gets completed with no mistakes.
An operational audit differs because it looks for the potential for improvement within
the company's business operations. It also tends to focus on factors related to processes,
such as their effectiveness and efficiency. Rather than performing an audit due to an issue
occurring, the operational audit examines business areas that may benefit from process
improvements. The operational audit will evaluate a process by assessing whether it
completed a task without mistakes and met company standards for efficiency related to
cost, time and resources used.

2. In your own opinion, what can you say about this saying, “An audit can improve
business effectiveness”.

“An audit can improve business effectivess”, I think having an effective audit system can
really improve business because, it evaluates each financial transaction of business for
checking if there is any mistake or not. This way it reduces the chances of errors and by that
it is possible to know if what is being done is the best or if some things could be changed.
Also, we can identify and seize opportunities for increasing customer quality, improve
service and even increase positive cash flow. 

3. Cite the advantages and disadvantages of operational audit.

Advantages of an operational audit


Conducing an operational audit within an organization can bring numerous benefits,
such as:

 The audit identifies opportunities and risks

The operations of a business may run smoothly, but an audit can identify areas for
improvement. These changes can make processes faster, less costly or improved in other
ways that support profitability and business goals. Through an audit, managers may also
discover risks or issues within their processes that they were not aware of previously. The
auditor helps identify these risks and provides methods of resolving them. Now that staff
understands the risks associated with their business, they can better identify and evaluate
future risks.

 The audit can improve business effectiveness


An operational audit requires taking an in-depth look a the processes and procedures
involved with business operations. The purpose of the audit is to ensure the business
completes processes effectively and efficiently. Therefore, any changes made serve that goal
and result in improvements to company operations and profitability. Sometimes, an auditor
may identify an area of the business that works efficiently and use it as an example to help
boost another team's efficiency.

 The audit can offer objective or new views


An auditor can help managers gain a fresh perspective on their business operations. If
the auditor has no regular involvement with the identified processes or procedures, they can
provide insights that someone who regularly performs them may not see. Because they base
their assessment of the processes on business goals, it serves as an objective evaluation
method. It is not about whether the auditor likes the process, but whether it meets the
required goals.

 The audit can provide motivation


During an audit, the auditor and management develop objectives they to achieve. These
goals aim to help the business perform better by making improvements to specific processes
and procedures. Management staff can use these goals to motivate their employees by
giving them a standard to work toward. The goals also provide clear guidelines for
employees, ensuring that they understand their employer's expectations and know what
constitutes good work.

Disadvantages of an operational audit


An operational audit aims to improve the processes and procedures within a company,
but it may come with some disadvantages. However, these disadvantages may not matter in
the long run due to the advantages of the improvements made. Some of those
disadvantages may include:

 The audit may require making changes


Improving the processes and procedures within a company often requires changing
elements of them. Employees may need time to adjust to these changes and become more
comfortable with them. Some changes may even require training staff on how to conduct
the new and improved processes. As a result, companies implementing changes due to an
operational audit need to consider developing a change management plan to help
employees ease into the transition.

 The audit comes with monetary costs


Like any other audit, an operational audit brings costs to the organization. While
typically handled by an internal auditor, a company may sometimes hire an external auditor
who charges a fee for their services. The audit may also deem certain changes necessary to
improve specific processes and procedures in the business. The implementation of those
improvements or training employees on them could add costs to the company.

 The audit can affect productivity


An operational audit could impact the productivity of the participating employees
participating. If the internal auditor typically performs other duties at the company,
conducting the audit takes them away from those responsibilities during its duration.
Similarly, the employees whose department or business area is being audited need to spend
time working with the auditor and going over their processes and procedures. This task
could slow down progress on their projects or take time from day-to-day responsibilities.
The processes highlighted for improvements may be put on hold as the company
implements any necessary changes.

 The audit can be time-consuming


It can take significant time for an auditor to review the business operations of a
company. They must examine every step of the processes they audit, and the more complex
the processes, the more time-consuming they can be. The task of implementing solutions or
improvements can also take time to complete. The company may need to perform tests to
ensure the solutions or improvements make the processes more effective. If employees
require training to learn how to conduct changed processes, that can also take time away
from their usual responsibilities.

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