Operations Auditing

• Operations Auditing
• Audit Process
• Project Management

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OPERATIONS AUDITING
Topic 1. Operations Auditing

Learning Objectives

After successful completion of this module, the learner should be able to:
1. Define the operations auditing.
2. Understand the characteristics of operations auditing.
3. Know the objectives and phases of operations auditing.

OVERVIEW
Operational auditing is a type of audit service in which the focus is primarily on important
processes, procedures, systems, and internal controls, with the primary goal of increasing
productivity, efficiency, and effectiveness of the operation. This form of audit differs significantly
from an internal audit, which examines the adequacy of controls and assesses the fairness of the
financial statement presentation. Operational auditing can employ financial data, but the major
sources of proof are operational policies and accomplishments related to the organization's goals.

Discussions

I. Definition and Characteristics

Operational auditing is defined as “A future-oriented, systematic, and independent
evaluation of organizational activities. Financial data may be used, but the primary sources of
evidence are the operational policies and achievements related to organizational objectives.
Internal controls and efficiencies may be evaluated during this type of review.”
Operational audits are usually conducted by the internal audit staff, though specialists
can be hired to conduct reviews in their areas of expertise. The primary users of the audit
recommendations are the management team, an d especially the managers of those areas that
have been reviewed.
An operational audit is a means of analyzing how a company runs its operations. It
necessitates an examination of the company's processes, procedures, and systems. This sort of
audit evaluates the organization's management procedures in addition to its financial situation. An
operational audit seeks to identify areas where the organization's operations might be made more
efficient, productive, and effective.

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 Operational audits are a forward looking process, and are part of many organizations’
ongoing business improvement process toolkit. The findings of operational audits are intended to
diagnose which areas need attention and to safeguard assets by averting potential future risks.
The Operational Auditing Handbook borrows The Institute of Internal Auditors’ (IIA) definition
of an operational audit: “A systematic process of evaluating an organization's effectiveness,
efficiency and economy of operations under management's control and reporting to appropriate
persons the results of the evaluation along with recommendations for improvement.” While
an audit is usually associated with financial matters, operational audits are more comprehensive
and go beyond financial data (although that type of reporting is often included). The primary
information sources are policies and achievements related to the objectives of the organization.
Operational audits are a ‘deep dive’ into every facet of management. As a result, start-to-finish
time frames can vary from a few weeks to many months, depending on scope, complexity, and
size of the organization, and whether the audit is for the entire entity or a particular business unit.
Unlike financial audits, which are conducted by external entities, operational audits are often
carried out by an internal auditor.

II. Objectives of Operations Auditing

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. While this may be necessary in certain occasions, this should not be the
prevailing practice, but rather, internal auditors should get management involvement as much as
possible to make sure that the review will meet their needs.
The objectives for the review could be driven by
1. 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)
2. 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.
3. 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, such as regulators.
4. 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

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 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.

Auditing Principles

• Integrity: Withstand pressures that may be exerted and take care to comply with any legal
requirements.
• Fair Presentation: Present all results fairly and report significant concerns.
• Due Professional Care: Use diligence, due care, and reasoned judgments in every
situation.
• Confidentiality: Keep information secure, and protect confidential or sensitive
information.
• Independence: Maintain impartiality and keep actions and reporting bias-free.
• Evidence-Based: Depend on a fact-based approach to reach reliable conclusions.

III. Different Types of Operational Audit

▪ Financial Audits or Review: Financial audits focus on financial controls as they relate to
reporting to internal and external governing bodies. Financial statement auditing is the
bailiwick of external auditors. Internal audits complement the work of operational audits,
which includes some form of budget, or a financial review.

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 ▪ Operational Audits: As noted, operational audits focus on the review and assessment of
single or multiple business processes.
▪ Department Reviews: Different departments or divisions may run a periodic analysis to
assess the adequacy of controls, how well assets are safeguarded, how resources are used,
and if there is compliance with applicable laws.
▪ Information System (IT) Audits: Information systems audits investigate overall
infrastructure and networks, technical operations, data center operation, project
management, and review security status and procedures.
▪ Investigative Audits: When a company suspects a risk of security breach, or when one
has occurred on the part of an individual or department, there is often an investigative audit
to understand causes and additional background information and research.
▪ Compliance Audits: Compliance audits review the level of compliance with external
regulatory requirements or internal policies.
▪ Marketing Audits: A marketing audit is a broad, precise, and autonomous probe into the
marketing of a company or a business. An audit holds both an external situation analysis
and a thorough review of internal marketing goals, strategies, capabilities, processes, and
systems. The result is actionable recommendations to improve progress toward stated
goals.
▪ Follow-Up Audits: After an operational audit report has been issued, it is standard practice
to follow up to evaluate corrective actions, usually within a six month period.

IV. Audit Phases

There are five phases of our audit process:
1. 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.
2. 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.
3. 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

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 discuss audit observations, potential findings, and recommendations with the client as they
are identified.
4. 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.
5. Follow-Up. Internal Audit follows up on all audit findings within one year of when the
report was issued.

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 Assessments

1. The type of audit that looks beyond the organization's financial circumstances and
examines its management practices.
a. investigative Audits
b. Operational Audit
c. Compliance audit
d. Financial audit

2. 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.
a. Poor performance
b. Anomalous revenues or expenses
c. New rules
d. Compliance issues

3. An auditing principle which maintain impartiality and keep actions and reporting bias-free.
a. Due professional care
b. Evidence-based
c. Integrity
d. Independence

4. 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.
a. Reporting Phase
b. Selection Phase
c. Execution Phase
d. Follow-up

5. The primary information sources of operational auditing.

a. Financial statements
b. Original source documents

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 c. Physical observations
d. Policies and achievements related to the objectives of the organization

6. These can be the result of internal quality control initiatives that identify anomalies.
a. Efficiency
b. Compliance issues
c. Effectiveness
d. New rules

7. A type of operational audit which is focus in investigating overall infrastructure and

networks, technical operations, data center operation, project management, and review
security status and procedures.
a. Department reviews
b. Marketing audit
c. Investigative audit
d. Information system audit

8. A phase of audit process where the Internal Audit staff gather relevant background
information and initiate contact with the client.
a. Selection Phase
b. Execution Phase
c. Reporting Phase
d. Planning Phase

9. Different departments or divisions may run a periodic analysis to assess the adequacy of
controls, how well assets are safeguarded, how resources are used, and if there is
compliance with applicable laws.
a. Department reviews
b. Follow-up
c. Financial reviews
d. Marketing reviews

10. A systematic process of evaluating an organization's effectiveness, efficiency and economy

of operations under management's control and reporting to appropriate persons the results
of the evaluation along with recommendations for improvement.
a. Financial auditing
b. Operational auditing
c. Compliance auditing
d. Information system audit

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OPERATIONS AUDITING
Topic 2. Audit Process

Learning Objectives

After successful completion of this module, the learner should be able to:
1. To have a clear understanding of the Audit Process
2. To know the definition of different Auditing terms.
3. To have an idea of the objectives of an Audit

OVERVIEW
An audit is defined as an official inspection of an organization’s accounts, typically by an
independent body. Many companies in the Philippines are likely to require an audit but are unsure
what an audit is and when is it needed. Thus, the Audit Process is divided into four phases, namely:
audit engagement planning, audit execution, audit reporting, and audit follow-up.
This flow of processes is to verify that all company are aligned with their strategic vision
and that they deliver the value that internal customers need, and external ones want. It also
evaluates the operational efficiency of processes and verify that the process chain provides
protection for company assets.
This audit process is applicable for both management and operations audit. For each phase,
there are specific criterial to ensure a successful audit engagement.

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 Discussions

I. Definition
According to Salosagcol et al., the audit process is the sequence of different activities
involve in an audit. It is a set of actions and procedures to control an organization as it aim to test
and prove that processes are being conducted effectively and followed due to control mechanisms.
Moreover, it also aim to detect opportunities for improvement in the audit process. Salosagcol also
stated in his book of Auditing Theory that the emphasis and order of certain activities may vary
depending upon a particular audit, but these processes would basically include activities such as:
• Accepting an Engagement
• Audit Planning
• Considering the Internal Control
• Performing Substantive Test
• Completing the Audit
• Issuing a Report

II. Objectives of Audit Process

Every auditor following the Audit Process has a strategic objective to achieve. They need
to make sure that they provide an Audit that best describes the organization they are in. As stated
in the previous page that one of the objectives of the audit process is to verify that all company
processes are aligned with their strategic vision (Veyrat, n.d.), it is significant to list other
objectives that will help the organization achieve their goals. The list of objectives are as follows:
• Evaluate the operational efficiency of processes
• Verify that the process chain provides protection for company assets
• Find out if your company information and data is secure and reliable
• Evaluate processes to determine if they’re reliable
• Check for incorrect procedures during processes
• Report detected failures and non-conformities
• Provide recommendations for appropriate corrections

III. The Audit Process

Source: (Internal Controls Manual)

1. Audit Engagement Planning

Audit Engagement planning is the most important part of the audit. It entails familiarization
with the objectives, processes, risks and controls of the auditee and activity to be audited and

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develop a strategy and approach in conducting the audit. It also involves the listing down of audit
activities per audit engagement based on the AWP.
Purposes:
a) Understanding the control environment and the organization.
b) Outlining the scope and objectives of the audit.
c) Establishing the basis for budgeting (time, cost, personnel).
d) Identifying the evidence required to develop the audit findings.
e) Assisting in choosing/determining the audit procedures (nature, extent and timing).
f) Establishing the basis for coordinating the staff.

Steps:

2. Audit Execution

Steps:

a. Entry conference – it sets the tone for the audit. Entry Conference is done to discuss the focus,
requirements, and timelines of the audit, as well as to obtain the audited entity’s views and
expectations for the overall framework for the conduct of the audit. Matters arising from the
entry conference must be recorded (as entry conference notes) and should be considered during
the conduct of the engagement planning

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 b. Conduct compliance audit – It is the evaluation of the extent or degree of compliance with
laws, regulations, managerial policies, and operating processes in the agency, including
compliance with accountability measures, ethical standards, and contractual obligations.

c. Conduct system / process audit – This process audit involves the following:
o documentation of the process or system under audit
o identification of the control procedures
o verification and validation on whether such control procedures are complied with and
are working effectively

d. Exit conference - The purpose of exit conference is to discuss the highlights of the audit
findings with the auditee and/or the responsible official who has sufficient knowledge about
the audit area. It provides an opportunity to get the auditee’s comments or management
comments and insights about the significant audit issues as a way of validating the findings

3. Audit Reporting

Audit reporting represents the culmination of the audit execution and the associated analysis
and considerations made during the audit. The audit report sets out the findings in appropriate
format and provides the pieces of evidence gathered to arrive at the audit findings and the
recommendations.

Steps:

a. Develop audit findings – Audit findings can be developed by analyzing the pieces of evidence
gathered for each of the audit elements. They should align with the audit objectives and be rational
and based on specific standards and criteria. Also, compare the conditions with the audit criteria,
and determine the causes
Note: Audit findings on probable cause of illegality of a transaction
constitute a violation of law while irregularity constitutes a violation of regulations.
b. Develop audit recommendations –
o Management / Legal remedies to avoid occurrence

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 o Provide courses of action as the basis for improving internal controls
o Should:
✓ Be clear
✓ Be based on science of facts, conditions, and evidence
✓ Consist of practicable, incontestable, and workable solutions that can stand
alone and address the issue(s) at hand

c. Prepare draft audit report - Prepared by laying out and analyzing the pieces of evidence gathered
to arrive at preliminary audit findings and recommendations.

d. Update the GM - The GM should be updated on the results of the audit engagement

e. Prepare the final audit report - The draft report may then be finalized integrating the following as
parts of the final report:

i. Table of Contents
ii. Executive Summary
iii. Detailed Audit Findings
iv. Management Comments and Team’s Rejoinder
v. Monitoring and Feedback on Prior Year’s Recommendations
vi. Recommendations
vii. Appendices.
Note: The final audit report should be presented to the GM who decides on the
distribution of the audit report based on the recommendation of the ICS

4. Audit Follow-up
A monitoring and feedback activity undertaken to ensure the extent and adequacy of preventive
/ corrective actions taken by the Management to address the inadequacies identified during the
audit. It aims to increase the probability that recommendations will be implemented.

Purposes:

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Steps:

a. Monitor implementation of approved audit findings and recommendations - It is a

sound practice to monitor the implementation of approved recommendations
(management/legal remedies) to avoid the occurrence (preventive measures) and
recurrence (corrective measures) of control weaknesses/incidences after a
reasonable period from the report submission date.

b. Resolve non-implementation / inadequate implementation of audit

recommendations - In the event of non-implementation of recommendation /
inadequate action, the ICS recommends appropriate legal and/or management
remedies for non-implementation of recommendation and inadequate preventive /
corrective actions.

c. Prepare audit follow-up report - Results of the audit follow-up should be recorded
and reported to apprise the GM of the status of actions on the approved
recommendations. - The reasons for the lack of action or non-completion of action
on any recommendation should be documented and further action considered on
significant recommendations that have not been acted upon.

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 Assessments

1. It is the most important part of the audit. It entails familiarization with the objectives,
processes, risks and controls of the auditee and activity to be audited and develop a strategy
and approach in conducting the audit.
a. Audit Follow up
b. Audit Reporting
c. Audit Document
d. Audit Engagement Planning

2. The purpose of this is to discuss the highlights of the audit findings with the auditee and/or
the responsible official who has sufficient knowledge about the audit area.
a. Exit Conference
b. Opening Remarks
c. Entry Conference
d. Audit Reporting

3. True or False: The final audit report should be presented to the GM who decides on the
distribution of the audit report based on the recommendation of the CIS
a. True
b. False

4. A monitoring and feedback activity undertaken to ensure the extent and adequacy of
preventive / corrective actions taken by the Management to address the inadequacies identified
during the audit.
a. Entry Conference
b. Audit Reporting
c. Audit Follow up
d. Audit Consideration

5. All are part of an Audit Process; except,

a. Audit Planning
b. Audit Reporting
c. Audit Follow up
d. Audit Performance

6. It is the sequence of different activities involve in an audit.

a. Audit Activities

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b. Audit Process
c. Audit Sequence
d. Audit Execution

7. One is not an objective of Audit Process

a. Evaluate the operational efficiency of processes
b. Verify that the process chain provides protection for company liabilities
c. Find out if your company information and data is secure and reliable
d. Evaluate processes to determine if they’re reliable

8. It represents the culmination of the audit execution and the associated analysis and
considerations made during the audit.
a. Audit Reporting
b. Audit Process
c. Audit Follow up
d. Audit System

9. All are steps in the Audit Execution; except,

a. Entry Conference
b. Conduct Operations Audit
c. Conduct system/process audit
d. Exit Conference

10. True or False: Audit findings on possible cause of illegality of a transaction constitute a
violation of law while irregularity constitutes a violation of regulations.
a. True
b. False

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OPERATIONS AUDITING
Topic 3. Project Management

Learning Objectives

The learner is expected to be able to:

1. Define the project management
2. Application of project management plan in operations auditing.
3. Appreciate the advantages of project management in performing audit.

OVERVIEW
The goal of project management is to create an end result that will bring about change for
the benefit of the company that initiated the project. It is the beginning, planning, and execution
of a variety of tasks necessary to deliver this final result. Projects that require formal management
are those that:
• produce something new or altered, tangible or intangible;
• have a finite timeframe: a definite start and end;
• are likely to be complex in terms of work or groups engaged;
• require the management of change;
• require the management of risks.
The benefits of investing in competent project management include:
• increasing the possibility of obtaining the desired result;
• guaranteeing efficient and best value resource use; and
• meeting the diverse needs of the project's stakeholders.
A project management audit is a bit different than the general definition of audit. The audit
process is intended to determine the status of work completed on a project in order to ensure that
it corresponds with the statement of work, which includes the project's scope, time, and budget, as
well as the maturity of the project management process.

Discussions

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 I. Definition
The Project Management Institute define project management as “the application of
knowledge, tools, skills and techniques to project activities to meet the project requirements.”
Project management is the discipline of planning, organizing, and controlling resources to
achieve specific goals. A project is a temporary endeavor with a defined beginning and end
(usually time-constrained, and often constrained by funding or deliverables), undertaken to meet
unique goals and objectives.
The goal of project management is to help you keep track of your audit. However, our
audits' original scope and details frequently change. We lose control if our project management
plan does not alter at the same time.
Auditors need to be effective (by complying with professional standards), but we also need
to be efficient (if we want to make money). And project management creates efficiency. Managing
resources, identifying impediments to audit processes, responding to scope creep–these are just a
few of the issues that we encounter. And these problems have the potential to boost engagement
time while lowering revenues. Worse, that promise of rapid completion may not be kept.
So, what are the keys to using project management in audits?
• Audit team members
• Project management software
• Create a project management plan.
• Be aware.
• Be vigilant.

II. Project Management Plan

What is a project management plan? It’s deciding what, when, and who. These three factors
are dependent upon the deliverables, such in the deliverable of the audit report.

• Who
First, let’s start with who will perform the actions.
An audit team usually consists of a partner, an in-charge, and one or two staff members. Your
initial decision, regardless of team size, is "who will work on the engagement?" As previously
said, this is the most important aspect of completing your audit. However, keep in mind that an
audit involves not only your team members, but also clients. You can't audit unless they provide
you information, answer your queries, and let you look at their records. You might also consult

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with experts or lawyers. Members of your audit team, client workers, and anyone who have access
to your project management software.
• What
Second, determine what needs to be done. It is the development of our audit plan.
The audit plan is our response to risk assessment which is performed early in the engagement.
Once we perform walkthroughs, make inquiries, inspect documents, and make observations, we
become aware of risks. And in response, we create an audit plan to address those risks. Now we
know what needs to be done. The audit plan feeds the project management plan.
Notice the risk assessment process and audit plan informs the project management plan. Notice
also that the project management plan is not the same as the audit plan; they are distinctly different.
One addresses risk and the other addresses the how, when, and who of getting things done.
Some audit tasks are performed in every audit, regardless of the audit risks, such as obtaining
a signed representation letter. These tasks can be set up in a project management template which
can be used to create your initial project management plan. Then you can add the client-specific
tasks as needed.

• When
Thirdly, we need to specify a date for each action.
Project management software allows you to specify when an action is to occur. You may
wonder, “How do I know when each action will occur?” You may not know precisely, but you
have an idea. So, go ahead and specify a date. If later you need to change that date, you can. There
is no sin in amending the plan.
Now that I have a project management plan, I need to be aware and vigilant to keep the plan
on track.

III. The Project Management Audit Process

▪ Plan the Audit: You shouldn’t start anything without a plan. Let everyone involved in the
audit and the project know about the audit, and stress that this is not anything scary. It’s a
method to make things work better, not lay blame.
▪ Conduct the Audit: Now do the audit and work through a thorough process to get all the
data and proof. This includes interviewing project sponsor, manager and team, either in
person, a group meeting or through a detailed questionnaire.
▪ Summarize the Audit: At this point, you’ll have lots of data; so take these findings about
improvements and faults, and put them in an executive summary to give a clear and broad
overview. Be sure to point out and praise those who have done well.

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 ▪ Present the Results: Next, you want to present that summary of results to all parties that
need to know about the audit, from your team to your stakeholders. At this point, you’ll
want to identify opportunities that have been realized and implemented, as well as a list of
all the problems that have and have not been resolved. Also, share recommendations.
▪ Determine the Action Plan: With all this data, you can now develop a plan of action that
will help improve efficiencies. Get people involved and set that course with assignments
and due dates. Use all the records collected during the interviews, meetings or via
questionnaire and define the solution. This will be submitted to senior management.
▪ Schedule Follow-Up: Don’t let this action plan go unattended. Go back to it and make
sure that the plan is progressing on schedule.
▪ Repeat: This is a list that should really be designed in a circle, because you can never sit
back and become complacent. The more audits you do, the more efficiencies you’ll create.

IV. Project Management Metrics

If you are just beginning to measure performance, get started with these 10 project management
metrics to propel success:

1. Productivity
This metric looks at overall capabilities of a company—how well it uses its resources. Productivity
shows the relationship between inputs and outputs. How much are you getting out after all that
you put into a project? The ideal productivity outcome is creating more for less.

Productivity = Units of Input/Units of Output

2. Gross Profit Margin

Numbers speak louder than words. Metrics directly tied to the bottom line communicate success
or failure more quickly than other metrics.

The higher the margin, the better the business is doing. Any program or work performed should
contribute to the financial profit of a business. Margin is the percentage of each dollar earned after
costs have been subtracted.

Gross Profit Margin = (Total Profit-Total Costs)/100

3. Return on Investment (ROI)

Return on investment specifically looks at the dollar amount earned for the amount invested in a
project. Like gross margin, this is a financial equation. Instead of looking at overall profit, it looks
at the specific benefit from the project divided by the costs.

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To use this metric, a dollar amount needs to be assigned to each unit of data to determine the net
benefits—benefits may include contribution to profit, cost savings, increased output, and
improvements. Costs may include resources, labor, training, and overhead.

ROI = (Net Benefits/Costs) x 100

4. Earned Value
Earned value provides strategic guidance by showing how much value you have earned from the
money spent to date on a project. It compares the value of the work completed by a specific date
in relation to the approved budget for the project.

Earned value is also called Budgeted Cost of Work Performed (BCWP). This metric provides a
reality check during the process of a project.

Earned Value (EV) = % of Completed Work / Budget at Completion (BAC)

5. Customer Satisfaction
A customer satisfaction score provides a measure of quality for your service or product. Customer
survey data results guide this metric. The Center for Business Practices outlines this as a score on
a scale from one to 100. The product or service should do what it was meant to do and satisfy real
customer needs.

Each company can develop a score unique to its business by weighing each variable based on its
importance. Variables may include customer survey results, revenue generated from clients, repeat
or lost clients, and complaints.

The Customer Satisfaction Index (CSI) is the most widely used system for measuring customer
satisfaction. The Net Promoter Score (NPS) is another method to capture customer satisfaction.
NPS reveals customer loyalty by probing the likelihood of a customer recommending the product
or service.

Customer Satisfaction Score = (Total Survey Point Score / Total Questions) x 100

6. Employee Satisfaction Score

Similar to customer satisfaction, survey data determines the employee satisfaction score. Why look
at employees in measuring project management? Employee morale is directly correlated to project
success—here are four tips to measure morale.

A satisfied employee creates better work more efficiently. The high costs of employee turnover—
totaling 50% to 200% of an employee’s salary—should be motive enough to pay attention to the
people closest to the project.

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The Gallup Q12 Employee Engagement Survey is a popular tool to collect employee data. An
Employee Satisfaction Index (ESI) processes results into an index score.

Employee Satisfaction Score = (Total Survey Point Score / Total Questions) x 100

7. Actual Cost
The Actual Cost is a simple number that shows how much money is spent on a project—not an
estimate. This cost is determined by adding up all the expenses for a specific project over
the timeline.

Actual Cost (AC) = Total Costs per Time Period x Time Period

8. Cost Variance
Cost variance shows the difference between the planned budget and actual costs within a specific
timeframe. Is the estimate above or below the actual costs? A project is over budget if the cost
variance is negative. A positive cost variance shows a project is under budget.

Cost Variance (CV) = Budgeted Cost of Work – Actual Cost of Work

9. Schedule Variance
Schedule variance looks at budgeted and scheduled work. Is the project running ahead or behind
of the planned budget?

The schedule variance is the budgeted cost of work performed minus the budgeted cost of work
scheduled—the difference between work scheduled and completed. A negative schedule variance
means the project is behind schedule.

Schedule Variance (SV) = Budgeted Cost of Work Performed – Budgeted Cost of Work
Scheduled

10. Cost Performance

Cost performance is a cost efficiency metric. Divide the value of the work actually performed
(earned value) by the actual costs it took to accomplish the earned value. Forecasting cost
performance allows for accurate budget estimations.

Cost Performance Index (CPI) = Earned Value / Actual Costs

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 Assessments

1. Our response to risk assessment which is performed early in the engagement.

a. Audit Plan
b. Physical observation
c. Data Gathering
d. Conduct the audit

2. The audit process is designed to determine the status of work performed on a project to
ensure it complies with the statement of work, such as the scope, time and budget of the
project, along with the maturity of the project management process.
a. Project Management plan
b. Project Management audit
c. Project Management
d. Financial Audit

3. At this point, you’ll have lots of data; so take these findings about improvements and faults,
and put them in an executive summary to give a clear and broad overview.
a. Present the results
b. Plan the audit
c. Summarize the audit
d. Conduct the audit

4. Provides strategic guidance by showing how much value you have earned from the money
spent to date on a project. It compares the value of the work completed by a specific date
in relation to the approved budget for the project.
a. Schedule variance
b. Cost performance
c. Earned value
d. Employee satisfaction score

5. Specifically looks at the dollar amount earned for the amount invested in a project.
a. Productivity
b. Gross profit margin
c. Cost value
d. Return on investment

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6. Another method to capture customer satisfaction. This reveals customer loyalty by probing
the likelihood of a customer recommending the product or service.
a. Customer satisfaction index
b. Net promoter score
c. Employee engagement survey
d. Cost performance index

7. This cost is determined by adding up all the expenses for a specific project over
the timeline.
a. Cost Variance
b. Schedule Variance
c. Productivity
d. Actual cost

8. Used for project planning, scheduling, resource allocation and change management. It
allows project managers (PMs), stakeholders and users to control costs and manage
budgeting, quality management and documentation and also may be used as an
administration system.
a. Project management plan
b. Project management software
c. Project management audit
d. Audit plan

9. The budgeted cost of work performed minus the budgeted cost of work scheduled—the
difference between works scheduled and completed.
a. Schedule Variance
b. Cost Variance
c. Cost Performance
d. Actual cost

10. This shows the relationship between inputs and outputs. How much are you getting out
after all that you put into a project?
a. Productivity
b. Effectiveness
c. Efficiency
d. Performance

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 ANSWER KEY

Operations Auditing

1. B
2. A
3. D
4. C
5. D
6. B
7. D
8. D
9. A
10. B

Audit Process

1. D
2. A
3. B
4. C
5. D
6. B
7. B
8. A
9. B
10. B

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 Project Management

1. A
2. B
3. C
4. C
5. D
6. B
7. D
8. B
9. A
10. A

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 References

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https://www.accountingtools.com/articles/2017/5/9/operational-audit
Bridges, J., (2019). How to Do a Project Management Audit. Retrieved from
https://www.projectmanager.com/training/project-management-audit
Canadian Audit and Accountability Foundation (2021). Projects and Operations Management.
Retrieved from https://www.caaf-fcar.ca/en/efficiency-concepts-and-
context/management-activities-that-can-foster-efficiency/projects-and-operations-
management
Eby, K., (2017). Operational Audits 101: Processes, Examples, and Checklists. Retrieved from
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Hall, C., (2021). Project Management in Audits: Key to Profit. Retrieved from
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(n.d.). In Internal Controls Manual.
Operations Auditing Definition: Retrieved from
https://www.accountingtools.com/articles/2017/5/9/operational-audit
Operational audit: Definition, Types, Processes, Example, and Reporting. (n.d.). Retrieved from
wiki accounting: https://www.wikiaccounting.com/operational-audit/
Operational Auditing: Principles and Techniques for a Changing World by Hernan Murdock
Salosagcol, T. H. (n.d.). Auditing Theory.
Wikiaccounting (2021). Operational audit: Definition, Types, Processes, Example, and Reporting.
Retrieved from https://www.wikiaccounting.com/operational-audit/.
Workfront, (2021). Project Management Metrics. Retrieved from
https://www.workfront.com/project-management/metrics
Veyrat, P. (n.d.).

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