INTRODUCTION TO

OPERATIONAL
AUDITING
TOPIC

I. Operational Audit
II. Operational Audit Objectives
II. A. 4 E’s
III. Operational Audit a statutory compliance?
IV. Audit Period
V. Operational Audit V. Financial Audit
VI. Operational Audit contribution to companies profit.
VII. PH Companies with Internal Auditor
VIII. Case
Operational Audit

• involves the examination of all operations and activities of the entity. (Process,
System, Controls and Performance)
• Conducted usually by INTERNAL AUDITORS
• Focuses on the efficiency, effectiveness, economy and ethics of an organization
or sub-unit.
• It provides an appraisal of whether the department is operating in conformity
with prescribed standards and procedures and whether standards of efficiency
and economy are maintained.
Operational Audits Objective

• Whether business operations are being managed in 4E’s

• Whether procedures for promoting and monitoring the 4Es are adequate
• Whether real improvements can be made – not just assessing whether there is
compliance or nonconformance.
• Economy
• Efficiency
• Effectiveness
• Ethics
Operational Audits Objective – 4 E’s

• Economy - is concerned with minimizing the cost of resources used.

Ex. Where healthcare supplies or services of a specific quality are

purchased at the best possible price.
 
Operational Audits Objective – 4 E’s

• Efficiency is about ‘doing things right’.

Ex. Where the quality of healthcare has been improved over time without
an increase in cost.
Operational Audits Objective – 4 E’s

• Effectiveness is about ‘doing the right things’.

Ex. Where disease rates have fallen as a result of healthcare provided.

Operational Audits Objective – 4 E’s

• Ethics is the standard of moral behaviour and conduct expected of

organisations and their employees.
Operational Audits Objective – Other E’s

• They may also have other objectives such as assessing compliance with
regulation or testing the controls of an information system.

• Environment: Sustainable development .

• Equity: This refers to fairness and impartiality in the use of resources.
Is Operational Audit a Statutory Compliance?

• Operational Audit is conducted when Management desires to evaluate the

company’s operational efficiency and effectiveness
How Long Does it Take for the Operational
Audit?

• This depends completely on the size of Operations.

 FINANCIAL AUDIT OPERATIONAL
AUDIT
· A financial Audit or an audit · An operational audit is a
of financial statements, is the more comprehensive
review of the financial form of an internal audit.
statements of a company or This type of audit is

OPERATIONAL any other legal entity,

resulting in the publication of
an independent opinion on
attempts to improve the
efficiency and
effectiveness of the
the

AUDIT V whether
statements
those
are
financial
relevant,
internal operations.

FINANCIAL accurate, complete, and fairly

presented.
 
AUDIT · Its objects is to enable ·
auditor to express an opinion
Its objectives vary a lot
and are determined by
whether the financial the management of the
statements are prepared, in company, based on their
accordance with the own scope
applicable financial reporting
framework.
· Conducted by External · Conducted by Internal
Auditors Auditors
How do companies become profitable under an Operational Audit?

• If conducted regularly an operational audit will eliminate the risk of

encountering cash shortages and assist companies facing operational issues
that could easily have been avoided through proper planning, and improve
business productivity.
 ABS-CBN

SHOPEE

PH WATSONS

COMPANIES MONDE NISSIN

WITH EMERSON

INTERNAL ACCENTURE

AUDITOR DMCI

SAMSUNG

PH RED CROSS
CASE • PURCHASING DEPARTMENT

ANALYSIS • FUNCTIONS

• PROCESS

• BENEFITS OF HAVING A PROPER PURCHASING

PROCESS
The role of the purchasing department is

• To provide all materials required for the organization’s operations

• To secure materials at the lowest possible cost.
• To furnish members of management with timely information.
• To obtain the greatest possible revenue from the disposal of by-products and of
surplus, damaged, scrap, or obsolete materials and equipment
• To manage inventory tracking system to record deliveries, shipments and stock levels.
Purchasing
Department
Process
Benefits of improving purchasing department
process

• Lower costs
•  Reduce risk and ensure the security of supply
•  Manage relationships
• Improve quality
• Pursue innovation
• Leverage technology
GROUP • BREAKOUT – 15 MINS
• A DEBATE
TASK
• READ THE CASE – INVENTORY COUNT
• ASSESS OTHER GROUPS RECOMMENDATION
• PROVIDE LOOPHOLE/CRITIQUE AS TO WHY IT
WILL NOT IMPROVE THE PROCESS
• PREPARE YOUR GROUP RECOMMENDATION
GROUP • BREAKOUT – 15 MINS
• A DEBATE
TASK
• PER GROUP, AT THE END OF THE DISCUSSION
ANSWER THIS FORM.
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THANK YOU