Introduction to Operations

Auditing

ACC314 - Operations Auditing

 Operational Auditing
Operational Auditing
This is a comprehensive review of organizations or
functions within an enterprise to appraise the efficiency
and economy of operations and the effectiveness of
those functions to achieve their objectives.
 Economic and efficient utilization
 Attainment of operational goals and objective

Internal Auditing
is an independent, objective assurance and consulting
activity designed to add value and improve an
organization’s operations.
It helps an organization accomplish its objectives by
bringing a systematic, disciplined approach to evaluate
and improve the effectiveness of risk management,
control, and governance processes.

IIA- International Standards for the Professional Practice of Internal Auditing (ISPPIA) are principle-focused and provide a framework for performing and promoting internal auditing.
ACC314 - Operations Auditing
IIA - International Standards for the Professional Practice
of Internal Auditing (Standards)
They are intended to
 State basic principles for the practice of internal
auditing
 Provide a framework for performing and
promoting value-added internal audit activities
 Establish the basis for evaluating internal
auditing performance
 Improve organizational processes and
operations.
Categories of Guidance.
 Mandatory guidance (Definition of Internal
Auditing, Standards, Interpretations, and the
Code of Ethics)
 Strongly recommended but not mandatory
guidance (Position Papers, Practice Advisories,
and Practice Guides)

ACC314 - Operations Auditing

International Professional Practice Framework
• relate to the attributes of the internal auditing organization or
Attribute attributes personal to the internal auditor, including objectivity and
independence, professional proficiency, and compliance with
Standards standards.

• are applicable to the performance of work and address managing

Performance the internal audit processes; assessing risk, control, and governance
processes; planning the engagement; testing and analyzing
Standards information; evaluating evidential matter; and communicating
results.

Implementation • address appropriate means of applying Attribute and Performance

Standards
Standards

Attribute Standards Performance Standards

• 1000 Purpose, Authority, and Responsibility • 2000 Managing the Internal Audit Activity
• 1100 Independence and Objectivity • 2100 Nature of Work
• 1200 Proficiency and Due Professional Care • 2200 Engagement Planning
• 1300 Quality Assurance and Improvement Program • 2300 Performing the Engagement
• 2400 Communicating Results
• 2500 Monitoring Progress
• 2600 Resolution of Management’s Acceptance of
Risks

ACC314 - Operations Auditing

The Three and Six “Es”

Economy
Effectiveness Efficiency

Equity Ethics

Environment

ACC314 - Operations Auditing

Resourcing the Internal Audit of Technical Activities

Proficiency – Internal auditors should

possess the knowledge, skills, and other
1210 Outside
competencies needed to perform their
individual responsibilities. Service
Provider

The chief audit executive should obtain

Internal
competent advice and assistance if the
1210.A1 internal audit staff lacks the knowledge, Technical
skills, or other competencies needed to Expert
perform all or part of the engagement.

The chief audit executive should decline

Control Self
the consulting engagement or obtain
competent advice and assistance if the Assessment
1210.C1
internal audit staff lacks the knowledge,
skills, or other competencies needed to
perform all or part of the engagement.
ACC314 - Operations Auditing
Performance Measurement Systems

Performance measurement is the

process of collecting, analyzing and Understand Manage
reporting information regarding the Business Business
performance of an individual, group,
organization, system or component.
PMS
Measurement data (standards) is
provided for interpretation and unless
there is a formal measurement Identify Monitor
protocol in place, there may be the OFI’s/Deviations Performance
potential for differing conclusions to
be drawn from the same.
Note: PM should be restructured from Macro level indicators to a more detailed (micro level) measures relative to specific areas or divisions.
ACC314 - Operations Auditing
Sample Performance Measurement Systems

Workload/Demand

Economy

Efficiency

Effectiveness

Equity

ACC314 - Operations Auditing

VALUE FOR MONEY (VFM) AUDITING

• refer to a style of operational auditing which makes extensive use of

key performance indicators to explore the cost of achieving standards
of efficiency and effectiveness and whether these costs represent
good value
• it take accounts of the three Es
• involve the assessment of an appropriate range of performance
measurement criteria

ACC314 - Operations Auditing

BENCHMARKING
• defined as a comparison of one’s own performance in a specific area
with that applied by others in compatible circumstances.
• For a benchmarking exercise to be meaningful, it is necessary to
understand fully the existing processes, systems and activities as a
firm basis for subsequent comparison with external points of
reference (such as industry or professional standards).

ACC314 - Operations Auditing

Internal audit departments can often benefit from participating in
benchmark comparisons with other audit functions; such involvement can
contribute to their understanding of:
• the internal auditing trends and practices as applied by the companies
surveyed;
• the implications and potential of the findings for the participant’s own
organization;
• the validity of the participant’s own stance on internal auditing in
relation to that apparent from the survey data.

It enable participants to take a view of the need for change or review of

their own organization’s approach to internal auditing in light of the
survey data.
ACC314 - Operations Auditing
-End-

ACC314 - Operations Auditing