operational audit.pdf

7/25/2019 operational Audit.pdf

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Operational Audit Best Practices

Operational Audit is a methodology for assessing the

conformity of implementing the procedures and

methodologies set forth in the departments instructions,

regulations or documents. Operational audit is performed by

specialized auditors. Upon completion of the auditing

process, a report of findings with recommendations is

submitted.

Operational audit contributes to improving implementation,

complying with the government organizations procedures

and providing the management with points of nonconformity

so that corrective and preventive actions can be taken,

thereby improving the efficiency and effectiveness of

operations and increasing customers satisfaction, as shown

in Figure 1.

Figure 1: Impact of operational audit on increasing customers

satisfaction

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Identify poor work practices in order to improve them.-

Verify that employees implement operations in

conformity with instructions and regulations, which

guarantees achieving the desired effectiveness and

efficiency.

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Assist in the evaluation of quality control procedures

adopted in the organization.

- Evaluate implementation processes in the organization.

- Enable management to identify ways to increase

operational control.

Select procedures or departments whose operations

are to be audited

This step is considered the basic stage in which the

procedures or departments whose operations are to be

audited are selected, which significantly affects al

subsequent steps of the auditing process. This is

accomplished by using the following criteria:

The audit added value: it refers to the impact that wil

result from improving the implementation of the

procedure whose operations are to be audited, noting

that priority will be given to the procedures o

departments that have never been audited.

Impact: priority is given to the procedures or

departments that have the highest impact on economy

efficiency or effectiveness.

Risk: the risks associated with the implementation of

procedures in conformity with the specified criteria and

regulations are analyzed. The more they are associated

with the public interest, the more important is the

auditing process.

1. Selectprocedures ordepartments

whose operations

are to be audited

2. Determineaudit objectives

3. Select the audteam and

determine theschedule

4. Define theoperations to be

audited

5. Determineaudit scope

6. Prepare auditchecklist

7. Informemployees to be

audited

8. Implementauditing

9. Prepare theaudit summary

report

10. Follow up

What is Operational Audit?

Why Operational Audit?

How to conduct Operational Audit?

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Operational

Audit

Identify points

of

nonconformity

in procedure

implementation

Corrective

actions by the

management

Increased

efficiency and

effectiveness

Increase

customer

satisfaction

A methodology to Conduct Operational Audit in Public


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Signs of risks associated with operations

- Financial loss due to implementation not conforming

operations to the adopted criteria and regulations.

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The emergence of new or urgent activities or sudden

change in working conditions (requirements,

demand).

- The complication of administrative structure, leading

to discrepancies between the responsibilities.

- Lack of independent, reliable and updated

information on the government departments

efficiency and the effectiveness.

Determine audit objectives

Objectives of operational audit are determined at this stage.

It should be noted that formulating the operational audit

objectives significantly affects the nature of the audit and the

results that will be obtained using this process.

Elements to consider when determining the objectives of

operational audit

- Procedures and departments to be audited.

-

Reason: the driving reasons of operational audit.

- Impact: results expected from operational audit.

Select the audit team and determine the schedule

Figure 2 illustrates the personal qualities that the operational

auditors should possess.

Figure 2: personal qualities that the operational auditors should

possess

Define the operations to be audited

The audit team reviews all documents related to the

operation to be audited. This may include the following:

-

Procedure manual.

- Instructions concerning the operations that will be

audited.

-

Regulations, legislation, policies and guidelines adopted

by the government department.

- Process flowcharts.

- Forms used and the instructions on how to fill them out.

- Performance indicators.

- The government departments strategic plans and

operational goals.

- Reports on plans and priorities.

-

Previous audit reports prepared by other auditors.

- Annual and periodic performance reports.

Determine audit scope

At this stage, the following questions should be answered:

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Which departments are involved in the operation to beaudited?

-

Who are responsible for implementing the procedures

and operations to be audited?

- What powers does the auditor have? How accessible is

the information?

- Are there temporal or spatial determinants to implement

the operations?

Operationalauditorsqualities

Objectivityand

impartiality

Maintain theconfidenttiali

ty ofinformation

Honesty andintegrity

Ability towork as part

of a team

Ability toassume

responsibility

and makedecisions

Experienceoperation

audit

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Prepare audit checklist

The auditor should prepare the audit checklist based on the

documents he has reviewed, which are relevant to the scope

of work specified. The checklist is a set of items that should

be checked for conformity to the procedures and criteria setforth in the documents. The auditor uses this checklist during

the audit process. It should be noted that the checklist should

be encoded by serial numbers to maintain the credibility of

information and document data to for easy access.

At this stage, the auditor uses the audit checklist form to

document all the queries through which to audit the

implementation process and its conformity to the procedures

and criteria. He should also:

- Identify the source and code of the document on which

the inquiry is being made.

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Collect the information and objective evidence required.

Inform employees to be audited

The department management informs the employees

involved in the procedure implementation of the date of

audit process: the scope of audit and the person to be

audited. Employees should be given an appropriate amount

of time prior to auditing in order to prepare the records and

files required.

Implement auditing

The audit process is divided into two parts:

Monitor the work

The auditor monitors the performance of staff and evaluates

the extent to which they conform to the sequence of

operations and how they deal with customers. In the process,

he writes down notes to prepare a report of nonconformity

cases, if any.

Audit by interviewing employees and reviewing the

documents

Prior to auditing, the auditor should explain to the employeeconcerned how auditing is to be performed. Then use the

audit checklist to ask the employee/ employees concerned

the required questions and write down their answers in detai

along with any notes. As well as auditing all the files and

records that contain the previous forms, reports and

documents on the implementation of the procedure, in order

to verify that operations are being carried out according to

the procedures and criteria specified.

Prepare the audit summary report

Upon the completion of the auditing process, the auditor

prepares the audit report and sends it along with the

checklist and nonconformity report (if any) to the department

management, which will in turn approve the report and pass

it on to the managers concerned in order to take the

necessary corrective and preventive actions.

When preparing the report, it is necessary to ensure that the

report contains all the required contents, including:

- Audit objectives.

-

Scope of work.

- Action steps, including the time needed, professiona

standards and policies adopted.

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Audit results, including points of nonconformity.

- Summary of experts views and management comments

(if any). They should include all opinions, whether

positive or negative.

- Any confidential or sensitive information that has been

deleted.

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It is advised that the auditor uses a form to collect

data on how employees perform their tasks, in order

to audit some service delivery standards, such as time

needed and number of errors, and evaluate the way

employees deal with customers

If points of nonconformity are noted, the auditorshould prepare a report of the violations. This report

contains mainly a description of points of

nonconformity, along with the reasons and evidence.

It should be noted that the approval of the employee

concerned of the report is required.

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Points to consider when preparing the audit report

- The report should be objective.

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The report should be consistent and reliable.

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The report should be transparent and

comprehensible.

Follow up

Within a reasonable time period after implementing

corrective and preventive actions, the audit process should

be repeated to ensure that it achieved its objectives and that

implementation conforms to the procedures and criteria

specified.

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