Operational audit
- 1. MANSI YADAV | MCOM II SEM 3 | MANAGEMENT AUDIT
- 2. ▪ Examination of the manner in which an organization conducts business. ▪ Direct attention to the improvements that will increase its efficiency & effectiveness. ▪ Primary users of the audit recommendations are the Management team, specific to the area that has been reviewed.
- 3. 1. INTERNAL CONTROL 2. INTERNAL AUDIT STAFF OR 3. SPECIALISTS HIRED IN THEIR AREAS OF EXPERTISE. INTERNAL AUDIT DOCUMENTS PROCEDURES TESTING SYSTEM RISK COMMUNICATION
- 4. COUNTER RIKS MAINTAIN QUALITY OF REPORTING COMPLY WITH LAWS & REGULATIONS
- 5. Management’s Attitude (towards control) Organisational Structure Values & Abilities of Employees
- 6. ELEMENTS : STRONG CONTROL ENVIRONMENT : CLEAR STRATEGIES For dealing with significant risks that have been identified COMPANY’S CULTURE, CODE OF CONDUCT Human resource policies & Performance reward systems supporting business objectives COMPETENCE,INTEGRITY Fostering a climate of trust within the company CLEAR DEFINITIONOF AUTHORITY & ACOUNTABILITY So that decisions are made actions are taken by the appropriate people. COMMUNICATION To employees of what is expected of them & scope of their Freedom of Act KNOWLEDGE, SKILLS AND TOOLS To support achievements of the organization’s goals
- 7. CLASSIFICATION DETAIL ADMINISTRATION Concerned with achieving the objectives & implementingpolicies. Relate to channelsof communication& reporting responsibilities ACCOUNTING Aim to provide accurateaccounting records & achieve accountability. Recording transactions& establishingresponsibilitiesfor records, assets PREVENT Designed to prevent errors from happeningin the first place. Eg. Checking invoices againstgoods received notes before paying invoices DETECT Detect errors once they have happened. Eg. Bank reconciliations& physicalchecks of inventoryagainstinventoryrecords CORRECT Minimise or negate the effect of errors. Eg. Back-up of computerinput at the end of the day
- 8. SEGREGATE TASKS : ▪ Responsibility for particular actions ▪ Defaults / omissions ▪ Can be traced to an individual person BREAKDOWN ROUTINEPROCEDURES: ▪ Separate steps or stages ▪ To facilitate and even flow of work ▪ Avoid bottlenecks CREATE & PRESERVE : ▪ Records that act as confirmation of ▪ Physical facts , and ▪ Accounting entries REDUCE POSSIBILITY OF FRAUD & ERROR: ▪ Aim should be ▪ To prevent fraud & error ▪ Rather than to be able to detect it after it has happened.
- 9. • Independent Appraisal activity • A control which functions by examining & evaluating the adequacy & effectiveness of other controls
- 10. 1. Review of Internal Control Systems 2. Risk Management 3. Legal Compliance , and 4. Value for Money Internal Audit is a part of the internal control system. Distinct from External Audit which is carried out for the benefit of shareholders only & examined published accounts.
- 11. Concerned with any sphere of a company’sactivities Objective is monitoring of management’sperformance at every level Ensure Optimalfunctioning according to predetermined criteria Concentrationon the outputs of the system Efficiency of the organisation
- 12. ALSO KNOWN AS :
- 13. STAGE 1 OBSERVING : Team observes operation’s key functions & will prepare an audit service customized to the needs of business
- 14. STAGE 2 : ASSESSING : Auditor’s team of experts will assess the effectiveness & efficiency of operational structure of your company
- 15. STAGE 3 : REPORTING : A detailed report with all findings included will be provided to the company
- 16. STAGE 4 : Feedback will be provided by experts to help in streamlining and optimizing business resources