SCHOOL OF BUSINESS AND COMPUTER STUDIES
OA424: OPERATION AUDITING
Answer the following questions from Group I and II Reports.
1.
Internal auditors’ response since the role has become more complex.
 An internal auditor should be able to identify business risks with further planning on
the scenario.
 An internal auditor response should also be continuous and in real-time with particular
attention to strategic planning.
 To be an internal auditor needs good skills and qualities with the ability for fraud
awareness, the use of ICTs, etc.
2.
What is CAATs?
 Computer-Assisted Audit Techniques and Tools (CAATTs) are computer tools and
techniques in performing various auditing procedures and improving the effectiveness
and efficiency of obtaining and evaluating audit evidence. It provides effective tests of
controls and substantive procedures where a wide range of techniques and tools are
used to automate the test procedures for evaluating controls, obtaining evidence and
data analysis.
3.
i.
What are the 4Es?
Economy is concerned with minimizing the cost of resources used (people, materials,
equipment, etc.), having regard to the appropriate quality required – keeping the cost
of inputs low without compromising quality.
-
An example could be where healthcare supplies or services of a specific quality
are purchased at the best possible price.
ii.
Efficiency is concerned with the relationship between goods and services produced
(outputs) and the resources used to produce them (inputs) – getting the most from
available resources. Efficiency is about ‘doing things right’.
-
An example could be where the quality of healthcare has been improved over time
without an increase in cost.
SCHOOL OF BUSINESS AND COMPUTER STUDIES
OA424: OPERATION AUDITING
iii.
Effectiveness is concerned with achieving predetermined objectives (specifically
planned achievements) and having the actual impact (output achieved) compared with
the intended impact (objective) – achieving the predetermined objective. Effectiveness
is about ‘doing the right things.
-
An example could be where disease rates have fallen because of healthcare
provided.
iv.
Ethics is the standard of moral behavior and conduct expected of organizations and
their employees. This has a direct effect on the operation of controls and therefore on
the achievement of the other 3Es.
4.
Operational objectives are attainable, action-oriented, short-term goals organizations set
and accomplish as a means of partially achieving larger, long-term objectives.
5.
Differentiate FINANCIAL, COMPLIANCE, AND OPERATIONAL AUDITS.
 Financial audits are responsible for how financial statements are prepared and
presented, whether they are done fairly and in accordance with the established
accounting criteria.
 Operational audits are the assessment of the efficiency and effectiveness of the
operating policies and the procedures.
 Compliance audit is what determines if the company is compliant with the policies and
regulations that are implemented with either contractual agreement; they are in, the
company management, the government, and other authority of higher rankings.
6.
A process can be defined as a series of purposeful steps or actions that, when completed,
produce the desired result. Thus, one of the first steps in an operational audit is to identify
the processes being reviewed.
SCHOOL OF BUSINESS AND COMPUTER STUDIES
OA424: OPERATION AUDITING
7.
A pre-audit meeting lays the foundation for the operational audit process, state the
process to do.
a. Collect background information about the business helps identify any areas of concern
or industry-specific challenges that need to be addressed.
b. Conduct interviews with managers in control of potentially risky areas.
c. Document objectives and activities with risk highlighted and sent back to the managers
for confirmation.
d. Tests are conducted, with results meticulously documented, to show which new
processes or goals can improve the Organization's efficiency using operational trouble
spots.
e. Auditor writes up a comprehensive audit report. Follow-up visits with management can
help to fine-tune any ongoing issues with new systems or controls.
8.
Part of the objective should also be to maintain quality in the auditing process.
Identify the main standard areas that govern audits.
 Part of the objective should also be to maintain quality in the auditing process.
The graphic below covers the main standard areas that govern audits:
1. Integrity: Withstand pressures that may be exerted and take care to comply with
any legal requirements.
2. Fair Presentation: Present all results fairly and report significant concerns.
3. Due Professional Care: Use diligence, due care, and reasoned judgments in
every situation.
4.
Confidentiality: Keep information secure
and protect confidential or sensitive information.
5.
Independence: Maintain impartiality and
keep actions and reporting bias
6.
Evidence-Based: Depend on a fact-based
approach to reach reliable conclusion.
SCHOOL OF BUSINESS AND COMPUTER STUDIES
OA424: OPERATION AUDITING
Understanding the true status of operations is the basis for a healthier, more
competitive, and more profitable organization.
9.
Organizational performance relates to how well a company's vision, mission, and
objectives are being met.
10.
What are the key tools and techniques for the performance management?
a. Key performance indicators (KPIs) and metrics. It enables rich data-driven
performance conversations and better decision-making.
b. Performance appraisals. Incredibly powerful for aligning the goals of individuals
with the strategic aims of the organization.
c. Management by objectives (MBO). The process of defining specific objectives and
then set out how to achieve each individual objective.
d. Performance management frameworks. The most popular and best-known
management framework is the Balanced Scorecard (BSC).
e. Reward and recognition programs. Simple praise and recognition of a job well done
is just as important for maintaining morale and continued high performance.
f. Personal development plans (PDP). Used to identify specific training and
development needs and create an action plan for meeting those. Also, identifies
concrete steps that can help drive individual performance in the future.
11.
What are the key operational audit tools?
I.
Risk Control Matrix (RACM)
 It is a powerful tool that can help an organization identify, rank, and
implement control measures to mitigate risks. A RACM is a repository of risks
that pose a threat to an organization's operations, as well as the controls in
place to mitigate those risks.
II.
Business Process Mapping
 Refers to activities involved in defining what a business entity does, who is
responsible, to what standard a business process should be completed, and
how the success of a business process can be determined.
SCHOOL OF BUSINESS AND COMPUTER STUDIES
OA424: OPERATION AUDITING
III.
RACI Matrix
 A responsibility assignment matrix (RAM), also known as the RACI matrix or
linear responsibility chart (LRC), describes the participation by various roles
in completing tasks or deliverables for a project or business process. RACI is
an acronym derived from the four key responsibilities most typically used:
responsible, accountable, consulted, and informed. It is used for clarifying
and defining roles and responsibilities in cross-functional or departmental
projects and processes.
IV.
Customer Mapping
 With a customer's journey to a product (the steps that led to the product's
acquisition). Customer maps are more straightforward: they show where
actual customers reside on a real-world map.
V.
Spaghetti Maps
 Visual representation using a continuous flow line tracing the path of an item
or activity through a process.