Operational audit: Definition, Types, Processes, Example, and Reporting


Operational audit is the type of audit service that the review is mainly focused on the key processes, procedures, system, as well as internal control which the main objective is to improve productivity, as well as efficiency and effectiveness of the operation.

The operational audit has also targeted the leak of key control and processes that cause waste of resources and then recommend for improvement.

Operational audit is the part of the internal audit and their main aim is to add value to the business their professional services. Systematic and highly disciplined is also the part that helps to make sure the operational audit adds value to the organization.

Types of operations to be audited:

There are many areas that which internal auditors perform their operational audits. And before the review could be performed, an internal audit needs to identify the audit-able areas, and process first. Those could be identified by obtaining input from the management of the companies.

For example, the chief of operation might raise some concern about the wrong information that could be provided to the customer by the sales team. The finance director might raise some concerns related to a miss-match between invoices with good delivery noted.

For this case, sales processes and issuing invoices processes might need to review. The auditor could also identify the processes or operations to be audited by themselves through obtaining an understanding of the big picture of business first.

Then, they could identify the key processes and well business units that related. Once all of these are identified, the auditor should perform the assessment to identify the related to risks related to controlling and processes.


Who is normally perform the operational audit?

Operational audit services are normally performed by internal auditors since this is also part of their job to assess the efficiency and effectiveness of internal audits and operations.

Normally, the internal auditor performs their review on the three key types including financial statements audit, compliance audit, and operational audit.

However, the entity might consider engaging these services to external firms if the entity does not have an internal audit department or internal audit team does not have enough experience and knowledge for certain key operations.

Operational auditing process:

The process of operational auditing is not much different from other audits performed by the internal auditor. Those include planning, execution, reporting, and follow-up.

  • Planning: The auditor needs to obtain an understanding of the business as well as its operation. Then, they need to make an assessment and target which key operation should they perform.
  • Execution: Validating the key control and operation involve obtaining the key documents, observing how certain key control is performing and inspecting certain documents like sales invoices, goods delivery note.
  • Reporting: Once the key operation and control are validated, the report needs to be prepared and submit to the audit committee.
  • Follow up: Same as other internal audits, any key findings, and recommendations that prepare by the auditor need to follow up whether those key findings are mitigated by related management or department.

Written by Sinra