What Is an Operational Audit? Definition, Types & Processes
Understanding your business operations ensures you’re operating as efficiently as possible. You can identify areas that might be causing bottlenecks or delays and make necessary adjustments. Plus, you can also see the areas of your operations that are running smoothly.
An operational audit is a great way to get an inside look into your business operations and how they are performing. You can improve sales figures, reduce operational costs and become more competitive. There can be a little bit to understand and there are also some different types of operational audits you can use.
Here is everything that you need to know about an operational audit and how it can help your business get ahead of the competition.
Here’s What We’ll Cover:
What Is an Operational Audit?
Are you monitoring how your business is operating on a daily basis? Do you know what’s working and what isn’t? What about any areas that can get improved?
An operational audit is a way to evaluate all of your business operation activities. This is done both on a daily level and on a much broader scale. Some other types of audits, like an internal audit, might only look at a single department or just your business’s finances. An operational audit, on the other hand, is going to dive much deeper into your business processes and internal processes.
It’s basically going to provide a detailed look at your internal departments and their processes. It’s able to take a look at and examine how you conduct business with the goal of increasing effectiveness. An operational audit is a type of audit that can be conducted by an internal auditor or an external auditor.
Why Would You Perform an Operational Audit?
Being as efficient as possible is good for business. And the aim of an operational audit is to optimize your overall efficiency. You can identify areas that aren’t working and make the necessary adjustments. It will provide recommendations for improvement and can identify future risks.
Here are some of the most common outcomes of an operational audit.
- Fix and fine-tune your internal controls. Since you examine each step of the operational process, you can identify the impact of any changes to your internal controls.
- Understand certain risks. There are always going to be operational risks in business, and they can range from things like cyber threats to health and safety issues. You can identify those risks and any other potential problems with compliance or fraud, for example.
- Maximize operational efficiency. Operational audits give a detailed breakdown of how you can improve policies and procedures.
How Does an Operational Audit Process Work?
It’s all going to depend on the type of business that you operate and some of the processes that you already have in place. But usually, a pre-audit meeting is going to lay the foundation for your operational audit process. Any relevant information will get collected and you can outline challenges you want to address.
Next, interviews can follow with managers that oversee certain risk areas. You can form and develop your objectives and highlight operational trouble spots. Tests are conducted and the results get documented to see which processes can get improved.
You will receive a final comprehensive report from the auditor and follow up visits can happen to fine-tune any issues.
It was mentioned above, but your operational audit process is going to depend on the type of business that you operate. Here is a brief checklist that you can follow when getting everything ready for an operational audit.
- Develop and define the audit plan and scope
- Compile any relevant reference documents
- Identify administrative support
- Do some research on your current operational procedures
- Compile any statistical evidence
- Put together any audit findings and evaluate
- Share the conclusions from the audit
- Generate and give actionable advice to improve operations
- Include any follow-up questions and concerns
There can be lots of reasons for you to decide to conduct an operational audit. But the biggest reason is that you are going to receive a detailed overview of how your current operations are performing. This can help you identify new insights to improve sales and a more efficient production process.
Everything can become more streamlined and any risks can get caught ahead of time. This will help future-proof your business against any potential damages. You might think that an operational audit can be time-consuming and expensive, and you might be right.
However, the benefits that you can get from an operational audit far outweigh any of the potential disruptions that could come with it. The aim is to optimize your business’s efficiency so you can make necessary adjustments and become even more efficient.
Being as efficient as possible is good for business. And the aim of an operational audit is to optimize your overall efficiency. You can identify areas that aren’t working and make the necessary adjustments. The auditing process can give a fresh perspective on operational performance for your management team.
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