Seven Basic Quality tools documents
Definition of Quality Management -- it is a method for ensuring that all the activities necessary to design, develop and implement a product or service are effective and efficient with respect to the system and its performance. It is also a principle set by the company to endure the continuous advocacy of quality services and products, or the further improvement of it.
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Original text on www.freequality.org
Operational Auditing
Increased competition, a shrinking
world, and the decentralizing of operations are factors that have greatly
magnified the role which operational auditing plays in the success of a
company. The desire of management to
monitor the overall operations of the company has increased the amount of
internal auditors finding themselves involved in operational audits. The function has started to assume an even
greater importance than any time in the past.
Operational Auditing Defined
Operational auditing is a technique used by an
organization to evaluate it’s effectiveness,
efficiency, and nature of its operations and report to appropriate persons the
results of the evaluation along with recommendations for improvement. The objectives are to assure management that
its goals are being carried out and whether or not they are capable of being
improved.
Operational auditing uses common sense
along with logical audit techniques to apply findings to organizational
objectives, operations, controls, communications, and information systems. The auditor performing the evaluation is
concerned with the whom, what, when, where, why, and
how of running an efficient and effective operation. This means that the auditor must have
knowledge of the company’s operations.
How to use Operational
Auditing
The purpose of operational auditing is to assist
employees of the company in effectively performing their responsibilities. The auditing provides them with analysis,
recommendations, advice, and information concerning the activities
reviewed. In order for the audit to be
successful and provide this type of feedback, five phases of an operational
audit exist and must be completed. The
five steps are: preliminary preparation, field survey, program development,
audit application, and reporting and follow up. Each step in the audit has its purpose and
depends on the success of the previous step.
In the preliminary preparation step,
the auditor must research and have a good understanding of the company that
he/she is auditing. The history of the
company, available technology, values of the company, and unique
characteristics of the company are just a few of the things that an auditor
will want to have knowledge of. It is
important that the goals, objectives, policies, strategies, and tactics of the
company also be clearly revealed by management to the auditors.
In the field survey step, the
auditor uses the information in the first step to begin asking questions of
management. More specific problem areas,
sensitive activities, and crucial operations will be identified in this
step. When this step is completed, the
auditor will know where to focus the audit efforts on. The next step will be to develop a written
audit plan that will set the objectives and steps to follow during the
audit. This plan is usually a
well-detailed outline on what is to occur in order to accomplish the objectives
of the overall audit. Since each audit
is unique in its objective, this step is important to the success of the audit.
Once the audit plan has been well
developed, the auditor will begin to apply the plan and perform the audit. The audit will more than likely take place on
the auditee’s premises. During this step
the problem areas, sensitive activities, and crucial operations that were
identified in the field survey will be reviewed in depth. In this step techniques such as
cause-and-effect relationships are developed to be able to report
recommendations, conclusions, and other findings. This is usually the most time consuming step
in the audit and it is important for all information to be carefully recorded
and documented in order to be able to refer to it after the physical audit has
taken place.
If the audit application step is
done effectively, the reporting and follow-up step is much easier to
perform. This is perhaps the most
critical part of the operational audit.
A good audit report will effectively communicate the recommendations and
conclusions to management. The report
will be supported by all the documented facts, findings, and opinions that were
gathered during the audit application.
The reporting step should include a follow up step to determine what if
any action needs to take place in order to improve the operations of the
company.
Some companies have an internal
audit department that can effectively perform all of these duties. In other cases, a company will hire an
auditor to come in and perform the audit for them. In either case, careful and correct audit
standards need to be used to prevent any bias or inaccurate conclusions from
occurring.
An Example of an Operational
Audit
The Oklahoma Employment Security Commission had an
operational audit performed in their department in November of 2000. The commission and executive directors wanted
to make sure that operations within the agency were efficient and correctly
following management instructions, federal and state laws, regulations,
policies, and procedures. In their case,
the audit was performed by the Oklahoma Department of Internal Audit. The internal audit department reported to the
commission and executive directors throughout the activities of the audit.
References for Further
Information
There is a great amount of
literature available for reading on the topic of operational auditing. The Institute of Internal Auditors founded in
1941 has developed credentials for those who wish to work in the auditing
field. There are a large number of
organizations that offer seminars and workshops for those companies who wish to
start or improve an audit department within their company. For the companies who do not find it feasible
to implement an internal audit department, there are many auditing firms out
there who are specialized to perform the work for them. More CPA firms are becoming involved with
this type of work as well. Below is a
list of sources that I found useful in learning about operational auditing.
-
American
Institute of Certified Public Accountants.
www.aicpa.com
-
Casler,
Darwin J., Crockett, James R. Operational
Auditing: An Introduction. The
Institute of Internal Auditors, Inc.
1982.
-
Coactive
Connection. Operational Audit. www.coactiveconnection.com/operatio.htm
-
Haley,
Donald C. Decentralized Operational
Auditing. Mid-Atlantic Journal of
Business. 1990. V26. P81-89.
-
Oklahoma
Employment Security Commission.
Department of Internal Audit. www.oesc.state.ok.us.htm
I think you will find that there is an
increasing need for operational auditing in the success of a company. Operational auditing is often a huge step for
a company. Making sure that it is
performed effectively will ensure that the company is able to accomplish its
goals and objectives in the future.