Operational Audit - Stpes Standards

An operational audit process is the series of steps an auditor takes to evaluate the operational activities of a given company or other organization. It is a forward looking process, and are part of many organizations' ongoing business improvement process toolkit.

Performance audit which includes auditing economy, efficiency and effectiveness are basically an extension of the conventional audit (for conventional audit) audit which include obedience and financial audit. One of the things that distinguishes the conventional audit and performance audit is in terms of auditing reports.

Introduction to Operational audit

In conventional audit, audit results is in the form of an opinion (opinion) auditor independently and objectively about the fairness of the financial statements in accordance with the established standard criteria, without granting the recommendation repair. Whereas in a performance audit, not only provides a conclusion about the audit stages or that have been performed, but also come with recommendations for improvements in the future. Audits on performance management and commenting on how they carry out their duties economically, efficiently and effectively is not a new topic right now, but until now the results of the performance audit is always stored and just as in consideration of the organization only.

The growing sense of unsatisfied and claims that increased accountability towards the management of public companies resulting in the need to consider the possibility of performance audit as a mandatory.

Traditionally the performance audit has been conducted through a Department internal audit of an entity. The results of this audit only stored by those entities with no further action. The internal auditor is asked to review an area from an entity and report back on the management about how economically, efficiently and effectively managed these lands during the period examined. Management seems reluctant to reveal those results on members from the entity or at the general public. This is a great question, should the results or conclusions of this audit are communicated or disclosed to persons concerned and also on the general public, so they can assess how the performance of management such.
 

The latest trend in auditing

Auditing is a profession and as with any other profession, he is dynamic not static. It will evolve and adapt itself to the needs of users of the profession. Currently the dissatisfaction against the results of the audit of the financial statements occurs everywhere, even in developed countries though, so going on what is called "expectation gap" i.e. the difference between what is done by the auditor and what is desired by user audit reports. This happens because the audit of the financial statements by the auditor only expresses opinion over the accounts of the financial statements only. Whereas users of financial reporting information would like to secure that the audited accounts are accurate, fair, no cheating and can be used for future projections.

Blair (1990) clarify the functions not performed by audit, i.e. an audit does not constitute a guarantee of the continuity of the company in the future. Audit results is not an opinion upon economical, efficiency or effectiveness conducted management, nor guarantee that no fraud or violation of the rules. Comment this is very interesting, because it is a reflection of the public's expectations of how should accounting services performed. When this arises the desire of most users of financial reporting information that an accountant should have commented upon management performance during the period of observation, as well as reporting to the accuracy of the financial statements of the company.

Understand the operation audit

Operational Audit is a systematic process for evaluating the efficiency and effectiveness of the activities of an organization in the process to achieve the objectives the Organization, and the Organization's operating economy who are in control of managing and reporting to the appropriate people upon the results of the evaluation and its recommendations for improvement.

A systematic process

As in the audit of the financial statements, the audit of operations concerning a series of steps or procedures that are logical, structured, and well organized. These aspects include good planning, as well as the acquisition and evaluation of evidence objectively related to the activities audited.

Evaluate the Organization's operations

The evaluation of the above operation must be based on several criteria set out and agreed upon. In auditing, operational criteria are often expressed in the form of performance standards set by management. However, in some cases, the standards that may be established by an agency of Government or by industry. This criterion is often defined less obvious when compared to the criteria used in the audit of the financial statements. Operational audits to measure the degree of conformity between actual performance and message.

Efficiency, effectiveness, and economical

Used to assess efficiency as good as does the use of the resources of an organization that is used to achieve the objectives that have been set, while effectiveness is used to assess how well the policies of these organizations to reach the goal. Efficiency and effectiveness are the two things are closely interconnected with each other, could have a policy that organization very efficient but ineffective as well as vice versa. Economical significance gain the quality and quantity of human and physical resources in a decent time and lower cost.

Reporting to the right people

Internal auditors typically report to a management or an individual or entity requesting an audit of how efficient, effective or economically a part or a work program has been implemented. Results of the performance audit is very rarely disclosed to all parts of the Organization to the general public. Whereas the results of this audit could be so badly needed by parties other than management, for example, the wider community who directly or indirectly related to the company. While the audit committee or the Board of Commissioners is the party that receives a copy of the audit report.
Recommendation improvements (standard Reporting third in Reporting Standards performance Audit)

The results of the audit of the operational recommendations which can be very useful for the management to determine and assess the policies and activities of the company are already on time or need improvement so that it will affect the the survival of the company.

Benefits of operational audit

Report audit of management can serve as a complementary information from the financial statements of the company. There are several benefits that could accrue if report performance audit it became obligatory provided by the company.

The 56th company the more transparent so that outside parties can follow the development of the company with the better.

Audit management will trigger companies to be careful in managing the company.
The interests of the Community (especially investors) the more protected so that a climate of investment and effort will be the more conducive.

Limitations of operational audit

There are some limitations of operational audits:

1. Time

time becomes a very limiting factor, because the auditor should provides information to management quickly or at least in a timely manner to solve the problem at hand. Operational audit should be done on a regular basis to ensure that the important issues not become chronic in the company.

2. The expertise of Auditors

complained of the lack of knowledge of many operational auditor karea is impossible for an auditor knowing and mastering a wide range of business disciplines. Operational auditor just more expert in the field of auditing than in the field of business.

3. The cost of

the fees is also one of the limiting factor, since it is of course the cost of the audit must be smaller than the amount that can be saved. Therefore, the auditor should ignore small problems that may cost if investigated further.

Operational Audit Stages

1. Select the auditees

as in many other events in an entity, the operational audit budget constraints affected biasnya or friendliness. Therefore, resources for operational audits should be used carefully. The selection of auditees began with a study or survey introduction against candidates auditees in the entity to identify activities that have the highest audit potential seen in terms of an improvement of effectiveness, efficiency, and frugality operations. In essence, the study is a preliminary screening process which produces the rankings of candidates aka auditees. 

The starting point of this preliminary study was to gain a comprehensive understanding of the structure of organizational entities as well as the characteristics of its operations. In addition, the auditor must also understand industry operating entities as well as the nature of the place and area of the applicable government regulations. Furthermore, attention is focused on activities, units, or functions will be audited. Understanding of the prospective auditees is obtained by:

• reviewing data archive background every auditees
• reviewing facilities auditees to ensure how the auditees reaches its destination
• study the relevant documentation about the operations of the auditees as the manual of policies and procedures, flow chart, performance standards and quality control, as well as a description of the task
• the activity Manager is interviewed about a particular problem areas (often called entry interview)
• apply analytical procedures to identify trends or unusual relationships
• checks (or testing) mini audit to affirm or clarify the auditor's understanding of the problems of potential
• The auditor's understanding about each auditees should be documented via the questionnaire already filled with complete, current, and chart a narrative note.

Based on this understanding, the auditor preparing a report or memorandum study introduction, which summarizes all the findings and outlines recommendations on auditees that should be audited. This report is only used by the internal auditing Department and is not intended for management.

2. Plan the audit

Planning audit scrutiny is very important both for the effectiveness or the efficiency of the operational audit. Planning is especially important in this type of audit this audit because of its various operations. The main runway of audit planning is the development of the audit program, which must be made in accordance with the State of the auditees are found at the stage of preliminary study audit. As in the audit of the financial statements, the audit of the program contains a set of procedures designed to obtain evidence relating to one or more destinations. The evidence reviewed is typically based on the sample data. So, in the planning of the audit gharus considered the use of statistical sampling techniques. In addition, the auditor must also find out whether the computer-assisted techniques (computer assisted techniques) will be efficient in terms of cost.

Audit Planning also includes the audit team selection and scheduling of work. The auditing team must consist of an auditor who has the technical capabilities necessary to fulfill the purpose of the audit. The work must be scheduled through consultation with Auditees in order that there be maximum cooperation from the auditees during the audit personnel.

3. Carry out audits

During the audit, the auditor carrying out extensively looking for facts that relate to the problems identified in the auditees during the preliminary study. The implementation of an audit is an audit phase of the most time consuming in operational audit. This stage is often referred to as do deep audi (in-depth audits).

In an operational audit, auditors rely heavily on submission of questions and observations. The usual approach is to develop a questionnaire to auditees and use it as a base to interview personnel auditees. Of the inquiry, the auditor will obtain opinions, comments, and suggestions about problem solving. The interview is crucial in the effective operational audits. Through observation of auditees personnel, auditors will detect the inefficiency and other conditions which cause this problem.

The Auditor should also use analysis in operational audit. For this purpose, the analysis must involve the study and measurement of performance of accrual in conjunction with certain criteria. These criteria could be developed internally by entities such as the target productivity and budget assigned to this criterion, or it can come from outside entities in the form of industry standards or by the auditor of the audit-audit in advance for a similar activity. This analysis can provide the basis for determining the extent of the auditees meets goals set.

Work performed, findings, and recommendations should be documented in the working papers. as in the audit of the financial statements, the paper work is a major supporter of the auditor's report. The auditor took responsibility (in-charge) is usually responsible for reviewing the paper work well during or upon completion of the examination. Review during the audit is useful in monitoring progress, whereas a review at the end of the audit ensure the quality of the work as a whole.

4. Report of the findings to management

The operational Auditing is similar to other types of auditing because the end product of this audit is an audit report. However, there are many unique situations related to reporting in operational audit. For example, contrary to the language contained in the auditor's report in financial statements audit, operational audit reports in languages varies for each of the auditees. The report must contain:

• a statement about the purpose and scope of the audit
• General description about the work being done in the audit
• Overview of findings
• recommendations for improvements
• comment auditees

The concept of this report is usually created by the auditor in charge. The concept is then discussed with the managers of the unit audited. The deliberations of this important goal meet several: (1) give the auditor the opportunity to test the accuracy of the findings and recommendations, ketpatan and (2) allow the auditor obtain comment auditees to be included in the report. This early concept further revised as needed, so that final drafts can be prepared.

In some cases, recommendations are given might just suggest the need for further study of the problem at hand. The inclusion of a comment is the auditees are optional. Typically, comments that are only included if the auditees did not approve the findings and recommendations.

The auditor's Findings basically produces a constructive criticism. At the time of writing the report, the auditor should be sensitive to the recipient. If the language is not too offensive, then the recipient's response to the report "possible will be more positive. Usually, a copy of the operational auditing report sent to senior management and to the audit committee. If the report is long and detailed, so the report can be started with a complete overview (executive summary) about the findings and recommendations.

5. To follow up

the last phase or stage of follow-up (follow-up phase) in the operational audit is a stage for Auditors to follow up on responses to auditees report audit. Ideally, the policy entity should require managers to report audited units in writing during a set time period. However, this follow-up should also include determination of the appropriateness of action taken by auditees in implementing recommendations. The standard practice of 440 IIA internal auditor stated that should follow up to ensure that appropriate action has been taken based on the reported findings. The failure of Auditors to receive the proper response should be communicated to senior management.

Operational Audit Standards

A. General Standards

1. The first Public standards (requirements of Ability)

"Staff assigned to carry out the audit should collectively possess adequate professional proficiency for the duties required"

By this standard, any organization or institution responsible that any audit audit carried out by the staff collectively possess adequate knowledge and skills to the task of the audit. The staff should have a deep knowledge about the auditing of Government, about the special circumstances audited, as well as to do with the nature of the type implemented.

2. The second General Standard (Independence)

"in all matters related to the audit work, the audit institutions or organizations and good government as well as the auditor of the public accountant, shall be independent (organizationally or personally), free from disturbance independence which is personal and from other private external call), which can affect the independence, and should be able to maintain the attitude and appearance independent"

With this second public standards, organization or institution audit and the Auditors are responsible for the maintained independence in such a way, so the opinions, conclusions, consideration or recommendations of the audits are viewed by impartial third party who has knowledge of it.

3. The third General Standard (use Carefully and thoroughly Proficiency)

"in the implementation of the audit and the preparation of his report, the auditor is obliged to use his professional skills carefully and thoroughly"

4. Fourth General standards (quality control)

"any organization or institution that carries out audits audits based on SAP must have adequate internal control system, and system quality control must be reviewed by another competent party (quality control external call)"

B. Field Work Standards of Audit Performance

1. The first Field Work standards (Planning)

"Work should be adequately planned"
in planning for examination, the examiner must define the purpose and scope of the examination, as well as inspection methodology to achieve the purpose of that examination. Purpose, scope, and methodology of the inspection not determined separately. The examiner determines a third of these elements together. Planning is a continuous process during the examination. Therefore, the examination should consider to make the adjustment on the objectives, scope and methodology the examination during the examination is done.

2. The second Field Work Standards (Supervision)

"Staff should be supervised (disupervisi) with either"
Supervision includes activities briefing the examiner and the parties others (like the experts involved in the examination) for the purpose of the examination can be achieved. Elements of supervision include the giving of instructions to staff, delivery of up-to-date information about the significant problems encountered, implementation reviu over work performed, and the granting of field work training (on the job training) effective. Supervisors must make sure that the staff really understand about the work of the examination to do, why the work had to be done, and what is expected to be achieved. For experienced staff, supervisors can provide fine points about the scope of the work of the examination and submit the details to staff. For less experienced staff, supervisors must provide direction regarding the technique of analyzing and how to collect data.

3. The standard of work of the third Field

standard implementation of the third Statement is: "the evidence is sufficient, competent, and relevant must be obtained to be an adequate basis for findings and recommendations the examiner".
Identify potential data sources that can be used as proof of the examination, the examiner should consider the validity and reliability of the data, including data collected by the entities inspected, the data compiled by the examiner, or the data provided by third parties. Similarly with the adequacy and relevance of the evidence.

4. The fourth Field Work Standards (documentation)

of the standard implementation of the fourth Statement is: "the examiner must prepare and maintain document examination in form of the examination papers. Examination of documents related to the planning, implementation, and reporting of examination should contain enough information to allow an experienced examiner but has no relationship with the examination can ensure the checks that the document could be the evidence that supports the findings, conclusions, and recommendations the examiner "

c. Reporting Standards performance Audit

1. The first standard of Reporting (Forms)

"Auditor of the audit report must be made in writing to be able to communicate the results of each audit"
the need to implement accountability about the program the Government requires that audit reports are presented in written form. Written report to function as:
communicate the results of the audit to government officials, local authorities based on applicable legislation,
make the results of the audit to avoid misunderstanding,
make hasl audit as a basis for corrective action by relevant agencies,
facilitate follow-up to determine whether the corrective actions that should have been done

2. The second Reporting Standard (the contents of the report)

the second reporting standard Statement is: "Report the inspection results should include":
the statement that the examination carried out in accordance with the standard Examination
purpose, scope, and methodology of the inspection
the inspection results in the form of examination findings, conclusions, and recommendations
the response of the officials responsible for the inspection results
reporting confidential information (if any)

3. The third Reporting Standards

reporting standards of the third Statement is: " check up result Reports must be timely, complete, accurate, objective, clear, and convincing, and probably concise".

4. The fourth Reporting Standard (publishing and Distributing the report examination results)

the fourth reporting standard Statement is: "Report the inspection results submitted to the Agency representatives, the entities examined, the parties have the authority to regulate the entities inspected, the responsible party to conduct a follow-up inspection results, and to other parties who are empowered to receive reports of results accordance with the provisions of the legislation in force".

Operational Audit Relationships support the effectiveness of the internal control System

of the audit operational Role in supporting the internal control system is operational audit can knowing the effectiveness and efficiency of a system internal control on a function (e.g. a sales function) of a company. As mentioned above, the purpose of the audit is to give itself an operational assessment of the efficiency and effectiveness as well as the economy of a part of the company's operations which is the result expected from a system control a good intern.

This relationship can also be seen from a statement about some basic concepts of the system of internal control, namely:

"the system of internal control is expected to reach the goal audit, financial audit, audit either operational or compliance audits and internal control Systems are not intended to provide an absolute guarantee where any internal control System must have a weakness".

Conclusion

Auditing on performance management aims to provide comments on the implementation of their obligations, whether it has been carried out economically, efficiently and effectively. And then give recommendation auditor over management performance. These recommendations will be followed up by management, and the results will be reviewed again and seen whether were in accordance with the established and in accordance with the recommendations that have been given. 

Performance Audit is more than just the traditional financial statements audit, in the next few years, public accounting in addition to the audit of the financial statements, also may be required to conduct the review on performance management being audited, the audit period at the time of such entities.
The purpose of the audit is to provide performance recommendations so that the resources are there on an audited entity can be controlled and used better, and can improve the efficient, economy, and improving performance management. 

If the general public and business community consider and feel in need of an audit to evaluate the performance of public and private companies in the future, then the performance audit is very necessary for public companies similarly. It is high time the performance audit as a necessity (mandatory), so that existing resources can be maintained well and is allocated with a good