1. Sir plz tell the need of operational audit2. Meaning of audit planning, audit strategy, audit programe, factors to be consider in formulating audit strategy
2 types of terminology is used as per SAs and as per Old Theory of Module
Audit Strategy (SA 300) / Overall Audit Plan (Module Theory) — Broad decisions on how to do audit, which areas to be focused etc
Audit Plan (SA 300) / Audit Programme (Module Theory) — Detailed step by step instructions for doinf audit for each area
Audit Planning is continuous activity , right from start and plan can be improved over a period of time
Regular Audits are not very informative in terms of internal business activities…. in operational audit manager gets detailed information and there analysis of internal operations, hence there is need of operational audit you can see answer below… please specific doubt you have NEED OF OPERATIONAL AUDIT Inadequacy of Traditional Sources
Conventional sources of management information are departmental managers, routine performance report, internal audit reports, and periodic special investigation and survey. These conventional sources fail to provide information for the best direction of the departments all of whose activities do not come under direct observation of managers.
The need for operational auditing has arisen due to the inadequacy of traditional sources of information for an effective management of the company
Management is at distance there are many layers of Delegation
Where the management is at a distance from actual operations due to layers of delegation of responsibility, separating it from actualities in the organisation.
Specifically, operational auditing arose from the need of managers responsible for areas beyond their direct observation to be fully, objectively and currently informed about conditions in the units under control.
Specialised Management Information Tool
Operational audit is considered as a specialized management information tool to fill the void that conventional information sources fail to fill.
Operational auditing has filled a very significant vacuum; it has come to provide the management with inexpensive, continuous and objective appraisal of activities, operations and controls to inform the management about achievement of standards and, if otherwise, to inform the management about what has gone wrong and how it has gone wrong. Also, it enlightens the management about possible dangers, constraints, and opportunities that may be of immense value to the management.
Scope depends on Management Attitude
The scope and quality of operational auditing is predominantly dependent upon management attitudes. An open minded management with broad vision, can appreciate the need of operational auditing and to give it the necessary freedom and sanction to perform what it is capable of performing. Also, the qualities and the sense of perspectives of the operational auditor can mould operational audit in the right shape. Without a combination of these two, operational auditing may not be able to show its distinctively and advantages to the organisation. Therefore, there is a possibility of operational auditing having different objectives to fulfil in different organizations.
Generally, operational audit objectives include:
(i) Appraisal of controls: Operations and the results in which management is interested are largely a matter of control. If controls are effective in design and are faithfully adhered to the result that can be attained will be subject to the other limiting constraints in the organization.
(ii) Evaluation of performance: In the task of performance evaluation, an operational auditor is heavily dependent upon availability of acceptable standards. The operational auditor cannot be expected to possess technical background in so many diverse technical fields obtaining even in one enterprise. Even when examining or appraising performance or reports of performance, the operational auditor’s mind is invariably fixed
on control aspects.
(iii) Appraisal of objectives and plans:</span> In performance appraisal, the operational auditor is basically concerned not so much with how well technically the operations are going on, but with accumulating information and evidence to measure the effectiveness, efficiency and economy with which the operations are being carried on.
(iv) Appraisal of organizational structure: Organizational structure provides the line of relationships and delegation of authority and tasks. This is an important element of the internal control design. In evaluating organizational structure, the operational auditorshould consider whether the structure is in conformity with the management objectives and it is drawn up on the basis of matching of responsibility and authority. He should also analyze whether line of responsibility has been fixed, whether delegation of responsibility or authority is clear and there is no overlapping area.