Denolan, Jwyneth Royce

BSA – 4A
Operations Audit

1. Discuss what is operations auditing and what is the impact of this in the
business world today.

Operations auditing is a thorough, independent, and future-oriented examination

of a company's efficacy, efficiency, and complains. It digs deep into the company’s
management procedures in the business’ functional areas, which helps uncover
all of the risks and opportunities in the current system.

Such an audit is a critical step for any company. Through operations audit,
potential areas of growth are identified, efficiency is improved, and productivity is
maximized, among others purposes and benefits. This is made possible because
an output of an operations audit is a curated list of changes that can be done for
the betterment of the business.

2. What are the different phases of audit and explain their functions?

An operations audit involves three primary phases: planning, fieldwork, and

reporting.

Planning. This phase encompasses scoping, budgeting, scheduling, identifying

the methods of testing and the population to be tested, and announcing the audit.
During this stage, the auditor meets with the management team to document
pertinent information. The two outputs of the planning phase are 1) a strategic plan
and 2) an audit plan.

Fieldwork. In this phase, majority of the testing takes place with the goal of
gathering audit evidence. It entails the creation of a program in which the goals
 and audit objectives identified in the planning phase are addressed. Further, in this
phase, the audit team checks to see that the controls in place are working and are
executed according to what management has planned. Some examples of the
work done in this phase are observation, document inspection, reperformance,
walkthrough, verification, vouching, footing, and etc. The auditors document such
through the workpapers, which compiles all the audit evidence that demonstrates
the planning that has been completed, the fieldwork activities performed, among
others.

Reporting. The third and final phase of an operations audit is reporting, in which
the results of the audit are communicated. The results include the audit’s findings
such as the company’s risks and opportunities, observations noted during testing,
and the recommendations developed.

3. Among the different key functions we have discussed. Select one function
except for the one you reported, identify at least2 key areas/objectives/risks
you want to highlight and list at least 2 control procedures for each you can
recommend.

One function that is scrutinized in an operations audit is the distribution process of a

company. The table below shows some control objectives in the audit of distributions
along with their respective control procedures.

Control Objective Control Procedures

To ensure that stock is located in the 1. Streamlining of orders, inventory,
optimum position to fulfill the anticipated supplier, and customer data in a
demands and to avoid localized regularly updated centralized
shortages. database.
2. Setting an alarm for when reorder
points are reached.
 3. Ensuring that EOQ is properly
calculated for each local
warehouse.

To ensure that staff are appropriately 1. Standardizing the regular

trained in the handling of goods to checking of perishable goods by
avoid damage to the goods and injury assigning quality control
to the staff. personnel at every critical point in
the delivery.
2. Employing maintenance
personnel to perform regular
testing for the effectiveness of
warehouses’ security systems,
fire containment systems, lights
and air condition.