Operations Audit:

Focus on Finance and Accounting

PreElec 1: Operation Auditing

La Verdad Christian Colleges
2nd Term SY 2021-2022
Instructor: Carmela Peduche
 • Accounting has an operations side –
document processing.
The Need for • Human intervention is involved each
step of the way from origination to
Operations recording of expenses.
• Risks are present both in manual and
Audit on the electronic system
Accounting • There are always areas for
improvement
and Finance • Expenses can be properly recorded, but
not properly authorized
Function • Sales can be identified according to
accounting standards, but
documentation could be lacking
 • Job Description

PURPOSE: Ensure each individual is fit and ready for

What to Look the job
Steps taken:
for in Auditing - Verify the credentials (education and experience)
the Accounting of the employee
- Review trainings attended if aligned with the job
Operations? - Investigate on the morals of the employee
especially if tasks involve handling cash
What to Look for in Auditing the Accounting
Operations?
• Interview on Process

PURPOSE: Ensure that the processes are undertaken as documented

Steps taken:
- Look for, read, and familiarize the company manual
- Interview and determine if steps taken are aligned with the manual
- Look for control lapses and red flags
- Evaluate if proper segregation of duties is applied each step of the
way
What to Look for in Auditing the Accounting
Operations?
• Observation

PURPOSE: Evaluate the interpersonal behavior and work ethic

Steps taken:
- Observe on the employee’s alignment with the company’s standard
on behavior
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- System check
- Review the system design and flowchart
- Verify the flow chart against the inputs and outputs of the system
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- Document check
- Verify the existence of approvals on documents
- Check if documents are prepared and issued chronologically
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- Transaction Check for Expenses
- Are all expenses approved?
- Are all expenses within the limits established by corporate policies?
- Are all expenses within budget?
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- Transaction Check for Income
- Did all sales transactions go through credit check?
- Are all discounts within standard and given to customers of good credit
standing?
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- Transaction Check for Fixed Assets
- Did all purchase of assets went through proper approval and review?
- Are all fixed assets accounted for?
- Are all assets of resigned employees surrendered?
What to Look for in Auditing the Accounting
Operations?
• Substantive Testing

PURPOSE: Evaluate on the correctness and completeness of corporate

accounting records
Steps taken:
- Transaction Check for Liabilities
- Are all loans made with reputable financial institutions?
- Are all loans reasonably made based on annual budget?
- Are the purpose of loan broken down?
- Are payments made as based contractual agreements?