An operational audit is a formal evaluation of the internal systems and procedures a company uses to produce goods or services. Made of at least four major steps, it tests how efficient and effective production operations are, which ultimately boosts revenue and profits. It also can reveal ethical issues in the business. External or internal accountants may perform the review, based on the needs of the business. This process has some disadvantages, such as potentially high cost, but it also offers advantages, such as new perspectives and increased risk awareness.

Purpose

In general, the tools and processes a business uses to get a product or service to the public have to work as intended and be efficient. When they aren’t, the company usually can’t make as much money and can’t be as competitive. Businesses, therefore, use these types of audits to streamline what they’re doing, with the ultimate goals being to decrease waste and boost revenue and profits.

An operational audit is an inspection and analysis of how well the business is performing. Management adherence to budgets and company policy is evaluated. After the audit is made, suggestions may be given to help make the company more efficient in meeting its goals.

Similar to other reviews, looking at how the company is functioning overall can uncover ethical problems, such as employees using company property for personal reasons. The results of the audit let managers identify who is involved in dishonest practices, which often leads to greater accountability on the job. Companies’ disciplinary and general policies often connect closely to the review for this reason

A business or organization uses an operational audit to closely examine its internal operations. This contrasts with a financial audit, which examines the company’s financial books for completeness and accuracy. The goal of an operational audit is to improve efficiency and allow the company to make the best use of its material and human resources.

What Are the Benefits of an Operational Audit?

The opportunity to examine your business in-depth and make important strategic decisions comes with an operational audit. Unlike financial audits, operational studies focus on the process of running your business. They are frequently conducted by outside agencies, though larger businesses sometimes maintain internal auditing departments. It is recommended that an impartial auditor conduct the evaluation because it adds the perspective of another viewpoint, especially if the auditor is experienced with businesses similar to yours. A well-performed audit can be beneficial, as it is personalized to identify specific areas of weakness and potential growth opportunities unique to your business.

In addition to making the business more efficient and profitable in the long run, an operational audit almost always provides a company with some new, fresh perspectives. It makes executives aware of problems that might not have been found otherwise and lets them evaluate risks for the future. Managers also can use results to motivate employees, as the company always has something to work toward at the end of the process.