What Is an Operational Audit?

by Tom Streissguth; Updated September 26, 2017

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.

Manufacturing

Companies that produce goods carry out operational audits to examine their manufacturing process. The workflow is put under scrutiny. Are employees making the best use of their time? Are goods coming out of the process at the fastest possible rate? Are raw materials being wasted through bad design or misuse? After the audit, the company may make some changes to improve its production numbers, allowing it to compete with its most efficient competitors.

Service Companies

Many companies provide a service to their customers, including hotels, real estate agencies, restaurants, auto or appliance repair shops or travel companies. These companies may carry out an operational audit to monitor their employees’ interaction with customers. They may measure the amount of time it takes to carry out a transaction, or make a sales presentation to a potential client. They may also employ straw buyers, unknown to the employees, to measure and improve customer service. Operational audits may also examine security, time schedules, the use of outside vendors and the business' physical setup and appearance.

Auditors

Accountants, either employed by the company or hired from an outside firm, often carry out operational audits. An accountant can examine the cost of making goods, from the purchase of raw materials to delivery to a customer or wholesale buyer. Someone trained in examining financial statements can also measure the efficiency of administrators and managers, who may not be the best individuals to carry out an internal audit of their department’s performance.

Results and Reports

An operational audit may uncover unnecessary costs and wastage, and result in a cost savings. The audit may also reveal time delays that slow the company’s order-filling process. At the end of the audit, the auditor presents a report detailing the company’s shortcomings and needed areas of improvement. The report makes detailed and specific suggestions on the steps to be taken to improve workflow, efficiency and service to its customers and clients.

About the Author

Founder/president of the innovative reference publisher The Archive LLC, Tom Streissguth has been a self-employed business owner, independent bookseller and freelance author in the school/library market. Holding a bachelor's degree from Yale, Streissguth has published more than 100 works of history, biography, current affairs and geography for young readers.