Checklist for Review of Financial Audits Performed by the OIG_part3 pdf

©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 21
Learning Objective 4
Provide an overview of
operational audits.
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 Effectiveness refers to the accomplishment
of objectives
 Efficiency is defined as reducing costs
without reducing effectiveness
Effectiveness Versus
Efficiency
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Types of Inefficiency Example
Acquisition of goods and
services is too costly
Bids for purchases of
materials are not required
Raw materials are not
available when needed
An assembly line was shut
down for lack of materials
A duplication of effort
by employees exists
Production and accounting
keep identical records
Effectiveness Versus
Efficiency

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Work is done that serves
no purpose
Vendors’ invoices and
receiving reports are filed
without being used
There are too many
employees
Office work could be done
with one less assistant
Effectiveness Versus
Efficiency
Types of Inefficiency Example
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Relationship Between Operational
Auditing and Internal Controls
 Reliability of financial reporting
 Efficiency and effectiveness of operations
 Compliance with applicable laws and regulations
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Types of Operational Audits
 Functional
 Organizational
 Special assignments

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 CPA firms
 Government auditors
 Internal auditors
Who Performs Operational
Audits
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The two most important qualities
for an operational auditor are:
Independence and Competence
of Operational Auditors
 Independence
 Competence
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Learning Objective 5
Plan and perform an
operational audit.
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Specific Criteria
 Were all plant layouts approved by home office
engineering at the time of original design?
 Has home office engineering done a reevaluation

study of plant layout in the past five years?
Questions that might be used to evaluate
plant layouts:
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