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70% of all businesses fail within the first 10 years. Business owners reading this: for every ten of you, 7 will fold. Despite that morbid start, I begin this Process Street article looking at the operational audit. I will demonstrate how using an operational audit can refine, improve, and evolve your business operations, setting you up for business prosperity. Wouldn’t it be nice to alter the above stat to 100% business success? A tall order but, as the Westlife song goes, Nothing is impossible – apologies if you are not a Westlife fan. I believe that optimized operational audits play a significant role in driving business success. In this article, I will explain why. You will also find out:
To jump to the relevant section, click on the links below. Alternatively, scroll down and read all to become an expert in the auditing world. Let’s get started! Operational audit: What is an operational audit?An operational audit systematically and independently analyzes an organization’s operations to evaluate operation effectiveness, efficiency, and economy, with a future-orientated perspective. Before we get started looking at the operational audit, I highly recommend you read my previous articles detailed below. These posts are to be used supplementary to this post on operational audits: The auditing world can be a 💣minefield 💣of jargon. When first introduced to auditing as a discipline, I was frankly confused. During my student days, studying the financial audit resulted in copious amounts of coffee and a Jane flapping around the library. If the term audit has a similar effect on you – I can sympathize. Luckily though, you have come to the right place. We at Process Street have simplified auditing to include only those aspects important for you and your business. By reading this, and the above articles, you will gain a thorough understanding of audits and audit procedures. Operational audit: What is an auditAs I state in Audit Procedures: A Quick Tour With 19 (Free) Templates, an audit is a…
Many associate the term audit with financial audits. However, financial audits are one type of audit, and there are many types. This is something that you need to be aware of. Operational audit: The different types of auditWhat do I mean by types of audits? Audits can be classified based on four principles, as defined by Wiki Accounting:
Wiki Accounting then goes on to list 14 different types of audits. From Financial audits – read: Financial Audits: A Quick Guide with Free Templates 🤓 – to the internal audit. They are all there. If you want to find out more about the different types of audits, I recommend that you read Types of Audits: 14 Types of Audits and Level of Assurance by Wiki Accounting For this article, we are only interested in one type of audit, that is, the operational audit. Operational audit: Operational audit objectivesBusiness Study Notes summarizes definitive objectives of an operational audit:
All in all, the above objectives align to give one overarching outcome: To do more with the least amount of resources possible. With this, say hello to a happier you and long-term business prosperity. Once more, by reducing the number of resources needed for your business processes, you inadvertently become a greener, more sustainable business. Environmental champion 👑, I hail to you. Keeping this in mind, conducting a thorough operational audit is a win-win situation. The question is, how do you do it? Operational audit: What do operational auditors do?Operational audits are externally conducted by an operational auditor. An operational auditor is a specialist, who looks into every facet of management to produce an operational audit report. Operational audits have many moving parts. They must follow a process that coincides with established best practices. Before we jump into these best practices, I will remind you what we have covered so far:
As interesting as this all is, there is little actionable value for you here. But that my friend is about to change. Keep reading. Outlining the best practices conducted by the experts gives you actionable information. How is this information actionable? You can use this information to conduct an internal operational audit. What do I mean by an internal operational audit? The term may seem self-explanatory. Well, there is no trickery here, an internal operational audit is pretty much what it says on the tin:
Operational audit: The internal operational auditEven though internal operational audits carry no legal weight, they bring extensive benefits. These benefits are defined by RSM South Africa:
In summary, internal operational audits are worth their salt. In this next section, I will run through the best practices of operational audits, used by experts. I will then show you how to use Process Street to implement these practices for your internal audit procedures. This can be done for free. Internal operational audits will act as your quality control check. They make sure your operations align with governmental, regulatory body and your own set standards. Operational audit: Best practices used by the expertsThe below operational audit best practices were given by Seetharam Kandarpa, Quality Auditor (ASQ-CAQ). Kandarpa applies his expertise to give internal audit advice. Operational audit best practice 1: Establish objectivesThe objectives of an operational audit have been mentioned above ⬆. However, within the lines of these, more specific, company aligning objectives are needed. Company-specific objectives can vary depending on:
Below are some examples of specific concerns operational audit objectives can be set to address:
Your objectives emphasize on quality. Standards are set to maintain and ensure audit quality. Following the standards detailed in ISO 19011: Guidelines for Auditing Management Systems will provide you with this imperative quality. To make your life easier – as we like to do at Process Street – we give you a range of ISO standard checklists. In this instance, we are talking about ISO 19000: Management System Standards. Within our extensive library of ISO checklists, you will find the ISO 19011 Management Systems Audit Checklist ⬇. Use this checklist to help you establish objectives for a quality internal operational audit. Click here to access our ISO 19011 Management Systems Audit Checklist Operational audit best practice 2: Follow the auditing principles6 auditing principles govern operational audits – and in that vein, all audits. These principles are covered in the below image: Operational auditors must follow these principles to produce a legitimate audit report.
Creating checklists in Process Street will guarantee the above 6 principles are met. But more on that later. For now, let’s continue our breakdown of operational audits and their associated best practices. Operational audit best practice 3: View your operational audit as a tool for continuous improvementViewing your operational audit as a tool for continuous improvement is key. We all know that business is not constant: You, therefore, need to execute your operational audit process as a continual event for continual improvement. Kandarpa tells us how to do this:
Using the plan-do-check-act model, the operational audit process continues as follows:
This is a continuous cycle. That is, you continue through the above stages again… …and again… …and again. Like Kandarpa, an auditing expert, we at Process Street also recognize the value establishing recurring processes bring. Process Street has been designed to make any recurring task fun, fast and faultless. Correctly designed operational audits bring continuous improvements. Operational audits are therefore recurring processes. Hence, Process Street will make your operational audits fun, fast and faultless. Integrating operational audit best practices into your internal operational audit processTo incorporate the above best practices, operational auditors will follow a process. This process has been outlined by Kandarpa below. Each step in the below process acts to improve the quality of your business operations, continuously.
With Process Street, you can incorporate the above steps for your internal operational audit. Do this by utilizing a checklist approach. Before I explain how you can do this, I will first answer the following questions:
Operational audit: Why you should use an audit checklist to conduct your internal operational auditAn audit checklist is a tool that contains all the steps necessary to carry out an audit procedure. If you read my article Financial Audits: A Quick Guide with Free Templates, you will already understand why checklists are an excellent audit tool. Whether this is to help with external audits, internal audits, financial or operational audits. The benefits of checklists in the auditing world broadly apply. I shall recap. With any audit, there are problems attaining maximum assurance. This is due to the prevalence of human error. Human error plagues business operations, and internal operational audit procedures are no exception. We need a way of reducing human error from our internal audits to achieve maximum audit assurance. This is where the audit checklist comes into play 🖐. There is a mass of evidence supporting the claim that checklists reduce human error. Read: The Checklist Manifesto. Just as 2+2=4, applying logic and reason brings us to the statement: Audit checklists will maximize assurance for your internal audit checks, by reducing human error. Great, now we know why an audit checklist should be used, we can focus on how? This also brings us back to the question: What is Process Street? I answer both below. Use Process Street and our audit checklists to conduct your internal operational auditAs a business process management tool, Process Street is superpowered checklists. You can use Process Street to create an audit checklist for your internal operational audit. By using our checklists, you can:
With this last bullet-point, remember operational audits are carried out continuously. One – of our many – missions at Process Street is to make recurring work fun, fast, and faultless for teams everywhere. This includes you and your recurring internal operational audit processes. With this, you can see how Process Street is the optimal tool for your internal operational audits. Once more, our checklists are superpowered. We have adapted the common checklist to contain features such as:
Our approvals feature is game-changing when it comes to conducting audits. If you haven’t used approvals before, don’t fret. Just check out our Approvals: How to Streamline Decisions-Making in Process Street article. In this article, you will learn exactly what approvals are, why they are incredibly useful, and how to use them. Approvals streamlines processes that need manager sign-off, from single instances to multi-step or sequential approvals. Heaps of time will be saved, setbacks and lengthy delays are prevented, and acceptions or rejections will be given on time. To add an approval task, simply click on the approvals button. This is located on the bottom of the left-hand bar within the template editor, where tasks and task headers can be added. Once you have added tasks subject to approval – within your internal audit – they can be assessed by the relevant team member. The assigned approver can easily open the checklist, see the information from the tasks, then either approve or reject, or reject with a comment. By using Process Street’s checklists, you can increase the efficiency, productivity, and effectiveness of your operational audit processes. For those of you that are unfamiliar with Process Street and our offerings, check out our Monthly Webinar: An Introduction to Process Street below, for further insight. Below I have embedded our Hotel Sustainability Audit checklist – part of our Hotel Management template pack. From this, you can see how an operational audit is carried out using Process Street. This checklist guides you through the necessary stages for operation refinement. The outcome: Fewer resources are needed to deliver the best results. Click here to access our Hotel Sustainability Audit Checklist You can create any checklist, just like the above, for free, using Process Street. Refer to our Help article Templates: Basics of creating and using templates. Alternatively, you can watch the below video for more information on how to create your own Process Street checklists. On top of all this, we have a wealth of pre-made templates, free and ready to use right away. These templates will help you conduct your internal audit checks. Whether these checks are operational, financial, or compliance-related. I have detailed these checklists below. Refine your business operations by conducting internal operational audits todayWith operational audits, you can scrutinize your business processes and identify areas to target for improvement. The overarching aim of an operational audit is to do-more-with-less. The perfect formula for long-term business success. If you want to find out more about operational audits, read: Operational Auditing, by Heran Murdock. How do you conduct your operational audits? Do you use a checklist? How have operational audits improved your business? Please let us know your thoughts in the comments below, we would love to hear from you. |