2014.12.09 presentation-operational auditing and ...€¦ · operational auditing & operations...
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Experis
| D
ecem
ber
2014
1
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Op
era
tio
na
l A
ud
itin
g &
O
pe
rati
on
s
Ma
na
ge
me
nt
Da
n S
mit
h
Sr. M
an
ag
er
Ris
k A
dv
iso
ry
Se
rv
ice
s
De
ce
mb
er 2
01
4
Experis
| D
ecem
ber
2014
2
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Ob
jecti
ves f
or
this
sessio
n
-E
xplo
re d
efinitio
ns a
nd k
ey c
oncepts
for
opera
tions
managem
ent
and o
pera
tional auditin
g
-D
iscuss w
hat
makes a
good o
pera
tional auditor
–and
perh
aps,
a g
ood o
pera
tions m
anager
-P
art
icip
ant
activitie
s w
ill p
rovid
e t
he o
pport
unity t
o
dem
onstr
ate
conduciv
e a
nd a
dvers
arial appro
aches t
o
auditin
g a
nd h
ow
the a
uditee a
nd a
uditor
can w
ork
bett
er
togeth
er.
-D
iscuss a
udit p
rogra
m d
evelo
pm
ent
tips
Experis
| D
ecem
ber
2014
3
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Defi
nit
ion
s o
f O
pera
tio
ns M
an
ag
em
en
t
•“T
he
de
sig
n, e
xe
cu
tio
n, a
nd
co
ntr
ol o
f o
pe
ratio
ns th
at co
nve
rt
reso
urc
es in
to d
esir
ed
go
od
s a
nd
se
rvic
es a
nd
im
ple
me
nt…
” a
n
org
an
iza
tio
n’s
str
ate
gy s
ourc
e: w
ww
.busin
essdic
tionary
.com
•“O
pe
ratio
ns m
an
ag
em
en
t is
th
e c
orp
ora
te a
rea
in
ch
arg
e o
f d
esig
nin
g,
ma
na
gin
g a
nd
tra
ckin
g d
iffe
ren
t p
roce
sse
s. T
he
se
pro
ce
sses a
re
ma
de
up
of in
terr
ela
ted
, se
qu
en
tia
l a
ctivitie
s th
rou
gh
wh
ich
th
e
co
mp
on
en
ts a
nd
acto
rs r
eq
uir
ed
(ra
w m
ate
ria
ls, la
bo
r, c
ap
ita
l,
info
rma
tio
n, th
e c
lien
t, a
nd
su
ch
) a
re tra
nsfo
rmed
in
to p
rod
ucts
.” s
ourc
e:
Mig
uel A
ngel H
era
s, E
SA
DE
Busin
ess S
chool
•“O
pe
ratio
ns m
an
ag
em
en
t is
th
e te
rm u
se
d fo
r th
e a
ctivitie
s w
hic
h
pro
du
ce
an
d d
eliv
er
pro
du
cts
an
d s
erv
ice
s.”
Sourc
e: S
lack N
., C
ham
bers
&
Johnsto
n, O
pera
tions M
anagem
ent, fourt
h e
ditio
n
Experis
| D
ecem
ber
2014
4
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Defi
nit
ion
of
Op
era
tio
nal A
ud
itin
g
•O
pera
tional A
uditin
g is a
syste
matic p
rocess o
f evalu
ating
an o
rganiz
ation’s
effectiveness,
effic
iency a
nd e
conom
y o
f
opera
tions.
It’s o
bje
ctives a
re to e
valu
ate
an
org
aniz
ation’s
perf
orm
ance a
nd t
o e
nhance p
erf
orm
ance
by m
akin
g r
ecom
mendations f
or
impro
vem
ent
to b
ett
er
att
ain
str
ate
gic
goals
and o
bje
ctives o
f th
e o
rganiz
ation.
Experis
| D
ecem
ber
2014
5
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Th
e T
hre
e E
’s o
f O
pera
tio
nal A
ud
itin
g
•E
co
no
my –
Min
imiz
ing
th
e c
ost o
f re
so
urc
es f
or
an
activity (
Do
ing
th
ing
s a
t a
lo
we
r p
rice
)
•E
ffic
ien
cy –
Pe
rfo
rmin
g t
asks w
ith
re
aso
na
ble
e
ffo
rt (
Do
ing
th
ing
s th
e r
igh
t w
ay)
•E
ffe
cti
ve
ne
ss
–T
he
exte
nt to
wh
ich
ob
jective
s
are
me
t (D
oin
g t
he
rig
ht
thin
gs)
Experis
| D
ecem
ber
2014
6
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Fin
an
cia
l v
s.
Co
mp
lia
nc
e v
s.
Op
era
tio
na
l A
ud
itin
g
Fin
an
cia
lC
om
plian
ce
Op
erati
on
al
Ob
jecti
ve:
Att
est
to t
he
fairness o
f financia
l sta
tem
ents
.
Dete
rmin
e a
dhere
nce t
o
policie
s,
pro
cedure
s,
law
s a
nd
regula
tions.
Evalu
ate
an
d im
pro
ve t
he
eff
ecti
ven
ess,
eff
icie
ncy
an
d e
co
no
my o
f o
perati
on
s
Prim
ary
Au
die
nce:
Public,
Sto
ckhold
ers
&
Board
Regula
tors
Man
ag
em
en
t, c
usto
mers,
an
d,
increasin
gly
, reg
ula
tors
Dir
ecti
on
of
Au
dit
s:
Lookin
g B
ack
Lookin
g B
ack
Lo
okin
g a
t P
resen
t an
d I
nto
Fu
ture
Au
dit
Basis
:Fin
ancia
l Report
ing
Obje
ctives /
GAAP
Corp
ora
te s
tandard
s o
f busin
ess c
onduct,
inte
rnal
policie
s,
specific
law
s a
nd
regula
tions.
Mis
sio
n,
Vis
ion
an
d
Ob
jecti
ves o
f th
e
org
an
izati
on
an
d its
m
an
ag
em
en
t
Exam
ple
s:
Annual audits
perf
orm
ed b
y
public a
ccounta
nts
.
Contr
act
audits,
audits f
or
OSH
A o
r Banks
Pro
cess a
ud
its a
nd
revie
ws,
IT O
perati
on
s,
Dep
artm
en
tal
Revie
ws
Experis
| D
ecem
ber
2014
7
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Are
blin
ders
on
or
off
?
Fo
r w
ho
?
Op
era
tio
ns
ma
na
ge
r…In
tern
al a
ud
ito
r…
Experis
| D
ecem
ber
2014
8
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Are
blin
ders
on
or
off
?
Fo
r w
ho
?
Experis
| D
ecem
ber
2014
9
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Experis
| D
ecem
ber
2014
10
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Wh
at
makes a
go
od
au
dit
or?
Wh
at
makes a
go
od
op
era
tio
ns m
an
ag
er?
Experis
| D
ecem
ber
2014
11
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Att
rib
ute
s o
f an
Id
eal
Op
era
tio
nal
Sett
ing
•S
tra
teg
ic o
bje
ctive
s d
efin
ed
fo
r th
e c
om
pa
ny
•F
un
ctio
na
l a
rea
ob
jective
s d
efin
ed
an
d
me
asu
rab
le (
KP
Is)
for
rele
va
nt sta
ke
ho
lde
rs
•P
roce
sse
s a
re d
efin
ed
in
a le
ve
l sp
ecific
ma
nn
er
•P
rolif
era
tio
n a
nd
alig
nm
en
t o
f p
ers
on
ne
l to
wa
rd
co
mm
on
kn
ow
n g
oa
ls
Experis
| D
ecem
ber
2014
12
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Wh
at
sh
ou
ld I
A d
o i
n s
uch
a s
ett
ing
?
•A
ssess w
heth
er
functional obje
ctives t
ie t
o c
om
pany
obje
ctives
•A
ssess m
easure
ment
syste
m(s
) risk –
is it
subje
ct to
m
anip
ula
tion a
nd/o
r ju
dgm
ent
without
appro
priate
overs
ight?
•D
ete
rmin
e if polic
ies a
nd p
rocedure
s a
re d
ocum
ente
d a
nd
assess t
heir q
ualit
y (
do c
ontr
ols
exis
t?)
•A
ssess w
heth
er
conflic
ting o
bje
ctives e
xis
t and t
he e
xte
nt
to w
hic
h t
hey c
ould
im
pact
effic
iency a
nd e
ffectiveness
(com
p p
rogra
ms,
inte
rnal/exte
rnal custo
mers
, cash f
low
vs. fu
lfill
ment,
etc
…)
Experis
| D
ecem
ber
2014
13
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Sp
ecif
ic A
ud
it S
tep
s
•P
lannin
g &
audit p
rogra
m d
evelo
pm
ent
•D
ocum
enting t
he p
rocess &
assessin
g inhere
nt
risk
•Id
entify
contr
ols
and d
evelo
p r
isk a
nd c
ontr
ol m
atr
ix
•E
valu
ate
contr
ol desig
n
•Test contr
ol execution
•Is
sue d
iscussio
n a
nd r
esolu
tion
•R
eport
ing
•F
ollo
w u
p
Experis
| D
ecem
ber
2014
14
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Pla
nn
ing
How
can I
get specific
enough w
ith m
y a
udit o
bje
ctives?
•K
now
the c
onte
xt…
Experis
| D
ecem
ber
2014
15
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Pla
nn
ing
•R
educe t
he c
onte
xt
to w
riting,
in a
well
art
icula
ted m
anner
consid
er
dis
burs
em
ents
:
–D
isburs
em
ents
can leave t
he c
om
pany in o
ne o
f five
meth
ods o
uts
ide o
f payro
ll. T
hose m
eth
ods, th
eir
perc
ent
of to
tal dis
burs
em
ents
, volu
me,
and a
vera
ge
dis
burs
em
ent
are
…
–T
he m
ost sig
nific
ant
risks w
ith d
isburs
em
ents
is
concentr
ate
d in t
wo o
f th
ese m
eth
ods a
s f
ollo
ws…
–T
he c
ost of pro
cessin
g m
eth
od o
ne a
nd f
ive is…
per
paym
ent,
the o
thers
were
not dete
rmin
able
in t
he
pla
nnin
g p
rocess o
f th
e a
udit
Experis
| D
ecem
ber
2014
16
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
•H
ow
do I
gain
an u
nders
tandin
g a
bout
the a
rea?
–In
terv
iew
s a
nd
Dis
cu
ssio
ns
–In
tern
al C
on
tro
l Q
ue
stio
nn
aire
s
–B
ackg
rou
nd
In
form
atio
n R
evie
w
–R
evie
w P
roce
ss D
ocu
me
nta
tio
n
What is
mis
sin
g?
Pla
nn
ing
Experis
| D
ecem
ber
2014
17
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Ob
jecti
ves –
Tie
-in
s t
o s
trate
gic
ob
jecti
ves
•A
udit O
bje
ctives: T
hese m
ust be s
pecific
, consid
ering
know
ledge a
bout
the a
udit t
arg
et such a
s:
•P
rovid
e a
ssura
nce o
ver
managem
ent
contr
ols
for
auth
orizin
g s
ale
s c
om
mis
sio
n p
aym
ents
and s
pot
bonus
paym
ents
for
the S
outh
east
sale
s o
rganiz
ation.
•P
rovid
e a
ssura
nce o
ver
the e
ffic
ient
and e
ffective u
se o
f
resourc
es t
o p
rocure
paym
ent
thro
ugh t
he X
X m
eth
ods o
f
paym
ent.
•P
rovid
e a
ssura
nce o
ver
ware
house p
ractices t
o fulfill
ord
ers
within
managem
ent’s s
tate
d s
erv
ice level
agre
em
ent
of 99.5
% w
ithin
24 h
ours
.
Experis
| D
ecem
ber
2014
18
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Ris
k A
ssessm
en
t –
Of
the A
ud
it T
arg
et
•B
usin
ess I
mpact
•Lik
elih
ood o
f O
ccurr
ence
•R
isk V
elo
city
•R
eputa
tional R
isk
•F
raud R
isk
•M
anagem
ent
Concern
Experis
| D
ecem
ber
2014
19
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Tem
po
rary
Div
ers
ion
Experis
| D
ecem
ber
2014
20
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Au
dit
Pro
gra
m T
ips
–A
re p
lanned s
teps r
easonable
consid
ering t
he b
udget?
–D
o a
udit s
teps c
learly a
lign w
ith s
trate
gic
obje
ctives,
busin
ess o
bje
ctives a
nd t
he a
udit o
bje
ctives?
–D
o t
he r
ight
contr
ols
have a
n a
udit p
rogra
m s
tep t
o
evalu
ate
contr
ol desig
n a
nd p
ossib
ly e
ffectiveness?
–A
re p
lanned s
teps r
isk a
ppro
priate
–in
quiry,
observ
ation,
inspection,
and r
e-p
erf
orm
ance?
Experis
| D
ecem
ber
2014
21
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Au
dit
Pro
gra
m T
ips
–A
rrange t
he a
udit p
rogra
m s
teps in a
logic
al, s
equentia
l m
anner
and r
ela
te t
hem
to the s
pecific
audit o
bje
ctives.
–C
learly s
tate
the k
ind o
r exte
nt
of te
sting r
equired t
o
achie
ve t
he o
bje
ctives.
–W
here
necessary
, pro
vid
e e
xpla
nations f
or
perf
orm
ing
com
ple
x a
udit p
rogra
m s
teps.
–D
id w
e f
ollo
w-t
hro
ugh o
n o
ut-
of-
scope a
reas t
hat oth
ers
m
ay a
ssum
e a
re inclu
ded in t
he a
udit?
Experis
| D
ecem
ber
2014
22
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Ris
k a
nd
Co
ntr
ol
Matr
ix
•C
ontr
ol obje
ctive -
The h
igh-level actions t
aken t
o
ensure
focus is t
aken t
o a
lign w
ith &
achie
ve t
he
entity
's o
bje
ctives.
•C
ontr
ol activity
–T
he a
ctu
al contr
ol activity t
hat ensure
we k
now
or
unders
tand t
he e
xte
nt
to w
hic
h m
anagem
ent
directives a
re c
arr
ied o
ut.
This
should
be o
bta
ined
in t
he p
rocess d
ocum
enta
tion p
hase o
f in
form
ation g
ath
ering.
•C
ontr
ol fr
equency,
type (
e.g
., a
uto
mate
d o
r m
anual)
•E
vid
ence o
f contr
ol
–Tangib
le d
ocum
ent,
record
, lo
g e
tc.,
that can b
e
revie
wed/t
este
d t
o p
rovid
e e
vid
ence t
hat th
e
contr
ol is
in p
lace.
Experis
| D
ecem
ber
2014
23
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Evalu
ate
Co
ntr
ol
Desig
n
•D
o c
ontr
ols
expecte
d t
o b
e in p
lace a
ppear
to p
rovid
e
assura
nce c
om
pany &
functional obje
ctives a
re m
et?
•A
re inhere
nt
risks b
ased o
n t
he p
rocess a
ddre
ssed b
y
contr
ols
expecte
d t
o b
e o
pera
ting e
ffectively
?
•D
oes it appear
an e
conom
ical and e
ffic
ient
use o
f
resourc
es is in p
lace?
Consid
ering t
echnolo
gy
investm
ents
?
•D
o w
e e
xpect
evid
ence o
f th
e a
ccom
plis
hm
ent
of
esta
blis
hed o
bje
ctives a
nd g
oals
for
opera
tions t
o e
xis
t?
Experis
| D
ecem
ber
2014
24
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Bra
in T
easer
-Q
uesti
on
Qu
es
tio
n
•It
's P
rtte
y f
nu
ny h
ow
we
ca
n r
ae
d t
ihs e
inrt
e s
ne
tne
ce
wtih
all
teh
se
ltt
ers
all
ou
t o
f p
alc
e, a
nd
we
ca
n c
no
tniu
e t
o k
ee
p
rae
dn
ig a
nd
sitll
me
ka
s s
ne
ce
of
wa
ht
we
are
ra
ed
ing
. N
o m
tta
r h
ow
mn
ay t
mie
s y
ou
ra
ed
tih
s o
evr
an
d o
evr
yo
u c
an
sitll
mka
e
sn
ese
of
it.
Ho
w is ta
ht
psso
ible
?
•I
ask a
ga
in,
ho
w is th
at
po
ssib
le?
Experis
| D
ecem
ber
2014
25
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Bra
in T
easer
-A
nsw
er
An
sw
er
As lo
ng
as th
e f
irst a
nd
la
st le
tte
r o
f th
e w
ord
is in
its c
orr
ect p
ositio
n,
yo
u c
an
po
sitio
n t
he
mid
dle
le
tte
rs in
an
y o
rde
r a
nd
still
ma
ke
se
nse
of
it. O
ur
eye
s ju
st g
lan
ce
at th
e f
irst a
nd
la
st
lett
ers
of a
w
ord
.
Experis
| D
ecem
ber
2014
26
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Wh
y w
as t
hat
exerc
ise r
ele
van
t…
Experis
| D
ecem
ber
2014
27
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Test
Desig
n a
nd
Execu
tio
n
Managem
ent
and A
dm
inis
trative C
ontr
ols
/Ris
ks/C
oncern
s
•C
learly d
efined r
esponsib
ilities
•M
anagem
ent
monitoring s
yste
ms
•C
ontr
ol environm
ent
•D
ele
gation o
f auth
ority
•O
rganiz
ation
•C
ost
of opera
ting t
he f
unction
•T
rain
ing
Experis
| D
ecem
ber
2014
28
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Test
Desig
n a
nd
Execu
tio
n
Accounting C
ontr
ols
/Ris
ks/C
oncern
s
•S
egre
gation o
f duties
•S
afe
guard
ing o
f assets
•C
ost
of opera
ting t
he f
unction
•M
isappro
priation o
f assets
•A
uth
orization o
f tr
ansactions
•O
mis
sio
n o
f re
cord
ing o
f tr
ansactions
•R
elia
bili
ty a
nd inte
grity
of in
form
ation
Experis
| D
ecem
ber
2014
29
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Do
cu
men
tati
on
of
Issu
es
•C
onditio
n –
What are
the f
acts
?
•C
rite
ria –
What ought
to b
e?
•C
ause –
Why?
•E
ffect –
So W
hat?
•R
ecom
mendation –
What N
eeds t
o b
e D
one?
Experis
| D
ecem
ber
2014
30
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Rep
ort
ing
& F
ollo
w-u
p
•V
alu
e a
dded r
ecom
mendations
•K
now
your
audie
nce
•C
om
munic
ate
issues d
uring t
he a
udit –
no s
urp
rises
•S
chedule
follo
w-u
p a
udit
Experis
| D
ecem
ber
2014
31
Op
era
tio
na
l Au
ditin
g &
Op
era
tio
ns M
an
age
ment
Questions &
Com
ments
For
more
info
rmation
Da
n S
mit
h, S
r. M
an
ge
r, R
isk
Ad
vis
ory
Se
rvic
es
Exp
eri
s F
ina
nce
–C
ha
rlo
tte
Offic
e
Da
n.s
mith
@exp
eris.c
om
(70
4)
95
3-1
98
6