Operation is synonymous with activity for which the organisation itself stands for. Operation for the instant purpose is an all-inclusive term and includes any activity of an undertaking, it encompasses activity relating to production, finance, sales and other related functions.

The same sense one can feel from the following definition of Operation audit as given by the Federal Financial Officers’ Institute (Canada). `A systematic independent appraisal activity within an organisation for a review of the entire departmental operations as a Service to Management'. The overall objective of operational auditing is to assist all levels of management in the effective discharge of their responsibilities by furnishing them with objective analysis, appraisals, recommendations and pertinent comments concerning the activities reviewed.

For many people, operation audit is a luxury and not cost effective, specially in case of small size organisations wherein the operations involved are not complex enough to justify operation audit. However, the said notion is not correct, small size does not mean simple work process, on the contrary unlike the complex mechanism involved in small machines the work processes of small organisations are also often found very complex. Moreover, many feel that cost involved is much more than the benefit reaped from the operation audit. This notion is not justified when one looks at the history of corporate turnaround throughout the world, which make it clear that operation audit has contributed enormously for betterment of organisation.

Line Managers are at the helm of operations. Due to their constant association with the processes most of the times they feel complacent and to them the system through which they are operating is a full proof one. Even if there be any fault most of the time they try to cover-up the same. The operation auditor being an independent person (not a line functionary) specially meant for the same, by dint of his analytical skill and ability can exercise a fresh thought to each and every minute process involved in an operation for proper appraisal. On such analysis if any process is found to be superfluous or not contributing to the operation as suggested by the Operation Auditor then the same can be eliminated, if the management think it fit Such elimination gives definitely a positive contribution towards value addition or cost curtailment. The following are the reasons for operation audit:

* Assist all level of Management in effective discharge of their responsibilities by furnishing them with objective, analysis, appraisal, recommendation and pertinent comments concerning the activities reviewed.

* A fresh thought to each and every minute existing are process for proper appraisal and on analytical study if any process found to be not contributing then the same can be eliminated or where any improvement is possible that can be achieved.

* Such appraisal gives a positive contribution towards value addition or cost curtailment.

* Find better ways of doing work.

The operation areas differ from organisation to organisation. For a multiproduct, multidivisional Company differences are as many as divisions and products. Due to lack of synergy it is more difficult to get an operation auditor of best fit for all the purposes. Hence, Audit

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Operation audit ………………

team should consist of people both from Finance and Non-Finance disciplines like Engineering, Computer System Analyst etc. However, operation auditor besides his educational background must possesses high level common sense, intelligence and analytical ability. The hands on knowledge of operations is definitely an added advantage for the auditor.

Firstly, the area of operation is to be selected for audit. It is not needed that all the operations throughout the organisation should be taken up at a time. It also depends on the involvement of the top management in the affairs of the organisation. The Auditor by dint of his knowledge regarding different affairs of the organisation, can select the critical areas for operation audit. (principle for selection may be FOTP- Finger On The Pulse Approach; FlRE - Frequency, Interval since last review, Risk, Exposure). There is no hard and fast rule for selection of areas as such. Moreover, it depends on the criticality of the operation, management perception, priority and sometimes even as ‘pick and choose’. However, the rational selection of the area of operation for audit definitely yield effective results. which depend on:

a) urge of management to improve the process.

b) flexibility of the organisation, and

Effectiveness of the auditor.

How to make operation audit successful?

After selection of the area for operation audit the job of the operation auditor starts, which comprises-

• Stage setup
• Planning the audit area
• Background information
• Initial auditee meeting
• On site familiarisation with subject area
• Programme/Questionnaire with subject area
• Assessment of operation/findings against programme
• Report preparations & presentation with recommendations