Internal audits are a common occurrence for organizations in the financial sector, with operational audits occurring more rarely. While the latter requires more time and resources, operational audits should happen more often than they do for teams to truly take stock of where they stand in the industry.

Organizations are harnessing the strategic power of operational audits by integrating Predict360.

It can be helpful to understand the difference between internal and operational audits for risk management to see where your team can improve their processes:

Aspect Internal Audit Operational Audit
Definition An independent, objective assurance and consulting activity. A review that evaluates how efficiently and effectively an organization’s processes and resources are being used.
Scope Broad scope covering multiple audit types including financial and compliance audits. Narrow, specialized focus on operational efficiency, effectiveness, and cost management.
Primary Focus Risk management, control, governance processes, financial reporting, and compliance. Efficiency, effectiveness, economy, and performance of day-to-day business processes.
Objectives Identify weaknesses in internal controls and processes to prevent harm and ensure compliance. Find areas of improvement to make operations more efficient, productive, and effective.
Orientation Looks at what has already happened and identifies mistakes and vulnerabilities. Examines what could be improved and how processes could be optimized.
Comparison Method Evaluates performance against internal standards, policies, and regulations. Compares performance against industry benchmarks and best practices used by competitors.
Key Components Internal controls, governance, risk management, financial systems, compliance mechanisms. Internal controls, resource utilization, process efficiency, management oversight, human resources systems.
Areas Covered Corporate governance, accounting, financial reporting, IT general controls, operational effectiveness. Procurement, IT service management, HR recruitment, supply chain, efficiency and cost management.
Relationship The broader audit function that encompasses multiple specialized audit types. A specific branch or type of internal audit with a distinct operational focus.
Typical Auditor Internal audit department or external auditors. Internal audit team or external auditor with operational expertise.
Deliverable Focus Recommendations on control effectiveness and risk mitigation. Actionable improvements and opportunities to streamline processes and reduce waste.

Operational audits are audits that focus on how the operations of the business meet standards for:

  • Effectiveness
  • Productivity
  • Cost efficiency

On the other hand, internal audits focus on what has already transpired for the organization. This allows organizations to look at the mistakes that were made and the vulnerabilities in the system which allowed those mistakes to be made.

While this is a necessary process to have in place, operational audits are valuable as they don’t look at whether things were done correctly or incorrectly. Instead, they look at the possible improvements in the business processes.

A process which produces no errors will be considered good in an internal audit. The same process will be considered good in an operational audit if:

  • There are no errors
  • The process is completed in optimal time
  • All resources are used efficiently

For more information on effectiveness, productivity and cost efficiency, read Four Ways Internal Audit Software Can Help Your Business.

Advantages of the Operational Audit Process

The objective of the operational audit process is to improve the way the organization performs. An operational audit can help those in the financial sector:

  • Lower costs
  • Decrease the turnaround time for many processes
  • Directly improving service delivery and customer satisfaction

1. Improved Departmental Effectiveness

An operational audit allows management to compare and rank the effectiveness of different departments or teams within the organization. This is a fantastic way of finding the best practices for completing a process.

Management simply needs to review each team’s performance for the process in question and then select the teams which perform most effectively. The best performing team can be analyzed to find out how they are performing better than other teams. All other teams can then be trained to reach the effectiveness level of the team that performs the best.

Understand this process in further detail with article on Increasing Audit Efficiency and Frequency Through Audit Management.

2. Discovering Opportunities for Improvement

Although operational audit programs are much more in-depth than normal internal audits, this adds further scope for auditors to strategize. These audits do not just look at how things are, they also look at how things could be.

For example, if an organization takes 10 days to complete a certain process, the Operational Auditor will also look at the competition to understand how many days it takes their team of auditors to complete the same process. The auditor will also be interested in discovering bottlenecks in the process to see whether removing the bottlenecks is possible.

Increasing the Efficiency of Operational Audits

If operational audits can provide such benefits, why aren’t they more common in businesses? The answer is simple: operational audits take a lot of time and resources in comparison to routine internal audits.

Organizations want to improve efficiency and the last thing they want is to start a process that decreases efficiency. However, this is where automated audit management comes into play, mitigating many of the inefficiencies that can arise during the audit process.

AI-driven platforms like Predict360 are designed to allow auditors to easily and quickly carry out audits. They allow the business to collaborate on audits in a non-disruptive manner as all updates and insights can also be easily shared by giving everyone access to the audit management system.

Conducting Operational Audits Using Predict360

If your business is looking for a more effective and efficient way to manage audits, consider this overview of what you can expect from the Predict360 platform:

Aspect Description
Platform Type Cloud-based, AI-augmented audit management system
Core Features Centralized repository, audit calendar, workflow automation, collaboration tools, dashboards, and reporting
Findings Management Tracks findings and remediation with assigned action plans and completion dates
Reporting & Analytics Configurable reports, real-time dashboards, and integration with Power BI and Tableau
Compliance Based on IIA standards; SOC 2 Type II certified
Key Benefits Reduces preparation time, improves quality, increases capacity, enhances decision-making

Get in touch with our team to learn more about a custom solution for your organization or request a demo to take a hands-on approach to integrating operational audits for compliance teams in the financial sector.