©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 21 Learning Objective 4 Provide an overview of operational audits. This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 22 Effectiveness refers to the accomplishment of objectives Efficiency is defined as reducing costs without reducing effectiveness Effectiveness Versus Efficiency This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 23 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 This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 24 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 This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 25 Relationship Between Operational Auditing and Internal Controls Reliability of financial reporting Efficiency and effectiveness of operations Compliance with applicable laws and regulations This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 26 Types of Operational Audits Functional Organizational Special assignments This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 27 CPA firms Government auditors Internal auditors Who Performs Operational Audits This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 28 The two most important qualities for an operational auditor are: Independence and Competence of Operational Auditors Independence Competence This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 29 Learning Objective 5 Plan and perform an operational audit. This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 30 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: This is trial version www.adultpdf.com . 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. shut down for lack of materials A duplication of effort by employees exists Production and accounting keep identical records Effectiveness Versus Efficiency This is trial version www.adultpdf.com ©2008. auditors Who Performs Operational Audits This is trial version www.adultpdf.com ©2008 Prentice Hall Business Publishing, Auditing 12/e, Arens/Beasley/Elder 26 - 28 The two most important qualities for an