Operational Audit:

Operational Audit involves examination of all operations and activities of the entity.

The major objective of an operational audit includes the examination of the control structure and of the relation of department controls in respect of general policies. It basically provides an appraisal of whether the departments are operating in conformity with the standards prescribed to them. It is concerned with formulation of plans, their implementation and control in respect of production and marketing activities

Traditionally, internal audit focused on accounting operations of the entity. However, operational audit covers all other operation such as marketing, manufacturing, etc.

Thus, operational audit in its initial stages developed as an extension of internal auditing. The need for operational auditing has arisen due to the inadequacy of traditional sources of information for an effective management of the company. This is because the management is at a distance from actual operations due to layers of delegation of responsibility, separating it from actualities in the organisation.

Specifically, operational auditing arose from the need of managers responsible for areas beyond their direct observation to be fully, objectively and currently informed about conditions in the units under control.

Operational audit, to conclude, is considered as a specialized management information too which provides extensive reports and informations which the conventional information sources fail to provide. The conventional information sources are usually the department managers, routine performance report, internal audit reports, and periodic special investigation and surveys etc.