Expert verified Operational audits in India can be an effective tool to spot inefficiencies, cut down costs, and tighten internal controls. In this post, we break down all about the best operational audit services.
We cover everything including their benefits, main components with examples, and how businesses can get the best from them to grow and stay compliant.
Why Operational Audit Services Are Important?
Operational audit services are a type of service offered by professionals and Consulting firms that conduct operational audits for businesses and other organisations.
It involves thoroughly evaluating an organization’s operational efficiency, effectiveness, and compliance with established policies and procedures.
Operational audit services are provided by internal audit departments within organizations or by external professional firms like PKC Management Consulting specializing in audit and advisory services.
The main benefits of operational audit services include:
- Boost Efficiency & Cut Costs: Identify and eliminate waste, bottlenecks, and redundancies to enhance productivity and reduce expenses.
- Enhance Effectiveness: Align operations with business goals—e.g., improve campaign conversions or meet production targets.
- Ensure Compliance & Avoid Penalties: Proactively spot gaps in GST, tax, labour laws, and sector regulations to avoid fines and reputational damage.
- Strengthen Risk Management & Prevent Fraud: Detect process vulnerabilities that could lead to fraud, data breaches, or supply chain disruptions.
- Improve Resource Allocation: Highlight underused or misused resources for smarter investment and manpower deployment.
- Enable Better Decision-Making: Deliver objective insights into real-time operations, leading to more informed strategic and tactical decisions.
- Enhance Customer Satisfaction: Streamline service, fulfillment, and complaint processes for faster, error-free delivery.
- Support Growth & Scalability: Help streamline and standardize processes, making scaling up smoother and more manageable.
- Boost Stakeholder Confidence: Show investors, lenders and partners the business is efficient, compliant, and risk-aware– boosting trust and credibility.
Key Components of an Operational Audit Services (With Examples )
In order to analyse how the business processes function, an operational audit has to go through several key components including:
Planning & Scoping
This involves defining the audit’s objectives, scope (which process/department), risks, criteria (standards to measure against), and resources.
It also means identifying key regulations and stakeholders.
Example: Auditing procurement process of a textile manufacturer.
Scope: vendor selection, purchase order approval, GST input credit verification, and inventory receipt.
Criteria: Company policy, Indian Contract Act, GST rules, efficiency benchmarks.
Understanding the Process
This means documenting how the process actually works (not just officially). This is done using flowcharts, interviews, and walkthroughs.
Example: Loan disbursal process in a regional NBFC.
The auditor discovers that while the policy mandates digital KYC, rural branches rely on physical Aadhaar copies and manual verification due to connectivity issues, increasing risk of fraud and slows down the disbursals.
Risk & Control Assessment
Here auditors identify what could go wrong (risks – fraud, error, inefficiency, non-compliance) and evaluate if existing controls (checks) are adequate to prevent/detect them.
Example: Inventory management for an auto parts retailer.
Risks: Theft, obsolescence, stockouts.
Controls: Physical counts (but done only quarterly), CCTV (blind spots), restricted access (often bypassed).
Assessment finds controls weak against pilferage and poor demand forecasting leading to dead stock.
Testing & Evidence Gathering
This involves performing procedures (inquiry, observation, inspection, re-performance, data analysis) to gather evidence on whether controls work in practice and objectives are met.
Example: GST Compliance for a Software Exporter
Selecting a sample of sales invoices and verifying if GST was charged correctly, HSN codes used accurate, and timely filing of GSTR-1/3B reconciliations.
Evaluation & Analysis
Here, the auditors compare evidence against criteria. They then identify root causes of issues (not just symptoms).
They also assess its impact (financial loss, time wasted, compliance gap).
Example: Delivery in construction firm
Analysis reveals that late project deliveries in the construction firm are primarily due to:
Root Cause 1: Inefficient cement procurement leading to frequent shortages (Impact: 15% project delay on avg),
Root Cause 2: Non-compliance with local municipal waste disposal rules causing work stoppages (Impact: Fines + Reputation damage).
Reporting & Communication
This deals with clearly documenting findings (condition, criteria, cause, consequence), recommendations for improvement, and management’s response.
Example: Operational Audit Report for a food processing unit
Finding: Manual temperature logs for cold storage are frequently incomplete/fabricated.
Criteria: FSSAI mandates accurate, real-time monitoring.
Cause: Lack of automated sensors; reliance on untrained staff.
Consequence: Risk of spoilage & FSSAI penalties.
Recommendation: Install IoT-based temperature monitoring system.
Follow-up & Monitoring
The final component handles tracking management’s progress in implementing agreed-upon recommendations. It also looks into verifying the effectiveness of corrective actions.
Example: Following up 6 months after the audit of a hospital’s billing process.
Auditor checks if the recommended controls (unique patient IDs to prevent duplicate billing, automated GST calculation in software) are implemented and tests a sample to confirm errors have reduced.
How to Choose the Right Operational Audit Firm in India?
Choosing the right operational audit firm is crucial to ensure you get actionable insights, not just a compliance report. Here’s how to find the best fit:
1. Define Needs & Objectives
- Identify key pain points: costs, compliance, delays, fraud, scaling
- Determine scope: full audit or focused (e.g., supply chain, GST)
- Ensure industry fit: auditors must understand sector-specific nuances
2. Evaluate Capabilities
- Prioritize operational audit experience, not just financial
- Ensure strong knowledge of regulations -GST, TDS, PF, POSH, FEMA, FSSAI, etc.
- Seek sector experience – expertise must align with your industry
3. Assess Methodology
- Risk-based focus: prioritize high-risk areas (fraud, compliance gaps)
- Practical, cost-effective solutions
- Use of tech: data analytics for GST, inventory, payroll insights
- Collaborative style: work with management, not just audit reports
4. Check Credentials & Reputation
- Qualified team: CAs, CIAs, CFEs, industry experts
- Speak to client references – focus on quality, relevance, and post-audit support
- Ensure independence and strong ethical standards
5. Ensure Practical & Cultural Fit
- Clear communication in English and local languages.
- Familiarity with Indian business culture and processes.
- Scalable for your size and locations.
- Evaluate proposals for value, not just cost—look for clear scope and pricing
Key Questions to Ask Potential Firms Offering Operational Audit
- Walk us through how you would approach an operational audit for [Your specific process, e.g., procurement in manufacturing]
- Can you share examples of impactful operational improvements you identified for similar clients?
- What technology/tools do you use for data analysis in operational audits?
- How do you quantify the financial or operational impact?
- What is your process for ensuring recommendations are practical and implementable?
- How do you handle follow-up to ensure recommendations are acted upon?
- What impact will the audit process will have on our [Your Specific Process being audited]
- Do you benchmark client processes against Indian or global industry best practices?
Benefits of Using PKC’s Operational Audit Services
✅37 years proven expertise across diverse industries
✅Real-time MIS reports for data-driven decision making
✅Process automation insights reducing manual dependencies significantly
✅Cost reduction strategies through operational efficiency improvements
✅Risk identification before they impact business operations
✅Compliance assurance across all regulatory requirements effectively
✅Structured approach ensuring quality service delivery standards
✅Industry and size specific solutions tailored for your business needs
✅Performance KPIs development for measurable operational improvements
✅Technology integration recommendations for streamlined business processes
✅Continuous monitoring systems for sustained operational excellence
Tips for Getting the Best Out of Operational Audit Services
If you have hired operational audit services, here are a few unique tips to get the most out of the engagement:
- Internal Audit Champions: Identify key employees from each department to act as bridges between auditors and your team, ensuring nothing important gets missed during the review process.
- Pre-Audit Self-Assessment: Perform your own mini-audit before professionals arrive to identify obvious gaps and demonstrate proactive management, leading to more strategic recommendations.
- Shadow Days for Auditors: Have auditors spend full days working alongside different roles to uncover operational realities that traditional interviews and document reviews often miss.
- Quick Win Identification: Ask auditors to identify 3-5 improvements that can be implemented immediately with minimal cost to build momentum while larger changes are planned.
- Failure Mode Analysis: Request analysis of what could go wrong with each current process and its potential impact to prioritize improvements based on actual risk exposure.
- Quick Implementation Teams: Form cross-functional teams dedicated to implementing specific recommendations within 30-day periods to prevent suggestions from getting lost in daily operations.
- Audit ROI Scorecards: Develop metrics that track the financial return on each implemented recommendation to demonstrate audit value and secure future improvement resources.
- Knowledge Transfer IInitiatives: Instead of just receiving recommendations, arrange training sessions where auditors teach your team their analytical methods for ongoing improvement capability.
- Reverse Auditing: Ask auditors to examine your most successful processes to understand why they work well, then apply those success principles to struggling areas.
Frequently Asked Questions
- What do operational audit services in India include?
These services include reviewing internal processes, identifying inefficiencies, checking compliance, and recommending improvements. They often cover finance, HR, IT, supply chain, and risk management functions.
- How to choose the right operational audit service provider in India?
Look for firms with industry-specific experience, certified auditors, and strong client reviews. Always check if they follow Indian audit standards and regulatory requirements.
- How long do operational audit services take to complete?
Most audits take between 2 to 6 weeks, depending on your company’s size and complexity. Larger organizations may require more time for fieldwork and reporting.
- What types of businesses in India need operational audit services?
All types of businesses from startups and SMEs to large enterprises and PSUs use operational audit services and benefit from them.
