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Operational audits
can be concerned with 
any sphere 
of a company's activities. Their prime objective is 
the monitoring of management's performance at every level, to ensure optimal functioning according to 
predetermined criteria. They concentrate on the outputs of the system, and the efficiency of the 
organisation. They are also known as 
'management', 'efficiency' 
or
 
'value for money' 
audits. 
A 
systems audit 
is based on a testing and evaluation of the 
internal controls
within an organisation so 
that those controls may be relied on to ensure that resources are being managed effectively and 
information provided accurately. Two types of tests are used. 
(a) 
Compliance tests 
seek evidence that the internal controls are being applied as prescribed. 
 
(b) 
Substantive tests 
substantiate the entries in the figures in accounts. They are used to discover 
errors and omissions
.
The auditor will be interested in a variety of processing errors when performing compliance tests. 

At the wrong time 

Error 

Incompleteness 

Fraud 

Omission 
The key importance of the two types of test is that, 
if the compliance tests reveal that internal controls 
are working satisfactorily, then the amount of substantive testing can be reduced
, and the internal 
auditor can concentrate the audit effort on those areas where controls do not exist or are not working 
satisfactorily.
3.7 Example 
Suppose a department within a company processes travel claims which are eventually paid and 
recorded on the general ledger. 
(a) When 
conducting 
compliance tests
,
the internal auditor is