RELATIONSHIPS OF OPERATIONAL, FINANCIAL, AND INFORMATION SYSTEMS AUDITING

 RELATIONSHIPS OF OPERATIONAL, FINANCIAL,

AND INFORMATION SYSTEMS AUDITING

During the 1960s, there was a strong tendency for many to use the term of operational

auditing in place of the traditional internal auditing. The rationale was that internal

auditing was a term tied too closely with basic financial auditing, including the external

auditor’s review of both financial control activities and financial statements.

Internal auditors called themselves operational auditors because of their desire to

focus more of their efforts on the other operational activities in the organization that

could potentially point to areas for increased profit and overall management service.

In its most extreme form, the so-called operational auditing function would disassociate

itself entirely from the so-called financial areas. They would claim, for example,

to have no expertise on the financial controls surrounding an accounts receivable

operation. Rather, they might look at process controls and ignore the issue of

whether the cash received was properly recorded and tied to financial accounts,

including the general ledger. Management often became confused and dismayed

when their internal auditors all but ignored these important accounting or financialrelated

issues. This separation of responsibility created issues of both substance and

self-interest for the operational audit–oriented internal auditors.