An Overview of Technical Audit

Business organisations that are involved in different industries require financials, projects, processes, and databases, among other things, to be audited and approved as efficient for long-term operations. Such audits help avoid unsafe and unethical practices, financial fraud and embezzlement other things. An audit is generally considered to examine an organisation's financial statements to ensure accuracy.

However, technical audits or something different that are applicable to specific industries. Most multinational companies which have complex international supply chains and even smaller businesses with high manufacturing costs are turning towards vendors that are low cost to meet their manufacturing needs.

These common cost vendors mostly have lower quality, manufacturing, sourcing and delivery process. Since companies are required to work with a range of vendors spread across territories, it is imperative to have in place acceptable and consistent standards while working with these vendors.

Before placing an order with a vendor, it is prudent to ensure that the manufacturer has the requisite infrastructure, processes, systems and competence to fulfil the requirements of the company. It is advisable to make sure that all the applicable international and local standards of safety and quality are maintained consistently by all the global and local vendors of the company fall through the manufacturing and delivery process.

A technical audit is an objective and independent assurance to evaluate the efficacy and efficiency of an organisation's operations. The actual purpose of a technical audit is not to assess accuracy but to ensure compliance and to make sure that applicable standards are being followed, which should ultimately provide accuracy.

It is a thorough assessment of the manufacturing processes of a vendor and the quality control systems in place to assess the competence of the facilities and machinery, among other things, of the manufacturer and whether the manufacturer can meet the specific requirements of a company. A technical audit is a comprehensive evaluation to assess the capacities and capabilities of a supplier.

It gives a company extensive visibility as to how a manufacturer will be able to meet its requirements pertaining to quality introduction. It also helps reveal how proactively the manufacturer shall manage the many aspects of the production process. Results from these audits can help companies to make an informed decision before placing an order with the supplier and to get an idea of the operational, ethical and quality risks that might be involved.

Role of a Technical Auditor

Technical audits are conducted by either engineers or subject matter experts by evaluating and investigating the systems, processes and procedures in place to assess or identify areas of improvement or discrepancies. The auditor will determine the existing deficiencies or areas of risk or where the system or process can be improved.

Technical audits help cover technical aspects of a procedure or project implemented and organisation. A technical auditor is required to have an in depth knowledge of the subject matter unit development, design, algorithm updates and security standards, among other things.

The primary duties of a technical auditor are as follows:

• Evaluation
• Preparing reports along with recommendations and findings for the top management of the organisation
• monitoring the implementation of improvements and corrective action plans to remove discrepancies and gaps in performance.
• Evaluating internal compliances, established policies and standards
• inspecting and auditing of materials, processes, and systems, among other things, in accordance with technical specifications and descriptions.

Objectives of a Technical Audit

A technical audit can be conducted for the following reasons:

• To ensure that every technical requirement is fulfilled and the required standards armet while performing various processes or tasks.
• Technical audit of suppliers products and procured materials is conducted to make sure that all the technical specifications r at par with the requirements
• assessing internal controls to identify any discrepancies and to ensure compliance with existing regulations and standards.
• To get assurance about the compliance of operations with the organisation’s policies and applicable standards.
• To evaluate whether technical operations are being performed as required.
• To assess whether the framework of sound control is in place to prevent and avoid potential risks.
• To check whether technical equipment is suited to the purpose for which it was procured.
• To ensure that authority and responsibility for operations have been assigned properly.
• To check if the information system is sufficient to provide assurance of proper conduct of operating activities

A technical audit majorly focuses on the below mentioned:

• Planning and design aspect of the project: This pertains to the demand analysis and need analysis of a technical audit. The questions that shall be asked during the planning stage shall include the scope of the audit, how the audit will be conducted, and the exercise of quality assurance measures. The experience of the auditor in the field of the subject matter that is being monitored shall also be the point of consideration. It shall also include preparation of authorisation and technical specification, quality assurance, and assessing the experience of the vendor required by the project.
• Purchase or procurement: The auditor shall check compliance of procedures and procurement methods with the financial manual and conduct an independent assessment and evaluation of the proposals received from different suppliers without any bias or coercion.
• Implementation: Evaluating whether the project is being completed within the given timeline. When situations of non-compliance arise, the provisions for relief in cases where the project completion is delayed shall also be evaluated. This stage of the technical audit shall also check the project completion is in accordance with the applicable standards. The acceptance test report is a crucial Document.
• Project impact: The auditor shall evaluate the full impact of the project. It shall be assessed considering various aspects like set goals and expectations along with improvement of KPIs or key performance indicators. At this stage, the auditor shall suggest ways to increase market share, increase or decrease in customer loyalty, reduce or improve operation costs, and increase the revenue of the company, among other things.

Preparation before a Technical Audit

Prior to conducting a technical audit, the auditor shall be provided with some basic information about the project which is to be audited. This shall include the main features of the project, contract agreement, an overview of the resources deployed, progress status, and timelines, among other things. The technical audit shall be conducted by an external auditor who shall visit the site and accompany a senior personnel from the organisation.

The auditor shall examine records and gather all vital information by inspecting various aspects of the site and by interacting with the on site team. The auditor can ask leading questions to guide the authorities to unearth and identify critical issues and find avenues for improvement. The auditor shall also borrow from his previous experience and help the auditees benchmark a higher level for their performance.

Common Audit Procedures

There are various ways in which an auditor conducts audits, and having an inside into such standard procedures for audit can help organisations gain an understanding as to how an auditor reaches decisions. Some of the commonly practised procedures for an audit are as follows:

Test of details sampling

To test for a mistake in any project or a financial statement, it requires the auditor how to select sample items from the lot and make a decision based on that sample. For instance, to test the balance of accounts receivables, she may examine the sub ledger to get an understanding of the customer listing making up the balance.

The auditor selects any sample of customers randomly from the sub ledger and another random sample of invoices from sub ledger. This way, the auditor gets an assurance of the whole account balance without having to go through every single invoice. She can gain a total estimate of the misstatement, if any, in the account balance based on the sampling results as long as the samples are selected randomly.

Reciprocal testing

Auditors can also use common balance while testing for understatement. These include population account entries of the accounts data being investigated. For instance, auditors are required to conduct tests to ensure that no liabilities have been understated. Auditors are required to examine cash receipts, asset receipts, along with equipment purchasing, assuming that the company has a genuine purpose in recording the liability.

Observation

Certain types of audits require the auditors to examine specific items physically. This holds true when a fixed asset of a project is required to be audited. Auditors can choose any material items randomly to observe their existence and to work. Observations by auditors regarding fixed assets like machinery or equipment are considered strong audit evidence.

Substantive Analytical Procedures

This procedure helps the auditor to compare the recordings made by the organisation, and the observations are recordings made by the auditor.

Fastzeal Technical Audit Expertise

The technical audits conducted by Fastzeal adhere too many of the internationally recognised standards, including the ISO 9000 standards for the quality management system, among other things. All our technical auditors are experienced professionals with proven records in their respective fields, and they regularly undergo training and assessment.

When a technical audit is conducted by our auditors, they employ comprehensive procedures and extensive evaluation to check whether a particular is competent and capable of meeting the requirements of the company. A technical audit conducted by FastZeal involves the following:

• Creating a basic profile of the factory
• assessing the quality management system of the factory, including the quality manual of the factory and conducting management and planning review
• reviewing the resource management of the manufacturer, including purchasing, human resources, and control of the measurement devices
• Stock management which shall involve assessing how materials are stored but also assessing the in-process products and finished products
• Inspection of the incoming material
• review of the process of production, including quality control, production and organisation of workshops, among other things
• The packaging and the quality control procedures that are involved before shipment, including parking line organisation
• Inspection, analysis, measurement and improvement of the data management, factory internal audits

Once the technical audit is conducted by auditors, on the findings shall be collated in an extensive audit report along with a corrective action plan that shall be provided in order to prioritise the most urgent collective actions to improve the functioning of the factory. Progress after the implementation of the corrective actions can further be measured by conducting follow up audits, phone calls, desktop review, among other things.

A technical audit that is carried out by expert auditors shall yield reports within 72 hours.

Our technical audit packages are primarily customisable and offer a high degree of flexibility to suit the specific requirements of every business. The below mentioned services can also be included to add on to the evaluation process and allied services provided by Fastzeal:

• Ethical audits: They are conducted to review social accountability with the aim of providing an ethical, safe and healthy work environment that complies with applicable labour practices and laws.
• Manufacturing audits: These audits area systematic and comprehensive evaluation of the manufacturing process in order to identify and curate solutions to errors found during different stages of the manufacturing process. It primarily involves a plethora of aspects like the competence and capacity of the manufacturer, systems employed, and workplace environment with a view to ensure that the manufacturer is competent of producing products that gel well with the requirements and specifications of a business.
• Structural audits: These help effectively analyse the safety and integrity of the manufacturing premises. This involves a comprehensive audit of the fire safety measures, relevant code, and structural integrity, among other things.
• Assessment of procurement conditions
• Evaluation of the social responsibility of the entity and associated compliance
• Research and development pertaining to the sampling capacity
• Evaluating health, hygiene and safety standards of the unit
• Assessing the environmental impacts of the factory processes involved
• Any other evaluations as required