Building an assessment model about the influence of operational audit within Vietnam cement industry corporation

est groups Table 5. Influence exerted on the audited bodies’ relation with interest groups The evidence shows that operational audits can impact not only on audited bodies but also on VICEM’s relations with interests groups. This is analogous with the Morin’s results. In particular, such an audit can impact on VICEM’s relations with its clients. In addition, a large number of relative authorities such as the tax department also can be influenced by operational audits. A manager from the financial department states that the VICEM’s performance has been considered as benchmark for evaluation in the cement industry in Vietnam since VICEM was asked to focus on operational audit in order to establish the criteria for the industry. 3.1.5. The perceived utility of auditor general reports Table 6. Perceived utility of auditors’ reports MEAN 1..5 No Very great Utility Reference instrument Validate positions taken or observations already made 2.96 Stimulate reflection 2.58 Take a more detached attitude towards management 2.05 Enrich VICEM’s memory 2.89 Provide data useful in implementing certain projects 2.53 Instrument of negotiation A basic for valid discussions 2.57 An opportunity to challenge terms and programmes 2.66 Strong point in arguments between different parties 2.75 Instrument of change Facilitate the signing of agreements or protocols 1.69 Realign programmes, services 2.85 Realign policies 2.35 Move from discussion to action 2.87 MEAN 1..5 No Very strong Influence Other VICEM’s members 2.04 Mother company 2.88 Audit department 2.94 External audit 2.78 VICEM’s clients 2.64 General public 2.27 563 Although the interview results demonstrated a slight difference from the literature review that was indicated in the research of Morin (2004: 154), the operational audit reports of VICEM’s operational auditors also can be used as reference instruments; instruments for change and instruments of negotiation. The evidence from table 6 shows that the audited bodies tend to use audit reports more as reference instruments rather than for other purposes. The respondents claim that although the auditors do not have the power to force auditees to comply with their recommendations, the auditees tend to follow the recommendations because they found that audit reports, especially audit recommendations are very useful for their performance. 3.1.7. The concrete actions taken by audited managers following an operational audit Table 7. Concrete actions taken by auditees MEAN 1..5 No Very great Contribution Reorganisation of information system 2.26 Creation of new work groups or reform of existing groups 2.15 Programme reform 1.98 Modification of certain laws or regulations 1.89 Recruitment of additional personnel 1.83 Reorganisation of the organisation 2.28 Adoption of new laws or regulations 2.47 Lay-off of existing staff 1.76 As shown in table 7, the respondents expressed the opinions that operational audits had negligible effect on the concrete actions taken by audited bodies. From the respondents’ perspective, operational audit only can be seen as one of a large number of events that they have to handle in the business. As a result, it is very difficult to not be distracted from the recommendations even the good ones which were formulated by operational auditors. This is slightly different with the literature. This implies that operational audits cannot revolutionise the procedures or projects in VICEM. In support to this finding, on average, a small number of managers who were interviewed believe that operational audits have noticeable contributions to the reorganisation of informational systems. The reason for this is due to the lack of the synchronisation in management, explained by a manager working in unit production management. Sometimes the recommendations are reasonable but lack of the link among departments could be seen as the main reason for the difficulty in applying recommendations of operational audits. The influence of operational audits, therefore, can be declined. Nevertheless, the evidence proved that operational audit still has impact on the concrete actions taken by audited bodies, even though this positive impact needs to be improved. 564 3.1.8. Organisational consequences of audits Table 8. Negative organisational consequences Regardless of positive impacts of operational audits on the “three Es” – effectiveness, efficiency and economy in the performance within VICEM, this section will discuss how respondents evaluate negative consequences. This will provide a full assessment of the impact of operational audits in VICEM. Based on the interviews’ results which are presented in table 4.8, it can be clearly seen that, operational audit does not seem to have strayed from the main path. In other words, if the operational audits may result in negative consequences in operational management in VICEM, they were believed to be marginal. 3.1.9. Personal consequences of audits Table 9. Personal consequences of audits MEAN 1..5 No Very strong Impact Increase in motivation 2.66 Tendency to encourage you to promote mid- to long-term objectives 2.45 Improvement in your performance 2.61 Increase in confidence on the part of your superiors 2.35 Positive influence on your ulterior work or on your career 2.32 Increased confidence in your subordinates 2.16 Loss of motivation 1.63 Tendency to limit you to the achievement of short-term objectives at the expense of long-term ones 1.35 Tendency to restrain your initiatives 1.23 Drop in your performance 1.29 Loss of confidence on the part of your superiors 1.18 Loss of confidence in your subordinates 1.20 Negative influence on your ulterior work or your career 1.15 MEAN 1..5 No Very great Contribution Increase in VICEM’s short-term operating costs with no mid-term benefits to compensate for the increase in cost 1.56 Multiplication of controls extensive enough to hinder achievement of objectives 1.35 Dissatisfaction of target clientele owing to a considerable loss of efficiency in the delivery of services following implementation of the additional controls recommended by the auditors 1.59 Organisational paralysis 1.13 565 According to the data collected, audited managers believed that they have received personal benefits from operational audits’ consequences. This is demonstrated by the numbers which managers selected to express the impact of such audit to them. In particular, on average, the numbers indicating positive consequences are much higher than the numbers indicating negative consequences, as shown in table 9. For example, the figure indicated the impact of operational audits on the increase in motivation was much higher than the figure indicating the impact of such audits on the loss of motivation (2.66 versus 1.63). Operational audits also have resulted in an increase in confidence on the part of managers’ superiors rather than loss of confidence of them. This implies that audited managers did not see operational audits as coercion but as learning opportunities. One of the interviewees highlighted that “operational audits offer me great opportunities not only to learn from auditors but also to prove my abilities. Therefore, I found interest in every operational audit”. 3.1.10. Global impact on the management of VICEM Table 10. Global impact on the management of VICEM In light of the data collected, once again, it can be clearly seen that the operational audit did nothing to revolutionize the operations within VICEM. Nonetheless, such an audit leaves a positive imprint in the course of the organisational life (see table 10). 3.2. Recommendations 3.2.1. Recommendations for the relevant authorities Operational auditing function, recently, could be seen as a part of internal audit. Regardless of this misconception, the legal documents about internal audit are not enough, not comprehensive and unfeasible. In particular, the relevant authorities should build internal auditing standards or establish the Vietnam association of internal auditors in order to manage the implementation of internal audit in organisations. Along with the legal documents, Vietnam National Cement Association (VNCA) plays an important role in establishing criteria. For example the acceptable waste rate in each stage of production and the rate of skilled work in total, etc. These enable both audited managers and auditors to identify how effective the audited activities are and how the performance becomes better. The benchmark also allows auditors to compare the MEAN 1..5 No Very strong Impact Improvement of management 2.87 Deterioration of management 1.38 Overall effect of operational audit 2.68 566 performance among Cement Companies. As a result, the auditors’ recommendations will be more reasonable and acceptable. In addition, VNCA should organise frequently, conferences or in-house training for internal auditors who have been responsible for operational audits in order to enhance their capabilities. The awareness of managers or directors about operational audit also needs to be improved so workshops held by VNCA and professional organisations would be very helpful. 3.2.2. Recommendations for VICEM Firstly, VICEM should enhance the role of operational auditing function. In order to do so, the board need to issue the charter which could describe in details the objectives, missions, responsibilities and power of operational audit function. This charter also needs to clarify the budget spent on operating such functions including human and other resources. Secondly, the internal audit department should shift its focus to conducting operational audits to help increase the efficiency of the operations, instead of just checking the compliance with regulatory guidelines and the accuracy of the financial statements. Thirdly, the capacity of operational auditors also needs to be enhanced regularly with the provision of on-the-job training or continuing professional development because human resource could be seen as the centre factor of operational audit. 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