A performance audit is an objective and systematic examination of the evidence to provide an independent assessment of the performance of a government organization, program, activity, or function to provide information to improve public accountability and facilitate decision-making by parties with responsibility to oversee or initiate corrective action.
Elements of performance audit
Performance audit includes evaluation of the economy, efficiency, and effectiveness.
Economics stands for minimizing the cost of resources used for an activity, having regard to appropriate quantity, quality, and the best price. Evaluating the economy implies forming an opinion about whether the resource has been used economically and acquired in due time, in appropriate quantity, and quality at the best price.
Efficiency is the measurement of input-output. It is said to be achieved when the output is maximized at the minimum of input, or input is minimized for any given quantity and quality of output.
Examining efficiency embraces aspects such as whether:
- Procurement practices followed are sound.
- Resources are properly protected, maintained, and efficiently used.
- Efficient operating procedures are used.
- The objectives of public sector programs are met cost-effectively.
Effectiveness is the measurement of the extent to which objectives are achieved and the relationship between the intended impact and the actual impact of an activity.
Examining effectiveness will cover the following:
- Determine the extent to which a program achieves are the desired level of results.
- Assess the effectiveness of the program and/or of individual program components.
- Determine whether management has considered an alternative for carrying out the program that yield might desire results more effectively or at a lower cost.
- Assess the adequacy of the management control system for measuring, monitoring, and reporting a program’s effectiveness.
- Ensure compliance with laws and regulations applicable to the program.
Planning a performance audit of some factors to be considered:
- Significance and the need for potential users of the audit report.
- Obtaining and understanding of the program to be audited.
- Identify the significant finding and Recommendations from a previous order that could affect the current audit objectives.
- Consider whether the work of other auditors and experts may be used to satisfy some of the auditor’s objectives.
- A potential source of data that could be used as audit evidence and considered the validity and reliability of the data.
- Preparing a written audit plan.
- Providing sufficient staff and other resources to do the audit.
- Legal and regulatory requirements.
- Identifying the criteria needs to evaluate matters subject to audit.
- Management controls.