Performance audit adding value

Editor's Notes

• #8: For a relatively young profession - and 70 years is youthful as professions go - the changes have been numerous and substantial.
• #16: Performance audits provide objective analysis so that management and those charged with governance and oversight can use the information to improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability.
• #18: As stated in the Auditing Standards, performance auditing is not overly subject to specific requirements and expectations. While financial auditing tends to apply relatively fixed standards, performance auditing is more flexible in its choice of subjects, audit objects, methods, and opinions. Performance auditing is not a regular audit with formalized opinions, and it does not have its roots in private auditing. It is an independent examination made on a non-recurring basis. It is by nature wide-ranging and open to judgments and interpretations. It must have at its disposal a wide selection of investigative and evaluative methods and operate from a quite different knowledge base to that of traditional auditing. It is not a checklist-based form of auditing. The special feature of performance auditing is due to the variety and complexity of questions relating to its work. Within its legal mandate, performance auditing must be free to examine all government activities from different perspectives.The character of performance auditing must not, of course, be taken as an argument for undermining collaboration between the two types of auditing.
• #23: The point of this brainteaser is THINK OUTSIDE THE BOX.
• #26: Management is our customer. We can give what they want the post without understand their business. Most internal auditors whish to be perceived as experts in control. They tell the auditee that they may have no experience in the technical aspects of an activity or unit, but they have both experience and expertise in control. This may well be true. But it doesn’t go far enough. Many auditees regard control as a harsh term, a constricting concept, the function of the nay-sayer. We must be more than experts in control if we are to meet high-minded goals.
• #29: Performance auditors can be faced with considerable variety and ambiguity in their work. They require skills in analyzing activities andmanagement practices. They can be faced with the need to become familiar with a wide range of organizational contexts and subjectmatters.
• #31: Seeing through management eyes - we will understand the issues management is facing and how to be partners with them to improve the performance. Internal auditors call themselves “control expert”. After all, control is but one of the four functions of management. And if we are to counsel managers we must be experts in all four functions – planning, organizing, and directing, as well as controlling. And we should be educated and prepared with management and business processes. This may be new frontier for some performance auditors. This is where the need is greatest. The supply of skilled, corporate managers is severely limited. Managerial performance is often adversely affected by poor managerial techniques or by the violation of accepted management principles. And that is where the management-oriented performance auditor can make a significant contribution. Being conversant with the principle of good management – not only with control – is the first step toward assuming the role of management counselor rather than of management critic.
• #34: Performance measures answer the questions:© How well are we doing?© Are we meeting our goals?© Are our customers satisfied?© Are our processes under control?© Are improvements necessary?
• #36: Example: Milestones completed, Customer Satisfaction Rating, Number of projects requiring reworkProduction cost overrun Cost of maintenance projectsNumber of Maintenance projectsRemember SMART in your organization’s objective setting
• #39: The original 1947 Statement of Responsibilities of the Internal Auditor was not much better. It gave a grudging nod to the internal auditor’s involvement with other than financial activities when it said that internal auditing “deals primarily with accounting matters but may properly deal with matters of an operating nature.”The revised 1957 Statement, somewhat more expansive, defined internal auditing as providing “for the review of accounting, financial, and other operations.”But the 1971 version of the Statement cut the umbilical cord to the books of account from which internal auditors first drew their life support by describing internal auditing quite simply as “the review of operations as a service to management.” Even this definition is too narrow. The Standards for the Professional Practice of Internal Auditing of 1978 expand “service to management” to read “service to the organization.” Thus, it encompasses both management and the board of directors.
• #42: Issued in 1968 to promote the ethical culture among the internal audit profession worldwide.What will happen if an internal auditor violate the Code?- Revoke membership in IIARemove certificationBar from taking CIA exam
• #59: Examples of External Factors affecting an organization include:Technological developments which can affect the nature and timing of service start-ups, or lead to changes in hiring.Changing legislation or expectations that can affect regulations or operating procedures or customer service.OthersExamples of Internal Factors include:A disruption in information system processing which can adversely affect the organization’s ability to function.The quality of personnel hired and methods of training and motivation that can influence the level of control consciousness within the organization.Others
• #73: • Open-ended - good for both hard and soft controls. There are no restrictions as to the type of controls or actions being reviewed.• Disciplined - helps to ensure that all major risks identified are addressed during the review as well as providing the opportunity to identify improvement actions. These forms help ensure that the documentation of work is completed at the time the work is performed and that the client and auditor have reviewed the results and taken the time to identify corrective actions which should be taken.• Risk-based - improves audit effectiveness and efficiency. By focusing on the risks management has expressed concern about, the entire audit process is enhanced since it is doing a review, which will have an impact on the operations and add value to the management team.• Inclusive - documents complete survey thought process. Again, the entire process that management and the auditor followed is documented on a few forms and can be used as a benchmark or as a tool to identify the opportunities
• #77: Performance auditing may contribute to strengthening these values by producing public and reliable information on the economy, efficiency, and effectiveness of government programs.
• #78: The approach is not to ignore the importance of risk-based approach. The question is what the organization and the management needs more. Canadian Government, GAO and other government auditors have been the leaders of this type of performance audit. They have recognized that the lake of the 3E’s can be a huge risk for an government entity to achieve its objectives.However, in UK, this type of performance audit approach is not recognized. They expect that internal auditors will audit the controls over efficiency, economy and effectiveness, but not make evaluations of performance. A possible exception is where auditors are asked to validate performance reports but we would not treat this normal auditing but a consultancy assignment. They generally address the three Es, Value for money and performance from a risk management perspective so that we would be looking at the effectiveness of the measures put in place to mitigate risks.