Performance Audit

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1. What is performance auditing?

1.1 What is performance auditing according to INTOSAI?

INTOSAI’s Auditing Standards (AS 1.0.38 and 1.0.40) state the following: ‘The full scope of government auditing includes regularity and performance audit’, and ‘Performance auditing is concerned with the audit of economy, efficiency and effectiveness and embraces: (a) Audit of the economy of administrative activities in accordance with sound administrative principles and practices, and management policies; (b) audit of the efficiency of utilization of human, financial and other resources, including examination of information systems, performance measures and monitoring arrangements, and procedures followed by audited entities for remedying identified deficiencies; and (c) Audit of the effectiveness of performance in relation to achievement of the objectiveness of the audited entity, and audit of the actual impact of activities compared with the intended impact’. Performance auditing is based on decisions made or goals established by the legislature, and it may be carried out throughout the whole public sector.

1.2 What is the special feature of performance auditing?

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 (AS 4.0.4, 4.0.21-23 and 2.2.16). The character of performance auditing must not, of course, be taken as an argument for undermining collaboration between the two types of auditing.

1.3 What ideas form the basis of performance auditing?

Public accountability means that those in charge of a government program or ministry are held responsible for the efficient and effective running of such. Accountability presupposes public insight into the activities of the program or ministry. Performance auditing is a way for taxpayers, financiers, legislatures, executives, ordinary citizens and the media to ‘execute control’ and to obtain insight into the running and outcome of different government activities. Performance auditing also provides answers to questions such as: Do we get value for money or is it possible to spend the money better or more wisely? A criterion of good governance is that all public services (or all government programs) are subjected to auditing Legitimacy and trust are essential values in all government undertakings, and performance auditing may contribute to strengthening these values by producing public and reliable information on the economy, efficiency, and effectiveness of government programs. This is facilitated by the fact that performance auditing is independent of the government ministries whose activities are subject to the audit. In this way, an independent and reliable view of the performance of the audited program or objects is obtained. The performance audit does not represent any vested interest and has no ties, financial or otherwise, to the audited objects. By producing independent assessments, performance auditing may also serve as a basis for decisions on future investments and activities....
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