1. An overview of performance audit
As carried out by ISSAI 300 and 1300, performance auditing is an independent, objective and reliable examination of whether an organisation undertakings, systems, operations, programmes, activities or organisations are operating in accordance with the principles of economy, efficiency and effectiveness and whether there is room for improvement.
a). The principle of economy means minimising the costs of resources. The resources used should be available in due time, in and of appropriate quantity and quality and at the best price.
b). The principle of efficiency means getting the most from the available resources. It is concerned with the relationship between resources employed and outputs delivered in terms of quantity, quality and timing.
c).The principle of effectiveness concerns meeting the objectives set and achieving the intended results.
2. Performance audit procedure
As established by ISSAI 300, performance audit procedure is mainly framed as an overall audit question which can be broken down into more precise sub-questions.
They should be thematically related, complementary, not overlapping and collectively exhaustive in addressing the overall audit question. All terms employed in the question should be clearly defined.
Auditors choose a result, problem or system-oriented approach, or a combination thereof, to facilitate the soundness of audit design.
Performance audit generally follows one of three approaches;
a). System-oriented approach, which examines the proper functioning of management systems, e.g. financial management systems;
b). Result-oriented approach, which assesses whether outcome or output objectives have been achieved as intended or programmes and services are operating as intended;
•c). A problem-oriented approach, which examines, verifies and analyses the causes of particular problems or deviations from criteria.
3. Notable Gaps of Performance Audit.
a. The purpose of performance audit is to assess whether the auditee is operating effectively and does not assess whether the accounts are true and fair. In this vein, performance audit report does not provide a level of assurance and therefore cannot be used to obtain bank loan and shareholders cannot base their investment decisions on performance audit. An organisation can operate effectively, efficiently and meet its objective in the particular year but still not a going concern.
b. Financial audit ensures that an organisation accounts for its assets properly and accurately presents its values in the statement of financial position in accordance with applicable accounting standards while performance audit pays little or no attention to this aspect. In addition, performance audit and its three Es does not analysis an organisations net asset, payables vs receivables ratio analysis, return on capital employed, liquidity levels etc.
What’s your view?
By; Winfred Mupakasi Silumbwe
