1. 1 Performance Auditing ICAS & IRAS Officers NAAA 21 Jan 2016

2. 2 Audit and Accountability LEGISLATURE REPORT ACCOUNTABILITY REPORTING Mandate SOCIETY Conferred Responsibility AUDIT OFFICE AUDIT EXECUTIVE

3. 3 The 3 E’s Economy Efficiency Effectiveness Performance

4. 4 Economy Minimising the cost of inputs used or required (consistent with quality) SPENDING LESS

5. 5 Performance Audit - Economy Audit of administrative activities in accordance with sound administrative principles and practices and management policies.

6. 6 Efficiency The relationship between the output from goods or services and the inputs to produce them SPENDING WELL

7. Audit of the efficiency of utilisation 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 7 Performance Audit- Efficiency

8. 8 Effectiveness The relationship between the intended and actual results of public spending SPENDING WISELY

9. 9 Performance Audit - Effectiveness Audit of the effectiveness of performance in relation to the acheivement of the objectives of the audited entity and audit of the actual impact of activities compared with the intended impact.

10. 10 Inputs to Outcomes INPUTS ACTIVITIESOUTPUTS IMMEDIATE OUTCOMES INTERMEDIATE OUTCOMES ULTIMATE OUTCOMES LABOUR, FUNDS PLANTING, PROTECTION PLANTATION FOREST COVER REDUCED EROSION REDUCED SILTATION

11. 11 Objectives of Performance Audit  Performance auditing has the objective of improving public sector administration and accountability by adding value through an effective programme of performance audits.  The performance audits may examine and report on: the quality of information and advice available to Government for the formulation of policy; the quality of information and advice available to Government for the formulation of policy;

12. 12 Objectives of Performance Audit (cont’d) the existence and effectiveness of administrative machinery to inform the Government whether programme objectives and targets have been determined with a view to fulfilling policy objectives; the existence and effectiveness of administrative machinery to inform the Government whether programme objectives and targets have been determined with a view to fulfilling policy objectives; whether and to what extent, stated programmed objectives have been met; whether and to what extent, stated programmed objectives have been met;

13. 13 Objectives of Performance Audit (cont’d) the economy, efficiency, effectiveness, equity and ethics of the means used to implement a programme/ activity; the economy, efficiency, effectiveness, equity and ethics of the means used to implement a programme/ activity; the intended and unintended, direct and indirect other impacts of programmes/ activities; for example, the environmental impact of Government activity, etc.; and the intended and unintended, direct and indirect other impacts of programmes/ activities; for example, the environmental impact of Government activity, etc.; and compliance to applicable laws, and regulations in the context of the performance audit objectives. compliance to applicable laws, and regulations in the context of the performance audit objectives.

14. 14 Objectives of Performance Audit (cont’d)  Performance audits should not confine the objectives to ‘what has been done’ but should also examine ‘what has not been done’ to meet the policy objectives.  In practice there can be an overlap between regularity and performance auditing and in such cases classification of a particular audit will depend on the primary purpose of that audit.

15. 15 Performance Audit versus Financial Audit  By contrast with financial audit performance audit involves: more judgement and interpretation. more judgement and interpretation. more selective coverage. more selective coverage. criteria for evaluation are not pre-defined. criteria for evaluation are not pre-defined. evidence tends to be at best persuasive, rather than conclusive. evidence tends to be at best persuasive, rather than conclusive. reports contain more discussion and reasoned argument. reports contain more discussion and reasoned argument.

16. 16 Performance Audit versus Financial Audit (cont’d)  Study selection stage  Study design Stage  Consulting the audited entity  Team work  Additional review

17. 17 REGULARITY AUDITPERFORMANCE AUDIT 1. Generally covers a financial period 2. Coverage for the whole of the entity for the period 3. Time bound 4. Attestation of financial accountability 5. Audit of financial systems 1. Covers the subject/ programme over a period of time 2. Focus is on whole or part of the entity’s activities/ programme 3. Coverage is selective 4. Audit of economy, efficiency effectiveness, ethics and equity Performance Audit versus Regularity Audit

18. 18 Strategic Issue Selecting Subjects for Performance Audits

19. 19 Selection Parameters Overall estimated audit impact Financial materiality Significance of the program to activities of the entity Visibility of the program Previous audit findings Auditability

20. 20 Planning Understand the entity (project/scheme) Identify areas of potential significance Define audit objectives & scope Establish audit criteria Develop audit approach & detailed plan/programme including –detailed audit guideline & questionnaire – sampling guideline

21. 21 Performance Audit Process I Selection of Entity /Program to be Audited Scoping of the Audit Identifying the Audit objectives Developing audit criteria

22. 22 Performance Audit Process 2 Communicating these to the Entity (at the level of top management)-  Entry Conference Conduct of the audit Mid term review Continuation of the audit Communicating major findings to the Entity (at top management level)-  Exit conference

23. 23 Basis of Audit findings Decide the basis of comparison – audit criteria Examine what has happened – audit evidence Compare the two : this is a fact, i.e. ‘the factual position’ If there is a significant discrepancy – record the audit finding

24. 24 SOURCES OF EVIDENCE: 1. Policy Statements and legislations 2. Management reports and reviews 3. Files of the entity on the subject (strategic & operation planning files, budget files, management control, monitoring & review files, internal audit reports, complaints & disputes) 4. Databases 5. External sources (independent surveys, research.) 6. SAI sources (evidences collected during previous audits)

25. 25 Use of consultants, experts and outsourcing Department retains full responsibility To document transparently the assessment of knowledge and skill required Examine if the skill required can be met inhouse

26. 26 From Findings to Conclusions The application of the auditor’s professional judgment to one or more facts results in a finding. A conclusion is a statement in an Auditor’s report, that is derived from findings during the audit, in the light of established facts.

27. 27 Execution Gather audit evidence Analyze audit evidence Document audit evidence Develop preliminary audit findings

28. 28 Reporting Discuss preliminary findings with entity management Prepare draft report including : audit conclusions recommendations Send draft report to auditee entity final report is approved by the CAG after examination by senior management

29. 29 Why the Process is Important AUDIT OBJECTIVES QUESTIONS CRITERIA FINDINGS OBSERVATIONSREPORT DO THEY TALLY ?

30. 30 Thank You