Performance Audit

AUDIT

Performance audit refers to an examination of a program, function, operation or the management systems and procedures of a governmental or non-profit entity to assess whether the entity is achieving economy, efficiency and effectiveness in the employment of available resources. The examination is objective and systematic, generally using structured and professionally adopted methodologies.

INTOSAI, the international association of Supreme Audit Institutions, has published generally accepted principles of performance auditing in its implementation guidelines. In the United States, the standard for government performance audits is the Generally Accepted Government Auditing Standards (GAGAS), often referred to as the "yellow book", maintained by the federal Government Accountability Office (GAO). Similarly, the European Court of Auditors (ECA) has developed a "performance audit manual" for its audits of the sound financial management of the European Commission and the programmers funded through the EU budget.

The principles guiding performance auditing are often called the “three Es”.

• The principle of ECONOMY is input oriented that keeping the cost low.

• The principle of EFFICIENCY is process oriented that getting the most out of available resources.

• The principle of EFFECTIVENESS is result oriented that meeting the objectives set.

ECONOMY

While reviewing acquisition of resources for economy, the auditor tries to ascertain whether resources have been procured in the -right amount- at right place- at right time and -at right cost.

right amount of resources, he would see if the management laid down its needs clearly and, as far as possible, quantitatively.

Right time :The resource should be available to satisfy the need when it is required.

Right place for a resource is the one where it is needed..

Right Cost refers to lowest cost in the life-cycle of a resource.

Measurement of Economy

• Are we...