PERFORMANCE AUDIT MANUAL,

STANDARDS AND
IMPLEMENTATION Guide I&II
-----------------------------------------------------
July 2013
Reviewed and Customized by MOFED For Internal Audit use
CONTENT
SECTION ONE Pe!"#$%&e Audi' M$%u$l P$(e

DEFINITIONS 0
INTRODUCTION 1
C)APTER ONE 2
C)APTER T*O +
C)APTER T)REE 13
C)APTER FOUR +,
C)APTER FI-E .,
C)APTER SI/ 00
SECTION T*O Pe!"#$%&e Audi' S'$%d$d1

DEFINITIONS 20
INTRODUCTION 21
C)APTER ONE 22
C)APTER T*O 23
C)APTER T)REE ,1
C)APTER FOUR 103
C)APTER FI-E 10,
GLOSAR4 110
REFERENCE 113
SECTION T)REE O$l I%!"#$'i"% O5'$i%i%(
ORAL INFORMATION O6TAINING & USE 11+

SECTION FOUR A77e%di&e1

APPENDICES 81 -2.9 13.
1
SECTION ONE
PERFORMANCE AUDIT MANUAL P$(e

DEFINITIONS ::::::::::::::::: 0
INTRODUCTION ::::::::::::::::: 1
C)APTER ONE C"%&e7'1 ::::::::::::: 2 - 3
C)APTER T*O Pu7"1e $%d S&"7e "! Pe!"#$%&e Audi' + - 12
C)APTER T)REE Pe!"#$%&e Audi' Pl$%%i%( :::::; 13 < +2
C)APTER FOUR M$i% I%=e1'i($'i"% ::::::::;; +, - .2
C)APTER FI-E Re7"'i%( ::::::::::: ., - 0.
C)APTER SI/ P"1' Audi' F"ll">- u7 :::::::; 00 - 0,
2
SECTION T*O
Audi'i%( S'$%d$d1 P$(e

DEFINITIONS :::::::::::::: 20
INTRODUCTION :::::::::::::: 21
C)APTER ONE 6$&? G"u%d :::::::: 22 -23
C)APTER T*O Ge%e$l S'$%d$d1 ::::::; 23 - ,0
C)APTER T)REE Field *"? S'$%d$d1 ::::; ,1 < 102
C)APTER FOUR Re7"'i%( S'$%d$d1 :::::; 103 - 102
C)APTER FI-E F"ll">-u7 :::::::::; 10,
Gl"11$y ::::::::::::::;; 110
Re!ee%&e ::::::::::::::;; 113
3
SECTION ONE Performance Audit manual
DEFINITIONS
In this manual the onte!t unless otherwise indiates"
Audi' is an evaluation o# a $erson% or&anization% system% $roess% enter$rise% $ro'et or
$rodut( )he term most ommonly re#ers to audits in aountin&% but similar one$ts also
e!ist in $ro'et mana&ement% *uality mana&ement% and ener&y onservation(
I%'e%$l Audi' means Audit servies established in eah Federal +overnment $ubli bodies(
MOFED means )he Ministry o# Finane , Eonomi Develo$ment in Federal +overnment
o# Ethio$ia(
I%'e%$l Audi'" means auditor o# the -ubli body o# Federal $ubli body(
Audi'ed e%'i'ie1@$udi'ed 5"die1@$udi'ed "($%iA$'i"%1 mean all Federal $ubli bodies that
are audited by the Internal Auditors(
S'$%d$d1B - Althou&h the word .standards/ is used throu&h out this doument it is
understood that this word is to be used synonymously with the word .&uidelines/ whih
0ee$s the authority #or om$liane within the domain o# eah &overnment bud&etary
institutions(
G"=e%#e%' means the Federal +overnment o# Ethio$ia(
I%'e%$l Audi' )e$d means head o# the internal Audit in bud&etary institutions(
ECe&u'i=e means the o##ie o# the ounil o# ministers o# Federal +overnment o# Ethio$ia(
1
INTRODUCTION
1( )he role o# the Internal Audit traditionally has been limited to e!$ressin&
Reommendations on #inanial statements and related issues o# le&ality% re&ularity and
#raud( )his involves assessments o# whether transations were $ro$erly ontrolled%
whether are was ta0en in the olletion and ustody o# revenues% whether
e!$enditures were $ro$erly inurred and &enerally% whether the e!eutives2 intentions
were bein& met(
2( 3owever% this a$$roah does not $rovide in#ormation on waste% ine##iieny or
ine##etiveness( Inreased $ubli e!$enditure% the need #or more rational and
in#ormed deision ma0in& in the use o# resoures and the &rowin& demand #or $ubli
aountability o# those who mana&e $ubli resoures neessitated a new and
e!$anded so$e audit4$er#ormane audit(
3( )oday% $er#ormane audit has beome one o# the ma'or tas0s in most develo$ed and in
some develo$in& ountries( Aordin& to Finanial administration $rolamation
51672881 9E(C: artile ;o < sub artile 1 9a: Internal audits in Ethio$ia are already
-a&e = 1$rovided with mandates to underta0e $er#ormane audit in the $ubli bodies(
)raditional #inanial and om$liane audits will ontinue to $lay an essential $art> it is
antii$ated% however% that there will be a &radual and $lanned &rowth o# $er#ormane
audit wor0(
1( )he Ethio$ian -er#ormane Auditin& ?tandards 9E-A?: and &uides aom$any this
manual( )he manual and the &uide are intended to assist $er#ormane auditors to
arry out $er#ormane audit $ro'ets suess#ully and to brin& about wor0 o#
ae$table and uni#orm *uality in all internal audits( )here#ore% all internal audits are
advised to $lan% e!eute and re$ort $er#ormane audits in aordane with the
su&&ested $roedures o# the manual% standards and &uide(
@( )he manual is divided into 5 ha$ters(
Cha$ter 1" Cone$ts
Cha$ter 2" -ur$ose and ?o$e o# -er#ormane Audit
Cha$ter 3" -er#ormane Audit -lannin&
Cha$ter 1" Main Investi&ation ?ta&e
Cha$ter @" Re$ortin&
Cha$ter 5" Closure and FollowAB$(

C)APTER 1B CONCEPTS
1(1 )he $ur$ose o# this ha$ter is to introdue some one$ts and terminolo&y used in
$er#ormane audit% to &ive the de#inition o# $er#ormane audit% eonomy% e##iieny and
e##etiveness and to e!$lain how the $er#ormane o# an or&anization% entity% ativity%
ministry% $ro&ram or sheme an be measured( It also e!$lains the interrelationshi$
between the basi one$ts(
De!i%i'i"% "! Pe!"#$%&e Audi'
1(2 -er#ormane auditin& is an audit o# eonomy% e##iieny and e##etiveness with whih a
&overnment or&anization% a $ro&ram% a $ro'et% an ativity or a #untion uses its
resoures in arryin& out its res$onsibilities( It embraes"
9a: Audit o# the eonomy o# administrative ativities in aordane with sound
administrative $rini$les and $raties% and mana&ement $oliies>
9b: Audit o# the e##iieny o# utilization o# human% #inanial and other resoures%
inludin& e!amination o# in#ormation systems% $er#ormane measures and
monitorin& arran&ements% and $roedures #ollowed by audited entities #or remedyin&
identi#ied de#iienies> and
9: Audit o# the e##etiveness o# $er#ormane in relation to the ahievement o# the
ob'etives o# the audited entity% and audit o# the atual im$at o# ativities om$ared
with the intended im$at(
9d: Audit o# the environmental e##ets o# &overnment ativities(
1(3 )he audit o# the environmental e##ets o# &overnment ativities entails the e!amination
o# &overnment ativities in relation to the environment in order to $rovide in#ormation
on im$rovements o# environment $rotetion $roesses and to enoura&e best $raties
in environmental mana&ement(
1(1 -er#ormane audit is intended to be a broad% onstrutive e!amination and dia&nosis o#
$oliies% or&anization and o$erations o# a &overnment entity( It alls #or a$$raisals o# an
or&anization to om$are aom$lishments with $lan% results with standards% and
$ratie with $oliy( )he ob'etive is to arrive at a dis$assionate and veri#iable basis #or
om$arin& what is bein& done 9and how well it is bein& done: with the $lans% $oliies
and standards and% most im$ortantly to understand the reasons #or $ositive or ne&ative
variane #rom those $lans% $oliies and standards(
1(@ )he $er#ormane o# an or&anization% ministry% sheme% $ro&ram or $ro'et an be
measured by re#erene to"
Ob'etives" what an or&anization is tryin& to ahieve>
In$uts" the #inanial% human and $hysial resoures an or&anization used or
onsumed>
Ativities" the $roesses by whih an or&anization% ministry% sheme% $ro&ram or
$ro'et onverts its resoure in$uts into out$uts>
Out$uts" the $rodut o# ativities in terms o# &oods% servies or other results>
Im$ats" the ultimate e##et o# out$uts not only in the diret ahievement o# the
or&anization2s or sheme2s ob'etives but also in the wider e##et on
other &overnmental ob'etives or the ob'etives o# others
E!am$les o# the above one$ts an be #ound in +uide 2 A$$endi! 1(
2
1(5 Bsin& these de#initions% $er#ormane is then the e!tent to whih an or&anization%
ministry% sheme $ro&ram or $ro'et is"
Eonomi" A It is a*uirin& and $rotetin& the ri&ht *uantity and *uality o# resoures
9e(&(% sta##% materials% e*ui$ment: at the ri&ht time% at the lowest
$ossible ost( For e!am$le% la0 o# eonomy ould ause e!essive
osts% or $oor *uality% or undue delays% o# &oods and servies bou&ht(
E##iient"A Ma!imizin& the out$ut 9&oods7servies $rodued: #rom a &iven level o#
resoure in$uts> or alternatively% minimizin& the in$uts #or a &iven
level o# out$ut( For e!am$le% la0 o# e##iieny ould result in lesser
out$ut% or $oorer servies% #or the same amount o# osts inurred> or%
alternatively% hi&her osts% or lon& time% #or the same amount o# &oods
and servies $rodued(
E##etive A It is ensurin& that the out$ut 9&oods or servies: is $rodued as
$lanned% and7or ahieved the desired results( For e!am$le% la0 o#
e##etiveness ould result in out$uts o# &oods or servies #allin& short
o# tar&ets% and7or #allin& to ahieve the desired ob'etives(
E!am$les o# the eonomy% e##iieny and e##etiveness issues o# s$ei#i $ro&rams and
shemes an be #ound in this manual( Further elaboration o# the one$ts o# eonomy%
e##iieny and e##etive in relation to $er#ormane audit is $rovided below"
E&"%"#y
1(< Eonomy is usually thou&ht o# as the obtainin& o# the a$$ro$riate *uality and *uantity
o# &oods and servies at the a$$ro$riate times and at the best 9minimum: $ries( Ca0
o# eonomy ould our% #or e!am$le% when there is oversta##in& or when over*uali#ied
sta## or over$ried #ailities are used or e!essive osts% or $oor *uality o# &oods and
servies bou&ht( 9For #urther tehnial elaboration re#er to tehnial a$$endi! 1:
E!!i&ie%&y
1(6 E##iieny is ma0in& sure that the ma!imum level o# out$ut is &ained #rom the resoures
devoted to eah ativity% or alternatively% that only the minimum level o# resoures are
devoted to ahievin& a &iven level o# out$ut(
1(D ?o it is onerned with the .$rodution/ $roess o# an or&anization i(e( )he relationshi$
between the *uantity o# in$uts e!$ended and the amount o# out$uts obtained( An
e##iient or&anization is one that o$timized this relationshi$% either"
Minimizin& the in$uts used to obtain a desired level o# out$ut> or
Ma!imizin& the out$uts $rodued #rom a set level o# in$uts(
E!!e&'i=e%e11
1(18 E##etiveness is de#ined as"
)he e!tent to whih an or&anization ahieves its ob'etives( An e##etive
or&anization will ma!imize this whilst minimizin& the ost o# doin& so> and
)he relationshi$ between its atual im$at and its intended im$at( An e##etive
or&anization will ma!imize the e!tent it seures its intended im$ats% at a least
ost% enoura&e bene#iial side e##ets and disoura&e unwanted side e##ets(
1(11 )he $ur$ose o# suh an evaluation is to determine whether the desired results or bene#its
are bein& ahieved% whether the ob'etives established by the le&islature or other
authorizin& bodies are bein& met% and whether the a&eny has onsidered alternatives
3
whih mi&ht yield desired results at a lower ost( In other words it attem$ts to
measure a $ubli setor or&anization2s true bottom line $er#ormane% that is% whether
or not the or&anization or $ro&ram is ahievin& its ob'etives( )his issue is ar&uably
the most im$ortant element o# $er#ormane today% #indin& inreasin& a$$liation in
the $ubli setor(
1(12 Reent develo$ments in $er#ormane audit have moved #rom eonomy and e##iieny%
o#ten easier to e!amine and measure to e##etiveness( )his third EE2 is losest to
$oliy issue and it is a thin line between needin& to 0now what onstitutes a $oliy
and ritiizin& it( Auditors are onerned with the hoie and im$ats o# o$eration o#
$oliy instruments% not *uestion the merits o# $oliy ob'etives(
I%'eel$'i"%1Di7 5e'>ee% E&"%"#y, E!!i&ie%&y $%d E!!e&'i=e%e11
1(13 From the de#initions o# the 3Es &iven in the above $ara&ra$h% eonomy relates to
in$uts> e##iieny is the relationshi$ between in$uts and out$uts> and e##etiveness is
the relationshi$ between out$uts and im$ats( In business enter$rise both the in$uts
and out$uts are measurable in terms o# money% and the e##iieny with whih the
business is onduted is re#leted in a resultant $ro#it or loss e*uation( )he latter is not
neessarily the ase with most &overnmental ativities(
1(11 One has% however% to be o&nizant that &overnmental ativities also have a $ur$ose(
+overnments usually s$end some amounts o# money on numerous ativities relatin&
to matters o# $ubli $oliy or the ommon &ood( ?uh e!$enditures are e!$eted to
yield results in the #orm o# bene#its to the ountry% ommunity% or to $artiular &rou$s
o# $eo$le( )he &oals% the bene#its% or other outomes that are e!$eted to be ahieved
re$resent the Evalue2 to be obtained #rom the envisa&ed e!$enditures% while the money
s$ent re$resents the e!$enditures inurred in the $roess( In short% the basi *uestion
in re&ard to &overnment e!$enditure is A Is the &overnment &ettin& ade*uate values
#or the money it s$ends on various $ro&rams% $ro'ets and ativitiesF )hat indeed is
the essene o# $er#ormane auditin&(
1(1@ In $er#ormane auditin&% we try to measure in$uts in terms o# the eonomy e!erised
in the e!$enditure o# money% out$uts in terms o# e##iieny% and e##etiveness value o#
the results obtained% and the relevant ativities by whih in$uts are onverted into
out$uts in terms o# the de&ree o# e##iieny with whih they are arried out(
Eonomy% e##iieny and e##etiveness are all related to one another by way o# in$uts%
ativities% out$uts% and outomes7im$ats% measured in terms o# money s$ent% wor0
done and value obtained(
1
C)APTER 2B PURPOSE AND SCOPE OF PERFORMANCE AUDIT
I%'"du&'i"%
2(1 )his Cha$ter introdues the $ur$oses and so$e o# $er#ormane audit( In &eneral%
$ur$oses o# $er#ormane auditin& are to determine i# eonomy% e##iieny and
e##etiveness have been attained in the e!$enditure o# $ubli #unds( In the $roess% it
will hel$ to im$rove internal ontrol system% to enhane $ubli aountability% to u$A
&rade all as$ets o# mana&ement $er#ormane and $ro&ram results(
2(2 )he so$e o# -er#ormane audit ran&es #rom ensurin& that GFM is obtained% to a
review o# those arran&ements% suh as or&anizational struture% mana&ement ontrol
et( In relation to an o$erational area 9whih mi&ht relate to a $ro&ram or
or&anizational unit: or a sin&le ativity to an overall review o# an or&anization% entity
et(
N$'ue $%d C$'e("ie1 "! Pe!"#$%&e Audi'
2(3 -er#ormane audit is an inde$endent assessment o# the e!tent to whih an
or&anization% ministry% ommission% a $ro&ram% an ativity et( O$erates
eonomially% e##iiently% e##etively and with due re&ard #or environment( It% in a
broad sense% is lar&ely onerned with mana&ement ontrol audit in seurin& and
aom$lishin& its mission in an eonomial% e##iient and e##etive manner
9environment A the 1
th
EE2 A is dealt with in the Environmental Auditin& Manual:> the
auditor2s role is to e!amine and re$ort on how well that res$onsibility has been
dishar&ed and su&&est ostAe##etive im$rovement as neessary( )o do this%
understandin& o# the nature o# the or&anization and its $ro&rams is re*uired(
2(1 -er#ormane audits #all into #our broad ate&ories"
1( Sele&'i=e i%=e1'i($'i"%1B )hese are arried out in ases where there are si&ns
o# $ossible serious waste% e!trava&ane% ine##iieny% ine##etiveness or
wea0ness in ontrol( )he investi&ations are on#ined to e!aminin& whether
ritiism is 'usti#ied% e!aminin& auses and onsiderin& ation ta0en or needed
to introdue im$rovements(
2( M$E" 5"$d-5$1ed i%=e1'i($'i"%1B )hese 0inds o# investi&ations #ous on the
whole audited body or o# im$ortant ativities or $ro&rams( )hese may serve to
&ive assurane in ma'or areas where arran&ements are #ound to be satis#atory
and no ritiism is 'usti#ied% as well as to draw attention to material wea0nesses
in ontrol or ahievement and their onse*uenes(
3( M$E" eC$#i%$'i"%1 "! 1'$%d$d #$%$(ei$l "7e$'i"%1B )hese tend to
#ollow ommon $atterns or $roedures or established &ood $ratie( 3ere% the
audit o##ie selets an audit area% suh as ash mana&ement% onstrution%
$rourement% et(% and audits the issue aross all o# &overnment% or aross all
@
ma'or de$artments involved in the ativity( )hese are sometimes alled
Esetoral2 audits(
1( S#$lle 1&$le, $d-D"& i%=e1'i($'i"%1B )hese ty$es o# investi&ations are
direted towards $roduin& use#ul im$rovements in value #or money in s$ei#i
$ro'ets or ativities( )hese may hel$ stren&thenin& systems and #osterin&
ostAonsiousness(
2(@ Hithin these broad ate&ories the auditor $ays $artiular attention to &ood
mana&ement $raties% in% #or e!am$le"
?ystems o# $lannin&% bud&etin& and ontrollin&% revenue% a$ital e!$enditure and
inome% and #or alloatin& sare resoures(
Man$ower mana&ement% inludin& arran&ements #or deidin& and reviewin&
establishment levels and reruitin&% trainin&% rewardin& or otherwise motivatin&
em$loyees(
Arran&ements onerned with the $ro$er mana&ement o# all the assets% that is%A
land and other $ro$erty 9inludin& the ade*uay o# arran&ements #or a*uisition%
maintenane% develo$ment% and dis$osal o# land and other $ro$erties:% $lants and
om$uters 9inludin& the data held by the in#ormation tehnolo&y systems:%
#inane and ener&y(
Arran&ements desi&ned to ta0e advanta&e o# eonomies o# sale or s0ills%
$artiularly in $rourements o# &oods and servies(
?$ei#i initiatives that have been ta0en to im$rove eonomy% e##iieny and
e##etiveness in the $er#ormane o# the ran&e o# auditee ativities(
-ro$er odi#iation o# res$onsibilities% authority and aountability(
Monitorin& results a&ainst $redetermined $er#ormane ob'etives and standards% to
ensure that outstandin& $er#ormane is enoura&ed(
2(5 Audit may over all or $art o# both o# these to$is( It may be su##iient #or the
auditor to assess $er#ormane to date to $oint u$ suess or the need #or remedial
ation by mana&ement( In other irumstanes the auditor may wish additionally to
identi#y &ood and bad $ratie in the mana&ement o# the sheme and su&&est
reommendations #or the #uture(
2(< In $er#ormane audit% the auditor must #irst &ain a lear understandin& o# the
ob'etives o# the or&anization% sheme or $ro&ram to be audited and o# the strate&ies
used to ahieve those ob'etives and then e!amine the systems and $raties that
mana&ement uses to ontrol o$erations( It $ermits the auditor to identi#y those
$artiular systems and $raties that are 0ey to the or&anizations suess and it is on
these systems and $raties that the auditor onentrates(
2(6 )he $er#ormane auditor must tailor the audit en&a&ement by seletin& those several
available methodolo&ies and tehni*ues that are a$$ro$riate to the nature o# the
audited $ro&rams% ativities% the interests o# the auditee% and the relationshi$ between
data availability and the audit resoures( )his seletion is the 0ey to the suess o#
the $er#ormane audit(
2(D I# a $er#ormane audit to be suess#ul"
11( Hor0 is to be ade*uately $lanned>
12( Assistants are to be $ro$erly su$ervised>
13( Relevant% reliable and su##iient evidene is to be obtained to a##ord a reasonable
basis #or the auditor2s o$inions% 'ud&ments% onlusions and reommendations(
5
2(18 )he e!tent to whih we an assess $er#ormane under eah o# eonomy%
e##iieny and e##etiveness an vary onsiderably( It is o#ten easier to identi#y and
value in$uts than out$uts and out$uts are &enerally easier to measure than im$ats(
)he ob'etives o# the audited sheme may relate to soial or eonomi as$ets o# a
$ro&ram or an ativity ma0in& it di##iult both to assess han&es and to distin&uish
the e##et o# the $ro&ram #rom other in#luenes( ?eurin& the intended im$ats may
also be lon& term and involve matters o# *uality as well as *uantity(
2(11 In the short term% in suh instanes% the e!amination may have to be on#ined
to whether intended out$uts have been ahieved rather than intended im$ats(
3owever% it must be reo&nized that this is not a measurement o# e##etiveness(
;evertheless &ood mana&ement and $er#ormane under all the three headin&s A
eonomy% e##iieny and e##etiveness A are the #oundation o# value #or money and
the onern o# $er#ormane auditin&(
2(12 -er#ormane auditin& is a dynami ativity aimin& at reommendin& timely
orretions% there#ore% more s0ill and e!$eriene is re*uired o# an auditor when
ondutin& the audit(
Ty7e1 "! 7e!"#$%&e $udi'1
2(13 )here are di##erent ty$es o# $er#ormane audit a$$roahes in order to ma0e the audit
$roduts more relevant to the $ubl body( Re$ortin& on the ativity or $ro'et as a whole is
normally more use#ul than ommentin& on a se&ment arried out by a s$ei#i entity(
)he ty$es o# $er#ormane audits are"
IE%'i'y " 7"($# $udi'1% whih $rovide a substantive review o# the whole or $art o#
the o$erations o# a de$artment or a&eny>
IG"=e%#e%'->ide $udi'1% whih #ous on &overnmentAwide issues or #untional areas%
suh as human resoure mana&ement% in a number o# de$artments seleted by the O##ie>
ISe&'"$l $udi'1% whih #ous on $ro&ram areas delivered by a number o# entities% #or
e!am$le% searh and resue o$erations>
IAudi' %"'e1% also alled other audit observations% are an alternative mehanism #or
re$ortin& matters o# si&ni#iane that ome to our attention durin& the ourse o# our wor0
on any O##ie $roduts( Audit notes usually re$ort on a sin&le sub'et whih must be
within the mandate o# the O##ie> and
IF"ll">-u7 $udi'1% whih re$ort on $ubli bodies ations in res$onse to $revious
reommendations and issues o# the O##ie and that are o# ontinued interest to
mana&ement% and7or that $ose a si&ni#iant ris0(
Di!!ee%&e 5e'>ee% Pe!"#$%&e $%d Fi%$%&i$l Audi'
2(11 Finanial audit re$orts on the #inanial reords o# an or&anization% em$hasizin&
whether the reords have been $ro$erly entered and adhere to $resribed aountin&
$rini$les and standards( Hhereas $er#ormane audits over the eonomy% e##iieny
and the e##etiveness o# mana&ement o$erational ativities and are onduted to hel$
mana&ement im$rove o$erations(
<
2(1@ -er#ormane audits are neessary #or a more om$lete $iture o# what is ta0in&
$lae inside the or&anizations( Finanial audits alone do not &ive this om$leteness%
whih is desirable #or e##etive ontrol and aountability o# any or&anization(
2(15 )he so$e o# #inanial audit is usually limited to #inanial statements at a
$artiular time and matters related to them( )he audit wor0 is based on
&enerally ae$ted auditin& standards whih $rovide the auditors with s$ei#i
&uidane #or audit $lannin&% #ieldwor0 and re$ortin&( In ontrast% &overnment
auditin& standards a$$liable to $er#ormane audits $rovide only &eneral
&uidelines #or ondutin& the audits> and the so$e o# $er#ormane audits varies
onsiderably de$endin& on audit ob'etives( Bn#ortunately% some o##iials
ontratin& #or a $er#ormane audit may not have learly de#ined audit
ob'etives% $lain& the auditor at &reater ris0 o# not meetin& user e!$etations(
)he auditor should disuss audit ob'etives and evaluative riteria with o##iials
o# the entity to be audited and &et their a&reement> i# a&reement annot be
reahed% the views o# the entity should be reorded(
6e%e!i'1 "! Pe!"#$%&e Audi'
2(1< I# an e##etive audit $ro&ram e!ists and has the su$$ort o# an or&anization2s
mana&ement% it will have a very bene#iial e##et on how the available human
resoures% materials% e*ui$ment and other in$uts are assi&ned and used( )he si!
ma'or bene#its are"
11( Clarity o# the aims and ob'etives o# $ro&rams and $ro'ets>
1@( Juality o# $lannin& at all levels>
15( Clarity o# a&eny res$onsibility and authority to e!eute a$$roved $lans>
1<( Juality and e##etiveness o# $ro&ram e!eution in relation to a$$roved $lans>
16( Juality o# internal administration and $ro&ress re$ortin&> and
1D( Juality o# results in relation to $reviously established ost and other ob'etives at
all levels(
Di!!i&ul'ie1 i% Pe!"#$%&e Audi'
2(16 -er#ormane audit an not be onduted without si&ni#iant e##ort to ensure
suess( )his is due to the di##iulties in suh audit whih inlude amon& other
thin&s"
28( Di##iulties in de#inin& the sub'ets o# $er#ormane auditin& and identi#yin& line o#
aountability" )hese are not easy tas0s in $ubli or&anizations beause o# the
#re*uent tendeny to over em$loy(
21( Ca0 o# le&al mandate and o# aess to in#ormation" In many ases $er#ormane
audit is not enablin& le&islation o# entities% while #inanial audits are re*uired o#
law( )hus auditees2 mana&ement may not attah muh im$ortane to suh audits%
and in some ases% in#ormation may not be readily $rovided to auditors(
22( Ca0 o# riteria" -er#ormane auditin& ob'etives are o#ten stated in &eneral and
va&ue terms and% at times% are not identi#ied at all( All these ob'etives must be
learly de#ined( In addition% s$ei#i riteria that are unanimously ae$ted to the
mana&ement and auditors must be #ormulated #or a suess#ul $er#ormane audit(
O5Ee&'i=e1 "! Pe!"#$%&e Audi'
2(1D -rime ob'etive o# $er#ormane audit are"
23( )o maintain and enhane $ubli aountability>
6
21( )o im$rove aountability by stren&thenin& the relevant su$ervisin& authority2s
re$ortin& to the ounsel o# ministers on the $er#ormane o# &overnment bud&etary
institutions 9Ministries% a&enies% et((:
2@( )o at as a #ore #or bene#iial han&e in the mana&ement o# resoures and the
ahievement o# value #or money>
25( )o enoura&e im$roved value #or money in Kud&etary institutions% a&enies et(
Hhere im$rovements are #ound to be neessary and ost e##etive>
2<( )o identi#y well $er#ormin& &overnment Kud&etary institutions as $ossible lessons
to be emulated by others>
26( )o enable to $rovide inde$endent in#ormation% advie and assurane about the 3Es
in the ma'or #ields o# revenue% e!$enditure and mana&ement o# other resoures>
2D( )o indue and assist audited entities to ta0e ation where im$rovements are shown
to be neessary and ost e##etive(
Pu5li& A&&"u%'$5ili'y
2(28 In a modern demorati &overnment% eleted re$resentatives rarely mana&e
e!$enditure or inome themselves( )hey entrust this to e!eutive &overnment
o##iials( Hhilst eleted re$resentatives should set the ob'etives #or
&overnment% it is the res$onsibility o# the o##iials to ensure that those
ob'etives are ahieved eonomially% e##iiently and e##etively and that
resoures are used with due re&ard #or value #or money(
2(21 )his s$lit between eleted re$resentatives and mana&ement means that the
ounil o# ministers re*uires ade*uate inde$endent in#ormation and advie to
hold o##iials aountable #or their ations( In the #irst instane it is #or o##iials
to $rovide su##iient relevant and reliable in#ormation( )he Internal audit has
the res$onsibility% throu&h $er#ormane audit re$orts% #or"
ECe&u'i=e
)o $rovide assurane that o##iial in#ormation is ade*uate and re#lets the true
$er#ormane o# the auditee>
)o su$$lement o##iial in#ormation where it believes it to be inade*uate(
TDe Audi'ee
)o &ive advie% as to what ould lead to im$rovements #or the audited body>
)o enoura&e audited entities to im$rove the *uality o# their re$ortin& to the
e!eutive(
Hays o# ahievin& these ob'etives entails"
Assessin& whether the auditee has established sound system and ade*uate ontrol
#or ensurin& its $er#ormane>
Assessin& whether the auditee has ade*uate systems and $roedures #or detetin&
non om$liane irre&ularity and ille&al ats(
E!aminin& the $ratie o# these systems7ontrols>
E!aminin& evidene o# $oor GFM% see0in& the auses and establishin& $otential
im$rovements>
Identi#yin& a$$ro$riate ost e##etive ways o# im$rovin& #inanial mana&ement
and ontrol to $ersuade auditees2 ost e##etive solutions>
D
Ensurin& that there is a yle o# overa&e based on materiality% ris0 and 0ey areas
and issues>
Ensurin& redibility by $resentin& re$orts on ma'or e!aminations whih are #air%
balaned% aurate and u$ to date(
F"&e !" CD$%(e
2(22 -er#ormane audit also &ives Internal audit the o$$ortunity to identi#y areas
where there an be im$roved mana&ement or $er#ormane( )hrou&h systemati
review o# the audit #ield and detailed e!amination o# areas where there is a ris0
to value #or money% the Internal Audit an ma0e valuable reommendations( It
is the res$onsibility o# the Internal auditor to enoura&e and assist audited
bodies to ta0e ation where im$rovements are shown to be neessary and ost
e##etive(
2(23 Followin& on #rom the $rime ob'etives% the Internal Audit should ado$t the
Followin& o$erational ob'etives"
)o selet #easible studies% on sub'ets havin& a le&islative or $ubli interest% or as
re*uested by the le&islature% the e!eutive or the mana&ement o# the audited
entities% in material areas o# the audit #ield where there is"
?o$e to ma0e worthwhile reommendations #or im$rovin& GFM> and7or
A need to enhane $ubli aountability(
)o $lan $er#ormane audit wor0 suh that"
It has lear ob'etives and so$e and a $ro$erly de#ined methodolo&y>
Resoures are utilized e##iiently> and
?ta## are #ully aware o# and a$able o# deliverin& the re*uirements e!$eted o#
them>
)o obtain su##iient% relevant and reliable evidene% inludin& ade*uate analysis>
)o enable reasonable onlusions to be drawn and worthwhile reommendations to
be made>
)o doument wor0 underta0en to $rovide a reord o# the evidene on whih the
$er#ormane audit re$ort was $re$ared and the basis o# the #indin&s and
onlusions reahed and reommendations made>
)o mana&e audits so that they are delivered on time% at the a$$roved ost and with
due re&ard #or the desired *uality>
)o #oster and develo$ &ood wor0in& relationshi$s with the audited entity so as to
allow the audit o##ies to wor0 e##iiently and e##etively and to ensure"
Mutual understandin& and ae$tane o# eah other2s roles% duties% ativities and
basi mana&ement strutures and systems>
)rust in $ro#essional and $ersonal inte&rity>
A willin&ness to ommuniate on si&ni#iant develo$ments> and
A res$et #or eah other2s $ro#essional and administrative 'ud&ments>
)o re$ort the results o# investi&ations aurately and #airly and in a manner that
aids the intended audiene2s understandin&(
All audit sta## should #ollow these ob'etives in all $er#ormane audit assi&nments(
C"%1ul'$'i"% $%d Ad=i&e
2(21 -er#ormane auditin& are o#ten om$le! underta0in&s re*uirin& a wide ran&e
o# s0ills% e!$ertise and e!$eriene to be om$leted ostAe##etively( As noted
throu&hout this manual% onsiderable 'ud&ment is re*uired at all sta&es o# the
audit( )he re*uirement to have an audit onsultin& ommittee% in individual
18
$ubli body ensures that a$$ro$riate advie and assistane are available to the
audit teams( Audit teams should onsult with internal audit ommittee% sub'et
matter s$eialists% and other su$$ort &rou$s% as a$$ro$riate% on ritial deisions
made durin& the audit% and also hold an in#ormal brainstormin& internal
methodolo&y meetin& durin& the $lannin& $roess to obtain advie and
&uidane be#ore #inalizin& the audit $lan(
2(2@ Followin& is an outline o# the 0ey res$onsibilities o# the onsultin& ommittee(
Audit advisory ommittees should be established in eah $ubli body(
Members o# ommittee% #rom both inside and outside the $ubli body% should be
seleted on the basis o# their s0ills% insi&hts% relevant 0nowled&e and e!$eriene(
Outside advisors are reo&nized as leaders in their #ields o# e!$ertise(
2(25 )he ommittee is desi&ned to $rimarily $rovide a #orum where the audit team
an see0 advie on the ob'etives o# the audit% the &eneral a$$roah% and the
si&ni#iant matters and issues that are to be re$orted( )he team also $resents
in#ormation to the ommittee at the ritial deision $oints o# the audit and
normally meets two to #our times durin& the ourse o# an audit( )he audit team
onsults with ommittee members on the #ollowin& as$ets o# the audit"
16( )he $reliminary broad audit issues whih were identi#ied durin& the overview
sta&e% ba0&round and rationale #or the audit% initial lines o# in*uiry% and the
relevane o# the $lanned audit to the o##ie2s mandate>
1D( )he so$e% &eneral a$$roah and evaluative riteria% and emer&in& issues durin&
the #easibility sta&e>
@8( E!$eted #indin&s% reommendations% onlusions and re$ortin& strate&y> and
@1( )he re$ort ha$ter to assure that it addresses the ri&ht messa&e% is #air% si&ni#iant
and learly $resented durin& the re$ortin& sta&e(
2(2< )he role o# the ommittee is to"
@2( Advise on $lanned overa&e% matters o# $otential si&ni#iane and audit a$$roah
in the early sta&es o# the audit>
@3( -rovide e!$ert ounsel on the si&ni#iane o# issues>
@1( Review the avenues #or *uanti#iation bein& $ursued and whether they will be
ahieved>
@@( -rovide inde$endent review% hallen&e and ounil at the ritial ontrol $oints o#
the audit> and
@5( Advise on whether the re$ort .messa&e is ri&ht/ and the issues are si&ni#iant% and
on the tone% #airness auray and reasonableness o# the $resentation(
)he audit de$artment7division ould also use individual members o# the ommittee
with e!$ert 0nowled&e as s$eial advisors to the audit team(
Rel$'i"%1 >i'D ECe&u'i=e Audi' &"##i''ee
2(26 )he develo$ment o# a system where by audit re$orts are e!amined by a
$arliamentary or other s$eially onvened ommittees with $owers to ma0e
reommendations based on the re$orts add &reatly to the standin& and
redibility o# the audit o##ie( )he e##etiveness o# the auditor an be enhaned
throu&h the ba0in& o# suh ommittee whose members are ommitted to
u$hold $ubli aountability( Conse*uently% the relationshi$ between the
ommittees and the internal audit ou&ht to be on #ormal statutory basis( )he
ob'etive o# the relationshi$s will be to im$rove mana&ement and ontrol over
$ubli #inane(
11
2(2D At the initial sta&e the ob'etives ould #ous on ensurin& establishment o#
sound aountin& standards and $roedures and see to it that money is s$ent
only #or authorized $ur$oses( )he subse*uent $ratie #or the ommittees to
s$end more time u$on the elimination o# waste and e!trava&ane% the
enoura&ement o# sound $raties in estimatin&% ontratin& and #inanial
administration% and #inally the need to ensure the *uality o# servie to the $ubli
and obtain &ood value #or money(
2(38 ?uh ommittees may not have an e!eutive $ower and an only submit
reommendations( )heir value omes not #rom sim$ly ritiizin& thin&s that
thin&s are wron& but by ma0in& #air reommendations% #irmly based on atual
ases% whih may be a$$lied with &ood e##et over a wide #ield( )heir terms o#
re#erene ould be de#ined in broad terms Inludin& the ri&ht to e!amine
aounts% to send #or $ersons% $a$ers and reords% and to re$ort( In $ratie the
si&ni#iant wor0 o# the ommittees will arise #rom its e!amination o# the
Internal audit re$ort(
2(31 )he e##etiveness o# the ommittees lar&ely de$ends on havin& sound audit
re$orts% #rom the Internal Auditors% as a startin& $oint with the s$ei#i issues to
be resolved learly indiated( In turn the auditors2 e##etiveness &ains
si&ni#iantly #rom the su$$ort and standin& o# the ommittees( )he e##ort o# the
internal audit may be seriously undermined when auditees #ail to &ive ade*uate%
$rom$t onsideration and res$onse to audit *ueries> this is an area where the
Internal Audit should &et to stron& mana&ement su$$ort to seure orretive
ations(
2(32 Hhere the ommittees su##er #rom havin& only limited sta##in& su$$ort% the
$roblem an be relieved by way o# diret assistane #rom the internal audit(
In $artiular the ommittees should be brie#ed as to the e##etive lines o# in*uiry
and *uestions whih eliit the in#ormation re*uired #or any $ossible ommittees2
re$orts( )he ommittees ma0e the &reatest im$at by ta0in& evidene #rom the
head o# the body under srutiny as suh body has the ultimate res$onsibility #or
#inanial mana&ement(
Li#i'1 "! Pe!"#$%&e Audi'
2(33 Hhile the internal audit will a*uire every ri&ht to loo0 at how well an
or&anization is ahievin& its ob'etives% throu&h +overnment laws this does not
mean the Internal Audit an investi&ate all as$ets o# &overnments( )he merits
o# what a &overnment is aimin& to do are #or $olitial debate and deision by
eleted re$resentatives and not the $reserve o# the Internal Audit( )here#ore% the
Internal Audit would not normally *uestion the merits o# $oliy ob'etives(
2(31 )his restrition% however% should not $revent the Internal Audit #rom
e!aminin&"
@<( )he events% evidenes and irumstanes leadin& u$ to the deisions
re&ardin& $oliy ob'etives>
@6( )he means hosen to im$lement the ob'etives>
@D( )he e!tent to whih the ob'etives are bein& ahieved>
58( Other results o# the $oliy% inludin& unintended or adverse e##ets(
12
C)APTER 3B PERFORMANCE AUDIT PLANNING
3(1 -er#ormane audit is om$le!% time onsumin& and laborAintensive wor0> there#ore% a
strutured a$$roah to $er#ormane audit is reommended in order that the most
si&ni#iant and im$ortant issues are identi#ied% investi&ated and then re$orted u$on(
3(2 At all sta&es% review and a$$roval o# the audit by senior mana&ement are neessary to be
#ollowed and liaison with the de$artments o# the auditee about the $ro&ress o# the wor0%
ta0in& into aount o# views and han&in& irumstanes are also neessary(
3(3 )he strutured a$$roah $ro$osed in this manual onsists o# the #ollowin&"
-lannin&
o Overview7+eneral ?urvey
o Mar0in&
o Annual O$eration -lan And ?trate&i -lan
o Feasibility ?ta&e
o Main Investi&ation -lannin&
Main Investi&ation
Re$ortin&
-ost Audit FollowAu$
O=e=ie>@Ge%e$l Su=ey
3(1 )he overview7&eneral survey is the startin& $oint #or a $er#ormane audit( Its $ur$ose is
to assemble relevant in#ormation to develo$ an understandin& o# the entity to be audited
and a$$raise the in#ormation to ome to some onlusion on the areas where there is
si&ni#iant ris0 to value #or money and to identi#y $otential GFM investi&ations(
3(@ It onsists o# a broad based review o# the ativities% in$uts% out$uts% im$ats% ob'etives
and mana&ement strutures o# the audited entity( Bnderstandin& o# the entity"
-rovides a basis #or initial so$in& deisions>
Allows a more e##iient and eonomial de$loyment o# audit e##ort>
-rovides a basis #or determinin& or han&in& audit $riorities>
Forms a #irm #oundation #or $lans and #or the #easibility studies% main investi&ation
and re$ortin& sta&es that #ollow(
3(5 Durin& this sta&e the auditor ma0es a $reliminary assessment o# those areas that warrant
audit attention% and determines a tentative audit strate&y #or addressin& them(
3(< An inAde$th understandin& o# an audit entity may be develo$ed and maintained over a
len&thy $eriod o# involvement with the entity% both throu&h #inanial audit and $ast
GFM ativities% or it may have to be a*uired be#ore the auditor is in a $osition to $lan
and arry out a s$ei#i audit(
3(6 Care#ul seletion and tar&etin& o# $er#ormane audit assi&nments is $artiularly im$ortant
in view o# the om$le!ity o# the $ubli setor and the relative resoure onstraints #or
arryin& out the wor0( Bnless worthwhile assi&nments are seleted% and on#irmed by
the #easibility study% time s$ent in detailed main investi&ations will be wasted with little
bein& ahieved( )he overview is there#ore a ruial sta&e in the $er#ormane audit
$roess(
13
3(D In#ormation &atherin& durin& the overview an be e!tensive but should not beome an
end in itsel#( )he auditor needs to stri0e a balane between olletin& su##iient
in#ormation to have on#idene in his7her reommendations to $roeed to a #easibility
study% thereby ommittin& the audit o##ie to #urther use o# sare resoures% without
tres$assin& into the #easibility study itsel#( Further e!$lanation #or the aims and
ob'etives o# the overview is &iven in +uide 2 a$$endi! 3(
Me'D"d"l"(y
3(18 )he overview onsists o# a to$ down a$$roah to in#ormation &atherin& and analysis(
?tartin& with the most strate&i and summarized in#ormation% we need to ollet only
su##iient evidene in eah $otential audit area as to"
5@( Di##erentiate the main ativities o# the auditee to allow us to #orm a broad strate&y
#or our audit>
55( Identi#y $ossible audit areas and issues #or the main #easibility study>
5<( Evaluate eah o# these audit areas and issues a&ainst the ris0 riteria mentioned
earlier(
)he ob'etive o# the overview is not to #ind out everythin& to 0now about the audited
entity( In#ormation &atherin& should% there#ore% be seletive and tar&eted(
I%i'i$l I%!"#$'i"% G$'Dei%( $%d Fi1' S'$(e A%$ly1i1
3(11 )he or&anizations we audit are usually very lar&e and om$le!( Audited entities may
have a multitude o# #untions% branhes and sta##% and over a wide ran&e o# &overnment
ob'etives( )he auditor needs% there#ore% to develo$ a to$Alevel $iture o# what the
entity is tryin& to ahieve% what ativities it is involved in and where it &ets and s$ends
its money( In short% the auditor needs a oherent and lo&ial ma$ o# the or&anization% its
ob'etives% ativities and use o# resoures(
3(12 )o develo$ suh a ma$ in a ommerial or&anization% the auditor would evaluate the
#inanial statements( )he main om$onents o# the balane sheet% soures and
a$$liations o# #unds and inome and e!$enditure statement would show the $rini$al
ativities o# the or&anization and its use o# #unds( E!amination o# movements in the
#inanial statements year on year% ou$led to variane analysis and om$arison with li0e
or&anizations% would &ive 0ey indiators o# $er#ormane A e(&(% return on a$ital
em$loyed% movements in debtors and reditors et(
3(13 ?imilar analysis is neessary o# &overnmental or&anizations( 3owever% the auditor
annot rely so heavily on the #inanial statements beause they are normally $resented
in a way that #ailitates internal #inanial ontrol% not an understandin& o# the audited
entity and its ob'etives and ativities( )hey rarely ontain $er#ormane in#ormation(
Ris0 to value #or money annot be #ound solely by loo0in& at bud&ets or annual
aounts( E*ually% many o# the entities are uni*ue and there are #ew use#ul om$arisons
we an ma0e to similar entities(
3(11 )he #irst ste$% and the ob'etive o# this initial in#ormation &atherin&% is to &ain a
$ers$etive o# the entity( Evaluation o# $er#ormane omes in the more detailed
e!amination( At this sta&e the auditor re*uires in#ormation on the entity2s"
Gision% missions and ob'etives as well li0ely out$uts>
-oliy instruments>
Re&ulatory and $rini$al administrative ativities>
Or&anizational struture and the aountability relationshi$s>
In$ut usa&e by ty$e e(&(% labor% interest $ayments>
11
Inome% e!$enditure% assets and liabilities>
Main #inanial and mana&ement ontrol systems>
)he environment in whih the entity o$erates>
Man $ower70ey $ersonnel in#ormation>
Ma'or ris0s #ain& the entity> and
-rior de#iienies70nown wea0nesses(
3(1@ )his in#ormation will normally be a*uired throu&h a ombination o# interviews and
review o# 0ey in#ormation systems( )he auditor should obtain a statement o# $oliy
ob'etives and instruments #rom to$ mana&ement and it is &ood $ratie to he0 our
understandin& o# the struture and ativities o# the audited entity with them(
9use +uide 1 #or detail:
3(15 Further in#ormation soures inlude"
)o$ mana&ement in#ormation systems>
Formal statements o# $oliy ob'etives>
Finanial statements% inludin& the annual aounts% bud&ets% and or$orate $lans>
Or&anizational harts or similar in#ormation>
O$enin& on#erene>
Internal and e!ternal audit re$ort>
Other studies 9researh: made by internal and e!ternal body>
Review o# audited entity2s webA site% i# any(
It may be neessary to obtain more detailed analysis #rom the audit2s #inane
branh( Finanial audit re$ort is also a use#ul soure o# in#ormation( It &ives a
$ers$etive o# the main ativities o# the audit% its struture and% most im$ortantly%
its #inanial mana&ement systems(
3(1< On its own this in#ormation will not &ive a #ull understandin& o# the audited entity( )he
auditor needs a means o# analyzin& it( One use#ul tehni*ue is that o# .rossAuts/(
)his involves struturin& the in#ormation in suh a way as to &ive us"
A to$Alevel a$$reiation o# the audit% its ob'etives% ativities% in$uts% out$uts and
mana&ement systems>
A ran&e o# $ossible study assi&nments7areas #or #urther investi&ation>
A view o# the materiality o# eah to$i% and% in some ases% a tentative view on
other riteria% e(&(% value #or money(
A detailed wor0ed e!am$le is in +uide 2 a$$endi! <(
3(16 )here are many ways to loo0 at an audited entity and we are li0ely to ome u$ with a
number o# di##erent ross uts #or the same entity( In#ormation an be onsidered by
what the audited entity is attem$tin& to ahieve 9whih would &ive a view o# the ran&e
o# e##etiveness issues:% what resoures it is usin& 9as a #irst ste$ to onsiderin&
eonomy studies:% as$ets o# mana&ement 9e(&(% the *uality o# $er#ormane
measurement:% in #at by any as$et that a##ets value #or money or $ubli
aountability( Crossuts are an area where the auditor needs to ombine his7her
e!istin& 0nowled&e o# the audited entity% the in#ormation olleted and an o$en mind as
to the 0ind o# #ators that an lead to $oor $er#ormane by the audited entity and
suess#ul audit o##ie2s studies(
3(1D )he minimum ross uts #or any entity are by"
P"li&y "5Ee&'i=e1 $%d 7"li&y i%1'u#e%'1" #or e##etiveness studies% and
mana&ement thereo#>
A&'i=i'ie1" in the #irst instane #or e##iieny and its mana&ement% but also to see to
what e!tent ativities tie u$ with ob'etives>
1@
I%7u'1" #or studies o# the ontrol o# resoures and #or wider eonomy studies> and
TDe 7i%&i7$l !i%$%&i$l #$%$(e#e%' &"%'"l 1y1'e#1" #or studies o# the ade*uay
and *uality o# the mana&ement ontrols over eonomy% e##iieny and e##etiveness(
3(28 Analysis should not be limited to the urrent #inanial year( )o understand the entity
#ully the auditor needs to a$$reiate or&anizational trends( Analysis o# movements in
the #inanial statements year on year and o# its bud&ets should also be underta0en to
show"
Ma'or han&es in e!$enditure or inome by $oliy ob'etive or instrument>
?i&ni#iant variations in in$uts>
BnAbud&eted inome or e!$enditure>
E!$lanations o# the above(
3(21 At the end o# the initial in#ormation &atherin& and analysis the auditor should $resent a
re$ort to the relevant $rini$al auditor showin& the results o# the rossuts and
reommendations o# the di##erent levels o# $riority #or materiality( )he $rini$al
auditor should deide on the basis o# this in#ormation whih areas to investi&ate #urther
9that is% a&ainst the remainin& riteria: and to what de$th(
De'$iled I%!"#$'i"% G$'Dei%( $%d A%$ly1i1
3(22 )he aim o# this element o# the overview is to evaluate the to$is identi#ied in rossuts
and initial in#ormation &atherin& a&ainst the remainin& riteria( )he auditor needs to"
56( Come to a $ere$tion on value #or money% $otential im$ats% audit ability et( For
eah to$i>
5D( Assi&n $riorities a&ainst eah riterion" this allows the auditor to 'ud&e whih
$otential assi&nments are most suited #or detailed audit investi&ation in the #uture>
and
<8( Foresee a $otential audit $ro&ram #or $er#ormane audit o# the #ield>
<1( Identi#y broadly the 2 A 1 audit areas #or eah $ro$osed assi&nment( -reise terms
o# re#erene #or the assi&nment will be de#ined at the #easibility sta&e but the
auditor should tar&et the 0ey areas o# the overview( -ro$osed audit areas re#let
the auditor2s onerns on $ubli aountability or value #or money(
3(23 )he availability and loation o# in#ormation will vary with the internal re$ortin&
strutures o# the audited entity( In#ormation may be obtained within the audit #rom"
<2( TDe '"7-#$%$(e#e%' i%!"#$'i"% 1y1'e#" #or $er#ormane data% ris0s to value
#or money aused by the seletion o# $oliy ob'etives or instruments and
disussion o# #uture develo$ments li0ely to a##et the audit #ield>
<3( De7$'#e%'$l 5id1@Eu1'i!i&$'i"%1 !" e1"u&e1" a&ain these may inlude
$er#ormane data% and may re#er to ma'or onstraints a##etin& the audit and
develo$ments li0ely to a##et the audit #ield>
<1( P"($# e=$lu$'i"%1" #or $er#ormane in#ormation and analysis>
<@( Pe!"#$%&e e7"'1>
<5( A%%u$l e7"'1 $%d &"7"$'e 7l$%1" may $rovide $er#ormane in#ormation and
results o# disussion o# onstraints and li0ely develo$ments( )hey may also
ontain hints o# the areas that the auditee #eel are o# most interest to the le&islature>
<<( I%'e%$l $udi' e7"'1" it would be &ood $ratie #or the $er#ormane auditor to
review all si&ni#iant internal audit re$orts or srutiny o# #inanial mana&ement
systems #or the last 2 A 3 years>
<6( )he auditor will also be interested in the e!istene% arran&ements and *uality o# $ll
'De $5"=e as this will re#let the or&anization2s ability to seure value #or money>
15
<D( 6ie!i%(1 $%d #i%u'e1 "! 1i(%i!i&$%' de7$'#e%'$l &"##i''ee1" auditees may
have too many o# internal ommittees and it is im$ortant to selet those that
disuss matters havin& a bearin& on the overview analysis>
68( C"%1ul'$%'F1 e7"'1 $%d "'De 1&u'i%iAe1>
61( Re1e$&D 7"($# 8i! $=$il$5le9B #or #uture wor0 $lanned by the auditee>
62( O51e=$'i"%1 dui%( !i%$%&i$l $udi'1" this is li0ely to be our $rini$al soure o#
in#ormation on the *uality o# the #inanial mana&ement systems(
3(21 Interviews will also $lay a ma'or role in this element o# the overview( )he main
ontats will be with"
)he to$ mana&ement o# the auditee and o# individual $ro&rams>
)he #inane and other si&ni#iant branhes o# the auditee(
3(2@ )he audit team should see0 the #ollowin& #rom the auditee2s to$ mana&ement"
Ma'or develo$ments in the $i$eline>
Any onerns they have on value #or money or $ubli aountability>
Ma'or onstraints under whih they are wor0in&% e(&(% limitations on the reruitment
and dismissal o# sta##% la0 o# #orei&n urreny et(% whih may be a##etin& the
$er#ormane o# the auditee or individual shemes(
3(25 )he Internal auditors should also disuss the results o# their overview with the audit
de$artment head% be#ore #inally $roduin& a re$ort to the head o# the $ubli body( All
suh interviews should normally be onduted at senior auditors level(
3(2< )he auditee2s #inane branh will normally be the #irst soure #or in#ormation that
annot be obtained #rom the $rini$al re$orts mentioned above% or to e!$and on detail(
)he #inane branh should also be e!$eted to have the $rimary de$artmental
res$onsibility #or ensurin& that there are ade*uate #inanial mana&ement strutures
overin& all as$ets o# the auditee2s use o# resoures( )he Internal Auditor will%
there#ore% wish to disuss"
63( )he broad ontent o# the #inanial mana&ement $roedures in $lae in the auditee
or&anization>
61( )he #inane branh2s monitorin& and review o# these $roedures> and
6@( Any re$orts arisin& #rom relevant srutiny(
Hhere the #inane branh has not e!erised this res$onsibility% and no other branh has
dele&ated #or it% there is a $otential audit onern about the auditee2s internal ontrol
$roedures(
3(26 E!ternal in#ormation soures may also be hel$#ul( In $artiular the reent relevant
out$uts% i# any% and #uture wor0 $lans #or instane% the #ollowin& or&anizations ould
be reviewed"
65( Ethio$ian Mana&ement Institute>
6<( Industrial -ro'et ?ervies 9I-?:>
66( Ministry o# Finane and Eonomi Develo$ment>
6D( Addis Ababa and other Bniversities>
D8( )he ma'or aid a&enies% et(
3(2D In#ormation on le&islative and $ubli interest will normally be artiulated by the
relevant or&anization and the media( )he auditor should 0ee$ abreast o# and #ollow
eonomial% $olitial and soial issues within the ountry throu&h the media and
relevant $ubli debates(
1<
3(38 In#ormation re*uirements to assess audit ability will de$end on the nature o# the
$ro$osed audit assi&nment and the neessary methodolo&y( Hhat in#ormation we will
re*uire durin& the main investi&ation% how we will analyze it% and the audit resoures
re*uired an only be determined one the issues and methodolo&y have been de#ined(
Kut% as noted above% the auditor must on#irm durin& the overview that a main
investi&ation is $ossible and should remain to be $roved in the #easibility sta&e(
3(31 At a minimum the auditor should he0% #or both de$artmental and $ossible e!ternal
in#ormation re*uired durin& the main investi&ation"
D1( Its availability% that is% does it e!ist and i# not what an we do to #ill &a$sF
D2( Its loation% that is% how easy will it be to olletF
D3( Its *uality% that is% an we rely u$on itF
)he auditor should also ensure that any neessary e!ternal assistane would be
available when re*uired(
Sele&'i%( $e$1 !" $udi'
3(32 )he main $ur$ose o# the overview is to identi#y $otential $er#ormane audit
investi&ations( Durin& the overview $roess vast amounts o# in#ormation are
olleted about the audited body( )o be able to ma0e reommendations about what
would or would not ma0e &ood studies and the $riorities between studies the auditor
needs some #orm o# basis #or evaluatin& the in#ormation that has been olleted(
3(33 ?eletin& $otential areas #or audit should be based on some or all o# the #ollowin&
riteria"
Materiality>
Ris0s to GFM>
-ubli aountability>
-ossible im$at>
Ce&islative or $ubli interest>
Ris0s to the audit o##ies>
De$artmental issues>
?uitability>
Audit ability>
)imeliness>
-revious audit wor0s>
Other ma'or wor0 $lanned or in $ro&ress>
Develo$ments li0ely to a##et assessment(
3(31 )he above in#ormation should be analyzed a&ainst eah ris0 riterion( )he $rimary
re*uirements are"
)o identi#y and evaluate all in#ormation havin& a si&ni#iant im$at on our view o# the
auditee>
)o develo$ a onsistent a$$roah to the alloation o# $riorities aross all to$is within
the audit #ield> and
)o delineate% within eah $otential audit area% the 2 A 1 0ey study areas #or the
#easibility study(
3(3@ )o om$lete the ris0 assessment #orms the auditor should"
18<( Assi&n a $riority to the to$i as a whole>
186( ?u&&est when the audit should ta0e $lae within the overall $ro&ramme>
16
18D( +ive a $riority ratin& 9low% medium% hi&h: a&ainst eah ris0 riterion and
brie#ly e!$lain the reasonin& #or these(
A wor0ed e!am$le is &iven in +uide 2 a$$endi! 18(
3(35 Even i# the auditor uses seletive a$$roah to &ather in#ormation% #or the overview% he
an &enerate a lar&e amount o# data( )o summarize results the auditor should $rodue
a short re$ort as in +uide 2 a$$endi! D #or eah o# the main to$is identi#ied in the
rossuts( Ris0 assessment #orm should be $rodued #or eah low% medium or hi&h
$riority areas% whether or not an assi&nment is bein& $ro$osed( It is im$ortant to
ensure om$leteness(
M$'ei$li'y 8Si(%i!i&$%&e9
3(3< In $er#ormane audit a matter is deemed material i# its dislosure is li0ely to be o#
interest to% or in#luene% the re$ort user( Materiality is one o# the main riteria
onsidered at the overview and strate&i $lannin& sta&es and latter in the re$ortin&
$roess( It assists in the seletion o# areas #or e!amination% in the determination o#
$riorities and in deidin& what needs to be inluded in re$orts(
3(36 Deidin& whether or not an audit issue or #indin& is material always involves the use o#
$ro#essional 'ud&ment( )here are three main #ators whih in#luene materiality
deisionsAthe amount% the nature o# a matter and the onte!t in whih it ours(
3owever% the measure o# whether an item is material may not be determined solely in
terms o# any sin&le #ator( )hus it may not be the value o# the ativity whih is the
overAridin& determinant o# what is material% but its very nature% or the onte!t in
whih it ours(
M$'ei$li'y 5y A#"u%'
3(3D Materiality by amount involves a onsideration o# whether the #inanial value is suh
as to ma0e it o# interest to re$ort users i(e( In#luene them( )his may be in terms o# its
absolute amount 9what is onsidered a si&ni#iant sum o# money: and7or its relative
value 9e(&(% om$ared to the auditee2s $ro&rams% total resoures% assets et(:( It does
not neessarily relate to a &iven year2s e!$enditure and is more li0ely to be onsidered
in relation to the ontinuin& $ro&ram o# ativity(
3(18 Materiality by amount overs all #inanial #ators in the or&anization e!$enditure and
inome% assets and liabilities( Items should be onsidered in &ross% rather than in net
terms so as not to hide underlyin& trends or si&ni#iant areas o# ativity( He should
also inlude any $ubli e!$enditure that is not the diret res$onsibility o# the audited
entity but over whih it has a ma'or in#luene( In the ase o# ountry li0e Ethio$ia%
reeivin& e!tensive but #inite #orei&n aid% it is also a$$ro$riate to inlude the aid
e!$enditure that #alls within the audited entity Es remit(
3(11 Analysis o# materiality should not be limited to the $resent #inanial year but should
inlude e!$enditure and inome over the reent $ast and $ro$osals #or the #uture(
Any ma'or han&es or si&ni#iant trends are im$ortant as they &ive #urther onte!t to
our assessment and may hel$ us evaluate the $otential #or inherent ris0( In#ormation
on materiality an normally be obtained #rom the or&anization2s bud&ets% or$orate
$lans and #inanial statements(
3(12 )he auditor2s interest in materiality is in both the absolute size o# the audit item and its
size relative to other audit areas( Its relative materiality will be one #ator in deidin&
the $riority o# eah individual item within the whole audit #ield(
1D
EC$#7le
OFA+2s ?oial ?ervies Division% in the 1D63 E(C( #inanial year% had an audit #ield o#
a$$ro!imately D62 million Kirr% with the #ollowin& e!$enditure s$read #or or&anizations"
1 A L 1D3 million Kirr>
2 A L 1@5 million Kirr>
2 A between 28 and 38 million Kirr>
1 A between 18 and 28 million Kirr>
2 A above 3 million Kirr>
Ran&e o# smaller institutions totalin& another L 188 million Kirr(
+iven this s$read o# e!$enditure% it mi&ht be reasonable to alloate $riorities as #ollows"
Entities s$endin& M188 million Kirr a year 93 in total: A hi&h $riority>
M3 million but less than 188 million 9@ in total: A medium $riority>
N3 million 9a #urther @3 entities: A low $riority(
I# the division has su##iient resoures to ondut 2 $er#ormane audits a year% and leavin&
all other riteria aside% the o##ie mi&ht deide to ondut $er#ormane audits as #ollows"
One study o# a hi&h $riority entity every 16 months% &ivin& an audit yle o# 1O
years>
One study o# a medium $riority entity every 2 years% &ivin& an audit yle o# 18
years>
?tudies o# low $riority items as audit resoures% and other riteria% ditate(
)he only aveat to this is to onsider a study o# the *uality o# #inanial ontrol systems in
low $riority entities( )his would be a hi&h $riority item as to&ether they s$end
a$$ro!imately 188 million Kirr a year A the utAo## $oint #or hi&h $riority entities(
M$'ei$li'y 5y N$'ue
3(13 )he onsideration o# materiality by nature relates to whether the intrinsi
harateristis o# an ativity are li0ely to interest or in#luene re$ort users( A$art
#rom o# its #inanial value% a matter may be si&ni#iant% #or e!am$le% beause" it is
new 9e(&(% a new s$endin& $ro&ram% initiative or ta!:> it is novel or unusual> it
involves substantial diseonomy% ine##iieny or ine##etiveness> or it is o# $artiular
le&islative or $ubli interest(
M$'ei$li'y 5y C"%'eC'
3(11 Materiality by onte!t relates to matters whih are not neessarily material in their
own ri&ht% but beause o# their si&ni#iane% they need to be drawn to attention( )he
auditor must be sure that the related matter is relevant and o# su##iient im$ortane
while% at the same time% be satis#ied that beause o# the onte!t in whih it ours it
warrants inlusion on the &rounds o# #airness or om$leteness(
Ri1?1 '" -$lue !" M"%ey
3(1@ Ris0 is de#ined as an event or ation ourrin& that may adversely a##et the
or&anization% suh as e!$osure to #inanial loss% loss o# re$utation or #ailure to deliver
28
the $ro&ram with eonomy% e##iieny% ost e##etiveness or ta0in& into aount the
environment im$liations(
3(15 A ris0 to GFM is the ris0 that eonomy% e##iieny and e##etiveness are not bein& or
may not be ahieved( Ris0 de#ined as the $robability that an event or ation may
adversely a##et the or&anization% suh as e!$osure to #inanial loss% loss o# re$utation
or #ailure to deliver the $ro&ram with eonomy% e##iieny% ost e##etiveness or ta0in&
in to aount the environmental im$liations( Ris0 assessment is the $roess that is
ruial to the develo$ment o# e##etive audit wor0 shedules( )he ris0 assessment
$roess inludes identi#iation o# auditable ativities% identi#iation o# relevant ris0
#ators% and an assessment o# their relative si&ni#iane( A ris0 assessment re*uires
the auditor to as0 the #ollowin& ty$es o# *uestions(
122( Hhat an &o wron&F
123( Hhat is the $robability o# it &oin& wron&F
121( Hhat are the onse*uenesF
12@( Can the ris0 be miti&ated or ontrolledF
3(1< )here are two main ty$es o# ris0 to GFM% inherent ris0% whih stems #rom the nature
o# the ativity% and identi#ied 9ontrol: ris0% whih may result #rom a $ereived
wea0ness or s$ei#i evidene( )he distintion between the two ty$es o# ris0 is o#ten
not learAut( Cate&orizin& ris0 in this way is merely intended as an aid to the
evaluation $roess(
I%Dee%' i1?
3(16 Certain ty$es o# o$eration% by their very nature% have an inherent ris0 to the
ahievement o# GFM( Fators outside the ontrol o# the audited body 9i# only
tem$orarily: may render a matter $rone to $oor GFM( )his would inlude suh
as$ets as"
125( )he set u$ o# new servies>
12<( Ce&islative han&e>
126( Ma'or ontin&enies>
12D( Introdution o# si&ni#iant new $oliies>
138( Bnusual transations% that is% those outside the normal ourse o# business o#
the entity>
131( Bnusual #inanial arran&ements>
132( )he e##ets o# the &eneral eonomi and $olitial onditions on o$erations%
#inanin& or investment ativities>
133( E!$osure to interest or e!han&e rate #lutuations>
131( Com$le! $ro&rams>
13@( ;ew tehnolo&y> and
135( Intan&ible ob'etives7out$uts(
Ide%'i!ied 8C"%'"l 9Ri1?
3(1D Identi#ied 9ontrol: ris0s are those s$ei#i irumstanes% events or $iees o# evidene
whih indiate that an ativity is not ahievin& or may not ahieve &ood GFM( )he
ran&e o# $ossibilities is enormous but% #or the most $art% they an be identi#ied #rom
overview and mar0in& wor0( Identi#ied 9ontrol: ris0 is deteted throu&h an a$$raisal
o# the limate in whih the audited body o$erates #rom analyzin& its mana&ement
21
$raties% and as a result o# the e!$eriene o# audit o##ies sta##( ?uh limates may
onsist o#"
a: O7e$'i"%$l &li#$'eB $olitial% soial% environmental or eonomi issues an
in#luene the way in whih o$erations are onduted% as an le&islative or
other $ressures( )hese may lead to ativities bein& e!$anded or urtailed%
resultin& in ontrols bein& irumvented% or other ris0s to GFM( Hhilst% these
#ators may be outside the ontrol o# the audited entity they are not inherent(
Evaluatin& the o$eration limate however an ensure that assoiated ris0s are
ta0en into aount(
b: M$%$(e#e%' 7$&'i&eB the *uality o# mana&ement an also $rovide a &ood
indiator o# the $ossibility o# ris0 to GFM( )he auditor should be loo0in& #or
three 0ey elements whih hel$ to seure% ontrol and monitor the ahievement
o# the 3Es( )hese are"
i: )he establishment o# lear or&anizational and o$erational ob'etives>
ii: ?ound ontrol over ativities and $roedures to ma0e the most eonomi%
e##iient and e##etive use o# resoures>
iii: A$$ro$riate monitorin& and in#ormation systems to ensure that
mana&ement an *ui0ly beome aware o# diseonomy% ine##iieny and
ine##etiveness and ta0e neessary ation(
)he absenes o# these elements an $in$oint the ris0 o# $oor v#m(
De(ee "! Ri1?
3(@8 One the inherent and identi#ied ris0s have been assessed the auditor will need to ma0e
some assessment as to how li0ely and how serious he7she believes them to be( )his
should enable the ris0s to be &iven an a$$ro!imate order or ran0in&% &enerally in
terms o# .hi&h/% .medium/ and .low/(
3(@1 It is not% however% $ossible to $rovide e!at &uidane on the level o# ris0( )he auditor
must use his7her 'ud&ment to deide% but the #ollowin& *uestions mi&ht hel$"
13<( Is there evidene that $oor GFM has atually ourred in the $astF I# so% to
what e!tentF
136( 3ow ade*uate is the evidene in showin& the li0elihood o# $oor GFM havin&
ourred in the $astF
13D( 3ow ade*uate is the evidene in showin& the li0elihood o# $oor GFM
ourrin& in the #utureF
S'e71 '$?e% i% i1? $11e11#e%'
3(@2 )he #ollowin& ste$s should be onsidered in evaluatin& ris0s to GFM"
118( Identi#y areas o# o$erations and ativities suse$tible to $oor GFM>
111( Identi#y s$ei#i ris0s>
112( Establish GFM ontrol and mana&ement in#ormation systems>
113( Assess de&ree o# ris0 9li0elihood% #re*ueny% si&ni#iane% e!tent%
onse*uenes% short7lon&Aterm et(:>
111( -rodue an order o# ran0in&(
3(@3 )o assess whether an or&anization is ahievin& value #or money the auditor must #irst
establish riteria o# what onstitutes eonomi% e##iient and e##etive use o# resoures
#or the entity or sheme in *uestion 9that is% what $rie it should $ay #or in$uts% what
level o# out$uts it should be &ettin& and what im$at it should be havin&:( Ky
22
om$arin& atual ahievement with these .ideal/ riteria the auditor an identi#y
areas where there is waste or $oor $er#ormane(
3(@1 Most $eo$le do this as a matter o# ourse eah time they ma0e a $urhase( For
e!am$le% when buyin& #ood we have a view o# how muh we want% what *uality we
are e!$etin& and what $rie we are $re$ared to $ay( I# the &oods do not live u$ to
the standards we set then we see them as a $oor $urhase% that is% bad value #or
money(
3(@@ In assessin& ris0 to value #or money the auditor ta0es this $roess one ste$ #urther( In
addition to seein& whether there has been waste s7he assesses the environment and
mana&ement ontrols to see whether they reate a ris0 to the eonomi% e##iient and
e##etive use o# resoures( Ky om$arin& the atual #inanial mana&ement
environment and ontrol systems with those that a seure and wellAmana&ed
or&anization would have in $lae% the auditor an assess the ris0 that the entity will
not seure &ood value #or money( A detailed disussion o# the nature and use o# ris0
evaluatin& riteria is available in +uide 2 a$$endi! 1(
3(@5 Auditors should also $ay s$eial attention to the indiations o# nonAom$liane with
laws and re&ulations% irre&ular and ille&al ats with in eah audit area(
3(@< It would be im$ossible to inlude here all the $ossible evaluative riteria the o##ies
mi&ht use( 3owever there are a number o# available soures in OFA+ library(
3(@6 )he overview should not be limited to loo0in& only at those $arts o# an or&anization
with diret ontrol over the use o# resoures( -oor value #or money an also be
e!$eriened in any area o# an or&anization whose ations or re&ulations a##et the use
o# resoures by others( For e!am$le% the Ministry o# )rans$ort may s$end only a
limited amount on aident $revention on roads( Kut its re&ulations on suh matters
as the wearin& o# seat belts and its e##etiveness as a test #or drivers may have a
ma'or% albeit indiret% e##et on money s$ent in the Ministry o# 3ealth on the
treatment o# aident vitims(
3(@D )his riterion also inor$orates the ob'etive o# identi#yin& well $er#ormin&
&overnment or&anizations( )his is the inverse o# hi&h ris0 and the analysis that
identi#ies $oor $er#ormin& or mana&ed or&anizations will also allow the auditor to
$i0 out the well $er#ormin& entities(
Pu5li& A&&"u%'$5ili'y
3(58 )his in#luenes the auditor2s assessment o# the audit #ield and seletion o# assi&nments
in two ways"
11@( )he e!eutive should be &iven the o$$ortunity to hold $ubli bodies aount
#or ma'or areas o# &overnment e!$enditure( )his is disussed more #ully in
Cha$ter 2(
115( )he Internal Audit or$orate ob'etives inlude im$rovin& aountability by
stren&thenin& audited entities re$ortin& to e!eutive (
3(51 In the #irst o# these% we are interested in or&anizations or shemes whih are so
im$ortant that it is reasonable that they are e!amined as a $riority issue% irres$etive
o# any other riteria( )his will o#ten ome down to a *uestion o# size and the auditor
will use materiality as the riteria #or seletion( 3owever% there may be oasions
where an or&anization is im$ortant beause o# its $olitial onte!t> this is disussed
below under . le&islature or $ubli interest/(
3(52 )he seond is onerned with the *uality o# or&anizations2 e!ternal re$ortin& $roess(
As noted in Cha$ter 2 it is the res$onsibility o# the or&anization to re$ort aurately
23
and #airly on its use o# resoures and $er#ormane ahieved( In seletin& $er#ormane
audit assi&nments% the auditor should assess whether there is $ro$er e!ternal re$ortin&
and% where a$$ro$riate% identi#y the need #or im$rovements( Evaluative riteria #or
this area are detailed in +uide 2 a$$endi! 1(
P"11i5le I#7$&'
3(53 )he Internal Audit ob'etives #or $er#ormane audit are heavily &eared to havin& a
bene#iial im$at( Its $rini$al $ur$ose is to enhane the *uality o# re$ortin&(
E*ually% those onerned with value #or money see0 to enoura&e im$rovements
throu&h reommendations whih are neessary and ostAe##etive or by learnin&
lessons #rom well $er#ormin& or&anizations( CostAe##etiveness analysis tries to show
how a &iven level o# bene#it an be ahieved at the minimum ost% or to show how the
ma!imum bene#it an be ahieved at some &iven level o# ost( )he audit o##ies%
then% are not interested in bein& ne&ative% ritial a&enies but wish to have a $ositive
im$at throu&h their wor0(
3(51 Identi#yin& the so$e #or bene#iial im$at &oes hand in hand with analyzin& .value
#or money/ and .$ubli aountability/( )hese riteria may identi#y instanes where
the auditee2s $er#ormane or systems are wea0( )o assess the $otential im$at o# an
audit assi&nment the auditor should then as0 a #urther *uestion as to what an be done
about it A what im$rovements should be made within the audited entity(
3(5@ )o answer this *uestion the auditor should &o ba0 to the om$arison between the
ation o# a .&ood/ or&anization and those o# the audited entity( As noted above% this
de#ines the $roblem areas within the auditee( Kut it also $oints to what the auditee
should do to im$rove( )he evaluative riteria A our views o# what a &ood or&anization
would be doin& A are the re*uired han&es(
3(55 Identi#yin& $otential im$rovements is only the #irst ste$( )he auditor should also
onsider whether they are"
11<( Feasible>
116( CostAe##etive(
He should not e!$et the audited entity to be $er#et( -er#etion an be e!orbitantly
e!$ensive( It may not even be $ossible( )he auditor should ma0e a realisti
assessment o# the true worth o# any $ossible reommendations(
ECe&u'i=e1 I%'ee1'
3(5< -er#ormane audit is not an end in itsel#( )he $ubli body e!$end valuable resoures
on it to serve the interests o# its main lients" the e!eutive and% throu&h them% the
$ubli and the media( )he auditor needs% there#ore% to have a view o# whether the
audit assi&nments he7she $ro$oses are in areas o# the e!eutive or $ubli interests or
whether the sub'et will $rove to be o# interest i# the Internal Audit $rovide ade*uate
in#ormation( )hou&h the auditor should be $olitially neutral he7she needs to have an
a$$reiation o# the $olitial environment(
3(56 )he e!eutive interest is also im$ortant beause it will have a diret e##et on the
im$at o# the $ubli body wor0( I# the Internal Audit reommendations are o$$osed
by the $ubli body and the audit re$ort does not &enerate muh interest by the
e!eutive% it may be di##iult to seure im$rovements in value #or money or $ubli
aountability(
Ri1?1 '" 'De I%'e%$l Audi'1
3(5D All ty$es o# audit involve ris0s to the auditor( ?uess#ul auditin& involves identi#yin&
these ris0s and limitin& their e!tent( )he ris0 to the Internal Audit at the overview
21
sta&e is sim$ly whether the Internal Auditor is li0ely to be embarrassed i# a $artiular
to$i is not e!amined(
3(<8 ?i&ni#iant ris0s to the Audit need to be identi#ied% evaluated and &iven $rominene
when re$ortin& the results o# the overview(
De7$'#e%'$l I11ue1
3(<1 )he audited entity a##ets seletion o# assi&nments in two ways"
11D( TDey #$y &"##i11i"% 'De 1'udy 'De#1el=e1B this is a $ositive advanta&e to
any assi&nment as the auditee is then more li0ely to ae$t the onlusions and
reommendations( )he auditor must% however% ensure that other riteria are met
be#ore reommendin& a study( ?he7he needs to be satis#ied that there is a real ris0
to value #or money worth investi&atin& and that the Internal Audits are a$able o#
ondutin& a *uality audit>
1@8( TDey #$y 1'e%u"u1ly "77"1e $ 7$'i&ul$ 1'udyB e!$eriene shows that
this an lead to onsiderable delays and may a##et the *uality o# the #inal out$ut(
)his should not% o# itsel#% sto$ the en&a&ement #rom $roeedin& but the auditor
should onsider the im$liations #or the audit o##ie wor0 9li0ely delays% ost in
resoures% #uture wor0in& relationshi$s: and re$ort aordin&ly to the audit o##ies2
senior mana&ement(
Sui'$5ili'y
3(<2 )he auditor should only reommend $otential assi&nments whih are suitable #or the
tar&et audiene( )his revolves around two issues"
1@1( Hhether the sub'et is so hi&hly ontentious $olitially that the Internal Audit
re$ort will end u$ bein& ar&ued over rather than ated u$on( Auditors should avoid
audits whih involve ritiism o# the &overnment2s $olitial ob'etives or whih
will inevitably to be used #or this $ur$ose by e!ternal audienes>
1@2( Hhether the sub'et is so tehnial in nature% that the Internal Audit annot
$resent a re$ort whih meets the audiene2s needs(
It is unli0ely that the Internal Audit an ahieve any o# its or$orate ob'etives i# either
o# these situations $revails(
3(<3 )he suitability o# a sub'et de$ends u$on how the li0ely ontent o# the #inal Internal
Audit re$ort an be $resented( Kein& $olitially ontentious or hi&hly tehnial does
not% in itsel#% rule out an audit( I# a sub'et an be $resented in a #atual% lear #ashion%
without $rovo0in& $olitial value 'ud&ments% it an still ma0e a &ood study re&ardless
o# its a$$arent sensitivity( )o assess suitability% auditors must onsider the #inal
$resentation o# the re$ort% even at this early sta&e(
Audi' $5ili'y
3(<1 )he auditor should only reommend assi&nments that the Internal Audit has the ability
to investi&ate( I# the auditor reommends a study at the overview sta&e she7he is
ommittin& the $ubli body to e!$endin& sare resoures on a #easibility study(
Further% i# it is #ound at the #easibility sta&e that the study is not viable% the audit will
have nothin& to show #or a onsiderable e##ort(
3(<@ Ky the end o# the overview sta&e the auditor should have a lear idea o# a #ew more
im$ortant% $otential audit areas to be investi&ated #or value #or money% $ubli
aountability and $er#ormane audit im$rovements( )he auditor should assess the
auditability o# the identi#ied $otential study issues(
3(<5 Audit ability de$ends u$on"
2@
1@3( TDe %$'ue "! 'De i11ue1" very broad% e##etiveness issues are &enerally more
di##iult to e!amine than narrower eonomy issues( For e!am$le% i# an audited
entity has #ailed to measure its ahievement o# soial ob'etives and the auditor
deides this is an issue to loo0 at he7she needs to thin0 are#ully about whether
his7her o##ie has the ability to measure $er#ormane in this area>
1@1( TDe #e'D"d"l"(y eGuied" the methodolo&y will determine the neessary
evidene% analysis and sta## s0ills( )he auditor should assess whether the audit
o##ie an ater #or all o# these be#ore reommendin& a study(
1@@( TDe $=$il$5ili'y "! e=ide%&e" evidene must be su##iient% relevant and
reliable( At the overview sta&e the auditor should ma0e an initial assessment o#
what will be needed% what is available in the audited body or elsewhere% and o# its
*uality( )he auditor should then onsider"
3ow easy it will be to ollet the evidene" it may only be available at various
loations #ar away #rom the audited entity( )his ould have si&ni#iant
im$liations #or osts and delivery o# the study>
Any &a$s in the available in#ormation and the im$liations o# $oor *uality o#
in#ormation" i# the &a$s and the $oor *uality o# in#ormation are si&ni#iant the
audit o##ie will have to #ill them itsel#( )he auditor needs to be sure that this is
$ossible and to have some view o# the li0ely ost>
TDe I%'e%$l Audi' $=$il$5le 1?ill1" auditors annot attem$t to be e!$erts in every
#ield( )he Internal Audits may need to em$loy s$eialist onsultants( E*ually% the
audit team may not have within it the neessary analytial s0ills and will have to
thin0 about biddin& #or sta## #rom elsewhere in its o##ie>
O=e$ll e1"u&e eGuie#e%'1" evidene may be available% and the o##ie may
have all the neessary s0ills% but the audit may be $rohibitively e!$ensive to
ondut( )he auditor should ma0e an initial assessment o# li0ely resoure
re*uirements and estimate the $ro'eted delivery date o# the #inal re$ort( )his
should be wei&hed a&ainst the $otential im$ats to see i# the audit is ost e##etive(
Ti#eli%e11
3(<< )he internal auditor should have to onsider whether or not"
1@6( )his is the ri&ht time #or the Internal Audit to investi&ate this area>
1@D( )he audited entity needs more time to im$lement ma'or suh as"
i: reommendations resultin& #rom internal7e!ternal reviews> or
ii: Chan&es resultin& #rom new le&islation(
Pe=i"u1 Audi' *"?
3(<6 )he 0nowled&e and e!$eriene &ained #rom $ast #inanial and $er#ormane audit is
also a valuable soure o# in#ormation in seletin& $er#ormane audit assi&nments(
O'De M$E" *"? Pl$%%ed " i% P"(e11
3(<D )he Internal Audit aims to ontribute ori&inal in#ormation and analysis( I# the audited
intity are in the $roess o# evaluatin& an area or have suh evaluation $lanned #or the
near #uture the auditor must as0 what an investi&ation by the Internal Audit will add
to im$rovin& value #or money or $ubli aountability(
3(68 In#ormation in this area is normally best sou&ht #rom the audited entity2s senior
mana&ement( Hhere there has been reent researh in a #ield we will also wish to
0now what ation the audited entity intends to ta0e on the #indin&s(
25
De=el"7#e%'1 Li?ely '" A!!e&' A11e11#e%'
3(61 )he Internal audit2s overall ob'etives are to im$rove value #or money or $ubli
aountability( )his de$ends% in $art% on what the &overnment or the audited entity
intends to do in the #uture in an area that is at ris0( For e!am$le% i# ma'or $oliy or
le&islation is $lanned the auditor should onsider what the internal audit study would
ontribute( )his an de$end on timin&( I# the internal audit re$ort is $rodued a#ter
the $oliy or le&islation is enated its wor0 may well $rove to be o# very limited
value( I#% however% it is able to $rodue a re$ort while audited entity or &overnment
are dra#tin& a new $oliy or le&islation it may be able to ontribute $ositively to
deisionAma0in&(
3(62 In#ormation in this area de$ends ruially on maintainin& a &ood relationshi$ with the
audited entity( O#ten they will be the only soure available( )he internal audit
should see0 their views as to whether there are any $ressin& reasons why it should not
$roeed with $ro$osed audit en&a&ement(
3(63 Ris0 riteria hel$ the auditor to assess the im$ortane o# an item in om$arison to
others in the audit #ield and to set $riorities #or the internal audit wor0( )o ome to a
view on the so$e #or $er#ormane audit in any area o# the audited entity% the auditor
should evaluate eah element a&ainst eah riterion and assi&n hi&h% medium or low
$riorities% omin& to a deision on the overall $riority o# the $ro$osed study areas(
)he #ators a##etin& $riorities or the various ris0 riteria are available in +uide 2
a$$endi! 6(
D"&u#e%'$'i"%
3(61 At the end o# the overview the auditor should $rodue a summary wor0in& $a$er
#older ontainin&"
158( A syno$sis o# the ross uts overin& the whole audit area( )his an #ollow
the #ormat o# table 1 o# a$$endi! 22 in +uide 2 with one dia&ram #or eah ty$e o#
rossAut e(&(% by ob'etive% in$uts% #inanial mana&ement ontrol system>
151( All ris0 assessment #orms>
152( A short disussion o# the $er#ormane audit strate&y #or the area% showin&% at a
minimum the yle o# overa&e o# hi&h% medium% and i# a$$ro$riate% low $riority
items>
153( A timetable #or the $ro$osed audit areas overin& the #ollowin& @ years(
151( ?e$arate wor0in& $a$er #olders ontainin& all relevant and neessary
su$$ortin& evidene(
3(6@ Eah ris0 assessment #orm should be #ully su$$orted by wor0in& $a$ers and evidene(
)his should be 0e$t on se$arate wor0in& $a$ers #olders( Detailed evidene should not
be $laed on the summary #older( )he summary #older will then be both onise and
su##iient to &o #orward #rom the Internal Audit head% with a overin& memo to the
head o# $ubli body Doumentation o# wor0in& $a$ers and wor0in& $a$er #olders are
disussed in +uide 2 A$$endies 28 and 21(
3(65 Ris0 assessment #orms on the summary #older should be re#erened to the relevant
wor0in& $a$ers and wor0in& $a$er #olders ontainin& the ba0&round in#ormation
and evidene #or the auditor2s 'ud&ments( Re#erenin& should be su##iient to allow
mana&ement to easily re#er to the relevant data(
2<
TDe O=e=ie> Re7"'
)he #inal out$ut o# the overview is a re$ort to the head o# $ubli body ontainin&"
Analysis o# the whole audit #ield a&ainst the ris0 riteria disussed below>
Alloation o# $riorities to eah area>
Reommendations o# yles o# overa&e o# the audit #ield 9e(&(% all hi&h $riority
items over a @ year $eriod:> and
Cimited details o# eah o# the audit assi&nments $ro$osed #or the ne!t 2 A 3 years(
On the basis o# this re$ort the head o# $ubli body will a$$rove #easibility studies in eah o#
the reommended audit en&a&ement areas( )here is no #ormal audit re$ort to the audited
entity or any other e!ternal lient(
3(6< )he #ous o# the overview re$ort is to hel$ the head o# $ubli body deide about the
audit assi&nment( )he re$ort &ives the auditor2s assessment about the 0ey areas to be
audited(
3(66 )he re$ort should over the auditor2s onlusions on the entire area that they e!amined
at the overview sta&e( It should inlude assessments o# those areas whih they have
deided not worth $ursuin& #or #urther study in the short term as well as the areas they
have ta0en #orward to the #easibility sta&e(
3(6D )he main overview re$ort should normally not be more than 6A18 $a&es lon& and
should inlude the #ollowin&"
Krie# desri$tion o# the audit area reviewed>
Details o# e!$enditure and inome% and soure o# #und in eah main area>
Review o# the various elements o# the audit area in terms o# their suitability #or
audit and their $riority>
Auditor2s reommendations #or the immediate audit and any reommendations
they may have #or #uture $er#ormane audit wor0 in this area>
Estimate o# the li0ely ost o# the $ro$osed audit> a$$ro!imate start and
om$letion dates o# the #easibility sta&e> start date o# the main investi&ation>
and $rodution o# the #irst dra#t re$ort>
Conludin& summary o# the above(
3(D8 )he a$$endies should inlude"
Ris0 assessment sheet #or eah element o# the audit area% #or e!am$le% a sheet #or eah
setion% division or $art o# the audited entity% or #or eah $ossible issue they have
onsidered( Ris0 assessment sheets should also be $rodued #or areas that they have
deided not to e!amine in the #easibility study or the main investi&ation(
A s$readsheet summarizin& the auditor2s 'ud&ments o# the $riority o# eah $otential
audit area a&ainst eah ris0 riterion(
Rel$'i"%1 >i'D 'De Audi'ed E%'i'y
3(D1 +ood relations with the auditee are essential #or a suess#ul overview( -artiularly% i#
the auditee has not $reviously been a sub'et #or the internal audit% #inanial or any
0ind o# investi&ation% at the start% the auditor may 0now little about the auditee and is
de$endent u$on its sta## to e!$lain its wor0in&s and to draw his7her attention to 0ey
in#ormation( Further% as noted above% a &ood level o# ontat with head o# $ubli
body is neessary(
26
3(D2 )he overAridin& $rini$le to whih we should always wor0 in our relations with
auditees% at all sta&es o# $er#ormane audit% is that o# .no sur$rises/( As we want to
be 0e$t in#ormed o# any si&ni#iant develo$ments in the audited entity% so we should
ensure that we 0ee$ all relevant sta## within the audited entity in#ormed o# what we
are doin&( CoAo$eration annot be oneAsided(
3(D3 )he #irst sta&e o# develo$in& &ood relations is to in#orm the head o# $ubli body o# our
intention to arry out an overview throu&h o$enin& on#erene( )his should normally
be underta0en by the internal audit head or senior auditor diretin& the wor0 and
should over"
TDe i%'e%$l $udi' 7e!"#$%&e $udi' "5Ee&'i=e1H
*D$' $% "=e=ie> i1 $%d >Dy >e $e &$yi%( i' "u'H
6ie!ly, 'De #e'D"d"l"(y "! $% "=e=ie>H
*D$' >"? >e >ill 5e u%de'$?i%(H
*D$' i%!"#$'i"% >e >ill eGuie !"# 'De $udi'ed e%'i'yH
*D" >i'Di% 'De $udi'ed e%'i'y >e >ill %eed '" '$l? '"H
Ou 1'$!!i%( $%d 'i#e'$5leH
A$%(e#e%'1 !" li$i1"% dui%( 'De "=e=ie>" the auditee should be enoura&ed
to in#orm relevant sta## about our wor0 and to a$$oint a liaison o##ier with whom
we an onsult in ase o# di##iulty% disuss han&es in timetable% sta##in& or aess
re*uirements and throu&h whom we an #ormally veri#y in#ormation as the
overview $ro&resses( )his liaison o##ier should be aessible% &iven reasonable
notie and have the authority to s$ea0 on behal# o# the auditee or be lose to the
auditee2s to$ mana&ement>
*D$' >e >ill d" >i'D "u e1ul'1" it should be stressed to the audited entity that
the overview is the audit o##ies2 internal $roedure and does not lead to a #ormal
audit re$ort( 3owever% the audit team should in#orm auditee2s to$ mana&ement
that we will want to disuss the broad outline o# our #indin&s at the end o# the
overview and to &ive them the o$$ortunity at that time to omment as they deem
neessary(
3(D1 In settin& u$ the overview we should also ta0e the o$$ortunity o# invitin& to$
mana&ement to &ive us a statement o# the auditee2s $oliy ob'etives and in#orm us
o#"
1<6( Any ma'or onerns re&ardin& its $er#ormane or that o# its subsidiary bodies>
1<D( Any onstraints a##etin& value #or money>
168( ?i&ni#iant #uture develo$ments within the auditee>
161( Any hindranes to the suess#ul om$letion o# the overview% e(&(% the
availability o# 0ey sta##( Ke#ore ommenin&% we should ma0e every e##ort to
resolve these(
3(D@ )he head and 0ey sta## within the #inane branh should also be #ully brie#ed( As
noted above% the #inane branh is an im$ortant soure o# in#ormation( Keause o# the
internal audit #inanial audit the #inane branh will be aware o# the internal audit %
but may not have ome aross $er#ormane audit be#ore(
3(D5 )he auditor must also liaise $ro$erly with all other sta## within the $ubli body whom
he7she wishes to interview( )hese sta## is more li0ely to be unaware o# the internal
audit% its role and $ur$ose and are unli0ely to have enountered $er#ormane audit
2D
$reviously( As a result they may% at #irst% a$$ear hostile but this an normally be
overome by are#ul e!$lanation and disussion(
3(D< )he auditor should ensure that the #inane branh and other de$artmental sta## o# the
audited entity are in#ormed% as a$$ro$riate% about"
162( TDe "le $%d 7u7"1e "! 'De I%'e%$l Audi'H
163( TDe "5Ee&'i=e1 "! 7e!"#$%&e $udi'H
161( *D$' $% "=e=ie> i1 $%d >Dy >e $e &$yi%( i' "u'H
16@( 6ie!ly, 'De #e'D"d"l"(y "! $% "=e=ie>H
165( *D$' i%!"#$'i"% i1 eGuied !"# 'De# $%d >DyH
16<( Ou 1'$!!i%( $%d 'i#e'$5leH
166( TDe li$i1"% $$%(e#e%'1 e1'$5li1Ded >i'D De$d "! 'De 7u5li& 5"dy, li$i1"%
"!!i&e 1D"uld 5e &l"1e '" 'De '"7 #$%$(e#e%' $%d D$=e 'De $u'D"i'y '" 17e$?
"% 5eD$l! "! 'De $udi'ed e%'i'y;
12,; *D$' >e >ill d" >i'D "u e1ul'1, i%&ludi%( 'De !$&' 'D$' 'De I%'e%$l
Audi' >ill di1&u11 e1ul'1 >i'D 'De $udi'ee $' 'De e%d "! 'De "=e=ie>;
3(D6 -reise methods o# #amiliarizin& sta## will de$end u$on the liaison arran&ements( In
some ases the audited entity will ta0e res$onsibility% in others it will be le#t to the
Internal Audit head( 9Hhihever is the ase% the auditor must he0 that auditee2s
auditee sta## is #ully and aurately brie#ed at an early sta&e(:
3(DD I# there are any ma'or han&es in our sta##in& or timetable% or in the aess we re*uire
to $eo$le and $a$ers% the internal auditor head should onsult with the head o# the
$ubli body the earliest o$$ortunity( Even where there are no han&es% it would be
ourteous to 0ee$ the auditee abreast o# the $ro&ress o# the overview( Internal audit
we wish to be in#ormed o# any develo$ments within the audited entity whih are
li0ely to a##et the ondut or outome o# the overview(
3(188 In lar&e% more om$le! or&anizations it is &ood $ratie to a&ree 0ey #ats as the
overview $ro&resses( )his &ives added on#idene to #indin&s and mi&ht inlude"
P"li&y "5Ee&'i=e1, i! 'De1e D$=e %"' 5ee% !"#$lly &"##u%i&$'ed 5y 'De
$udi'eeF1 '"7 #$%$(e#e%'H
Fi%$%&i$l i%!"#$'i"%H
ECi1'e%&e $%d u1$(e >i'Di% 'De $udi'ee "! 'De #$E" i%!"#$'i"% 1y1'e#1H
TDe 1'u&'ue $%d ?ey &"#7"%e%'1 "! 'De !i%$%&i$l #$%$(e#e%' 1y1'e#1,
i%&ludi%( 1'e%('D1 $%d >e$?%e11e1H
C"#7le'e%e11 "! li1'i%(1 "! $ll #$E" de7$'#e%'$l e=ie>1 "! 'De $udi'ee,
i%'e%$l $udi' " &"%1ul'$%&y e7"'1;
)he auditor may #ind it use#ul to $rodue a .#at sheet/ o# the 0ey in#ormation and
see0 veri#iation and a&reement #rom the auditee(
3(181 On om$letion o# the overview the $rini$al or senior auditor should disuss the
results with auditee to$ mana&ement( )his is $artly a matter o# maintainin& the
$rini$le o# .no sur$rises/ by 0ee$in& the auditee in#ormed% but their omments on
our onlusions would be valuable at this $oint( )hey may be able to add a &loss to
some o# the audit #indin&s 9e(&(% by $lain& some ris0s to value #or money into
onte!t: and may be able to orret any errors that may have re$t into our wor0 9that
is% atin& as a #orm o# *uality ontrol on the overview:(
3(182 )hese disussions should only over the #indin&s and broad onlusions o# the
overview and should not ommit the internal audit to a de#inite $ro&ram o# studies #or
the #uture( Final deisions on the internal audit #uture wor0 $lan lies with the head o#
38
the internal audit and other mana&ement who will not have had an o$$ortunity to
onsider the overview at this $oint(
M$%$(e#e%'
3(183 )he overview is di##iult to $lan and ontrol( It does not lend itsel# to detailed early
$lannin& beause both"
1D@( )he results o# early rounds o# in#ormation &atherin& and analysis and
1D5( )he lar&e number o# audit 'ud&ments involved 9e(&(% on the levels o#
materiality:
A##et the diretion o# later elements o# the wor0( At the outset there will be
onsiderable unertainty about whih areas to onentrate audit resoures on( )his
will only beome a$$arent as the overview $ro&resses( Indeed% one o# the reasons #or
the overview% and later #easibility and main investi&ation $lannin& sta&es% is to redue
unertainty about the so$e% ontent and outome o# the 9more ostly: main
investi&ation by tar&etin& audit areas with a hi&h $robability o# suess(
3(181 )hese di##iulties an be redued by brea0in& the overview down into sel#Aontained
tas0s( )his &ives mana&ement so$e to monitor and review $ro&ress and intervene as
and when neessary at 0ey deision $oints( )he main tas0s are"
1D<( I%i'i$l E"5 17e&i!i&$'i"%" be#ore any in#ormation &atherin& starts mana&ement
must are#ully desi&n the 'ob% de#inin& the so$e% overall ob'etives% time and ost
bud&ets% and overall resoure re*uirements>
1D6( I%i'i$l i%!"#$'i"% ($'Dei%( $%d &"11 &u'1>
1DD( De'$iled i%!"#$'i"% ($'Dei%( $%d i1? $11e11#e%'" this an be bro0en
down by sub'et and alloated to a number o# sta##>
288( Re7"' 7e7$$'i"%(
3(18@ Althou&h the wor0 should be bro0en down into mana&eable tas0s% it is &ood $ratie to
0ee$ ontinuity o# sta## throu&hout( Bnderstandin& o# the audited entity and
'ud&ment o# the ris0s and $riority o# eah individual area in the onte!t o# the whole
or&anization de$ends u$on the steady aumulation o# 0nowled&e and understandin&
by those involved( )his will not be #ailitated by ho$$in& and han&in& sta##(
3(185 Eah tas0 should be se$arately $lanned in its own"
281( Ob'etives>
282( Methodolo&y% data soures and analytial re*uirements>
283( )ime and ost bud&ets>
281( Milestones> and
28@( E!$eted out$uts and doumentation re*uirements% inludin& deadlines(
?ta## should be le#t in no doubt o# what is re*uired o# them% how% by when and with
what results(
3(18< Milestones are those $oints in a tas0 when mana&ement needs to evaluate $ro&ress to
date and onsider o$tions #or #uture diretion( )hey are deision $oints% and may
re*uire some element o# reA$lannin& o# tas0s or the overview as a whole( Identi#yin&
milestones has a number o# advanta&es"
285( )hey hi&hli&ht when mana&ement in$ut is essential>
28<( )hey em$hasize the im$ortane o# 0ey out$uts without whih mana&ement
annot ma0e in#ormed deisions>
286( )hey delineate between those deisions whih mana&ement needs to ma0e and
those that an be le#t to more 'unior audit sta##( )his in turn $oints u$ to sta##
whih un$lanned results should be brou&ht to mana&ement2s attention(
31
3(186 One the audit be&ins mana&ement must maintain a hi&h de&ree o# involvement(
Ade*uate ontrol relies u$on"
28D( M"%i'"i%( 7"(e11 $%d e=ie>i%( "u'&"#e1 $%d "u'7u'1" mana&ement
should retain su##iiently lose ontat with the $ro&ress% outomes and out$uts o#
the various tas0s as to be on#ident that ob'etives #or *uality% time and ost are
bein& ahieved> and
218( A&'i%( $' e$&D ?ey de&i1i"% 7"i%'" mana&ement must maintain the diretion
o# the study by ma0in& wellAin#ormed% $rom$t and a$$ro$riate deisions as
neessary(
3(18D Control also de$ends u$on ade*uate ommuniation within the internal audit and with
mana&ement( +ood $lannin& and the s$ei#iation o# 0ey out$uts and milestones will
hel$( Communiations will also be aided by the use o# re&ular internal audit
meetin&s( )hese should inlude all sta##% inludin& mana&ement( )heir suess
de$ends u$on"
211( Rele=$%&e" the $ur$ose o# team meetin&s is to review $ro&ress and onsider
the #uture diretion o# the overview( )hey should not beome a #orum #or &eneral
disussion( )he head o# the internal audit should hair all meetin&s>
212( Pe7$$'i"%" eah sta## should ta0e res$onsibility #or their own wor0 and be
able to review $ro&ress aurately and om$letely% hi&hli&htin& the si&ni#iant
#indin&s and areas where deisions need to be made>
213( Fee !l"> "! i%!"#$'i"%" &ood *uality deisionAma0in& de$ends u$on all
relevant in#ormation bein& onsidered( )his re*uires everyone bein& $re$ared to
listen as well as ontribute>
211( C"#7le'e%e11 "! de&i1i"% #$?i%(" deisions should over what needs to be
done% #or what $ur$ose% by whom% the deadline and% i# a$$ro$riate% the
methodolo&y>
21@( A&&u$'e #i%u'e '$?i%(" minutes are reords o# disussion but% more
im$ortantly% o# deisions made( )hey are wor0in& douments #rom whih all
should be able to see learly what is re*uired o# them(
M$?i%(
3(118 )he in#ormation and analysis #rom overview wor0 needs to be 0e$t u$ to date so that
han&es in irumstanes an be ta0en into aount when $lannin& the audit strate&y
e(&(% han&in& le&islation% ra$id &rowth in inome or e!$enditure(
3(111 Mar0in& is the $roess o# 0ee$in& the overview u$AtoAdate( It involves maintainin& a
seletive wath o# in#ormation and develo$ments in the audited body with the
ob'etives o#"
215( Identi#yin& and evaluatin& any ma'or han&es in the audit #ield>
21<( Revisin& the audit strate&y and $riority o# audit areas as the han&es ditate(
3(112 )he two main elements o# mar0in& are"
216( Maintainin& a broad overview o# de$artmental $lans and ativities e(&( Annual
re$orts and estimates( )he aim is to identi#y the $rini$al develo$ments whih
mi&ht a##et deisions ta0en as a result o# overview>
21D( Pee$in& a $artiular wath in those areas identi#ied #rom the overview as
warrantin& s$eial attention 9e!amination o# $ro&ress re$orts% mana&ement
in#ormation% statistis et(:(
32
3(113 )o be #ully e##etive mar0in& must be a$able o# hi&hli&htin& both new ris0s to GFM
and han&es in the im$ortane o# $reviously identi#ied ris0s(
3(111 Chan&es in the audited entity are li0ely to ta0e $lae( )hese han&es may inlude"
revisin& $oliy ob'etives% institutin& new $oliy instruments% han&in& the alloation
o# resoures% &ettin& involved in new ativities et( E*ually% as $er#ormane audit
ta0es e##et we would e!$et to see auditees with in the entity develo$in& their
mana&ement systems% reduin& ris0 to value #or money% im$rovin& $ubli
aountability and ma0in& better $er#ormane in#ormation available( All han&es%
whether #or the better or worse% must be inor$orated into audit $lannin&( )his may
o$en u$ new areas #or audit and han&e the $riority &iven to e!istin& ones(
3(11@ Althou&h we need to 0ee$ our audit $lannin& u$ to date% we do not want to &o throu&h
the entire $roess o# an overview eah year( )hey are lar&eAsale e!erises whih
onsume onsiderable resoures( He need to ta0e a seletive a$$roah to our review%
homin& in on any ma'or han&es in the audited entity and evaluatin& their
si&ni#iane( Hhere the auditee ontinues as be#ore lar&ely unhan&ed the overview
analysis an stand unhallen&ed(
Me'D"d"l"(y
3(115 Mar0in& inludes the #ollowin& ativities"
228( ?eletion o# 0ey de$artmental data soures to monitor>
221( Review o# data soures to identi#y si&ni#iant develo$ments in the audit #ield
sine the $revious overview or mar0in& round>
222( Evaluation o# develo$ments a&ainst the ris0 riteria disussed in Overview>
223( Revision o# the audit strate&y and audit $ro$osals% as neessary>
221( Doumentation and re$ortin& o# results(
Mar0in& inor$orates only those tehni*ues that are used durin& an overview% but on a
more limited and tar&eted sale(
Sele&'i"% "! D$'$ S"u&e1
3(11< Mar0in& should be 0e$t to the minimum neessary to identi#y and evaluate si&ni#iant
develo$ments in the audited entity( )he are#ul seletion o# 0ey data soures is
there#ore essential( ?eletion should be based on"
22@( EC7eie%&e !"# 'De "=e=ie>" this should have hi&hli&hted the most
valuable in#ormation soures% i(e( )hose most li0ely to &ive a &ood in#ormative
$iture>
225( A%y %e> de=el"7#e%'1 i% ei'De 'De $udi'eeF1 i%'e%$l " eC'e%$l
e7"'i%( 1'u&'ue1 " $$%(e#e%'1 dui%( 'De ye$" these may yield new
soures o# *uality in#ormation(
Re=ie> "! D$'$ S"u&e1 $%d E=$lu$'i"%
3(116 )his should #ollow the methodolo&y o# the overview( 3owever it should be stressed
that the ob'etive is to identi#y and evaluate only those develo$ments in the audit #ield
that will alter the audit strate&y or assessment o# $otential audit assi&nments( )he
overview will have &iven a &ood a$$reiation o# the audit area> mar0in& should build
u$on it% not reA$er#orm it(
33
3(11D As with the overview% the #irst ste$ is to analyze the #inanial data usin& rossuts(
Mar0in& rossAuts have two $ur$oses"
22<( )o see whether the overview analysis o# the audit area is still valid% that is%
whether there have been si&ni#iant han&es in the materiality o# the various
elements o# the area>
226( )o identi#y any si&ni#iant trends in e!$enditure% inome% or use o# resoures(
3(128 Mar0in& should also inlude a brie# review o# or&anizational"
22D( -oliy ob'etives>
238( Ativities>
231( Finanial mana&ement strutures(
)he internal auditor should also monitor the auditee2s #uture $lans throu&h suh
soures as or$orate $lans% resoure bids et(
3(121 )he internal auditor should stay in#ormed on the auditee2s ahievement o# value #or
money( ?oures #or this will normally be identi#ied durin& the overview and%
ty$ially% will inlude"
232( Internal or e!ternal re$ortin& o# $er#ormane 9e(&( Annual re$orts:>
233( Internal audit re$orts>
231( Consultany or other mana&ement re$orts(
3(122 All in#ormation should be evaluated a&ainst the ris0 riteria disussed in Overview and
the results om$ared to that o# the overview or $revious year2s mar0in&( In eah ase
the auditor should loo0 #or any si&ni#iant develo$ments sine the $revious year and
assess the im$liations #or the audit strate&y and $otential assi&nments(
D"&u#e%'$'i"%
3(123 Doumentation should re#let the $rini$al ativities o# mar0in&( It should"
23@( Reord the results o# rossAuts o# #inanial data>
235( Identi#y #urther data soures>
23<( Reord the results o# the monitorin& o# eah data soure% on#irmin&% as
neessary% that the audit strate&y or $ro$osed assi&nments remain una##eted or
hi&hli&htin& any ma'or han&es re*uired>
236( ?ummarize $ro$osed revisions in eah individual #uture audit assi&nments and
the strate&y as a whole(
3(121 )y$ially doumentation would $rodue three sets o# wor0in& $a$er #olders"
23D( CrossAuts>
218( One #or eah data soure 9e(&(% internal audit re$orts% annual re$orts et(: Hith
a brie# overin& note o# #indin&s and im$liations>
211( A summary #older ontainin& any revised or additional ris0 assessment #orms
and revised audit strate&y% as neessary(
3(12@ As with the overview% it is essential that all wor0in& $a$ers and wor0in& $a$er #olders
are re#erened $ro$erly( Doumentation o# wor0in& $a$ers% inludin& re#erenin&% is
disussed in +uide 2 a$$endi! 5(
3(125 Ade*uate ontat should also be made with"
)he #inane de$artment>
Other de$artmental in#ormation will be re*uired durin& the ourse o# mar0in&(
31
All internal auditee sta## should be in#ormed o#"
)he role and $ur$ose o# mar0in&>
Krie#ly% the methodolo&y>
Hhat in#ormation is re*uired #rom them and why>
Our sta##in& and timetable>
Hhat we will do with audit results(
3(12< As with the overview% $reise methods o# #amiliarizin& sta## will de$end u$on the
internal audit arran&ements( In some ases the auditee will ta0e res$onsibility% in
others it will be le#t to the internal audit( Hhihever is the ase% the auditor must
he0 that auditee sta## are #ully and aurately brie#ed at an early sta&e(
3(126 Keause o# the restrited nature o# mar0in&% there is usually only limited need #or
ontinued ommuniation durin& its $ro&ress( Disussions will% normally enter on
$oints o# lari#iation only( E*ually% there is rarely any need to $re$are detailed #at
sheets #or a&reement(
3(12D )here will normally be no need to disuss the outome o# the mar0in& with auditee2s
o##iials( 3owever% i# mar0in& $oints to the need #or a #undamental han&e in the
internal audit $er#ormane audit a$$roah or immediate $ro&ram o# audit assi&nments
the head o# internal audit in har&e should onsider whether this should be disussed
with the head o# $ubli body at an early sta&e(
M$%$(e#e%'
3(138 Mar0in& must be losely mana&ed( Deisions need to be made at the outset on"
21D( )he de$th or intensity o# mar0in&>
2@8( Hhih data soures to review>
2@1( Hhether mar0in& should be one a year event or on a ontinuous basis>
2@2( Hho should do the wor0 sta##in&>
2@3( )ime bud&ets and delivery dates(
De7'D " I%'e%1i'y "! M$?i%(
3(131 )his an be varied aross the de$artment( It may $rove to be most e##iient to strati#y
the audit #ield to &ive areas o# low and hi&h intensity mar0in& eah year( 3i&h
intensity mar0in& may inlude those areas where we intend to do ma'or study area in
the ne!t two years or areas where there was e!$etation #or ma'or han&es in the
$oliy ob'etives or $oliy instruments in the near #uture or areas o# si&ni#iant $ubli
interest( For low intensity mar0in& areas we would 0ee$ a relatively limited wath to
merely reAon#irm or alter the overview onlusions( For hi&h intensity areas we
would want to develo$ a more om$lete $iture o# han&es and develo$ment in the
area(
3(132 Fators a##etin& the e!tent to whih an area is monitored and reviewed inlude"
2@1( TDe li?ely i%!lue%&e1 "! i%Dee%' i1? " 'De &"%'"l e%=i"%#e%' "%
&D$%(e1 i% i1? '" =$lue !" #"%ey" the more li0ely that han&es will our 9both
$ositive and ne&ative: the more it should be monitored to 0ee$ the audit strate&y
tar&eted>
2@@( I%">% de=el"7#e%'1" #or e!am$le an area should reeive e!tensive
monitorin& i# there is stron& li0elihood that there will be le&islative han&e(
2@5( TDe 'i#i%( "! $%y !u'ue $udi' $11i(%#e%'" in ma0in& reommendations to
internal audit mana&ement #or assi&nment #or the #ollowin& year we will want to
3@
ensure that all $ro$osals are valid( )he basis% so$e and tar&etin& o# eah
reommendation should there#ore be reviewed in some de$th durin& mar0in&(
2@<( TDe &"#7leCi'y $%d 1iAe "! 'De $udi'ee" i# the audit entity is lar&e% with
multi$le ob'etives and a wide variety o# #untions mar0in& ould develo$ into a
ma'or audit ativity( Kut the $ur$ose is not auditin&% hene e##ort will there#ore
need to be onentrated on monitorin& o# $riority areas(
D$'$ S"u&e1
3(133 )he mana&ement should reo&nize that the more data soures that they re*uire to be
mar0ed the more audit resoures they will onsume(
O($%iA$'i"%
3(131 Mana&ement has a hoie as to whether $art or all o# mar0in& should be onduted as
a one a year e!erise or s$read throu&hout the year( )his will normally ome down
to a *uestion o# the availability o# resoures( In $ratie it is $robably best to $arel
the 'ob u$ into disrete tas0s 9e(&(% by data soure: whih an be &iven to sta## as and
when they beome available( I# this is the ase then there should be a mar0in&
oordinator to monitor $ro&ress and to draw the #indin&s to&ether at the end o# the
year(
S'$!!i%(
3(13@ Deisions on sta##in& revolve around &ettin& the best mi! o# s0ills to do the 'ob(
Mar0in& bene#its #rom ombinin&"
2@6( Pe!"#$%&e $udi' 1?ill1" es$eially a 0nowled&e and understandin& o# ris0
riteria>
2@D( I%">led(e "! 'De "=e=ie>" the auditor needs to a$$reiate the results o# the
overview to $ut mar0in& #indin&s in onte!t>
258( U7 '" d$'e ?%">led(e "! 'De $udi'ed e%'i'y" bein& #amiliar with what is
&oin& on in di##erent #ields o# the audited entity on a day to day basis an add
insi&ht to and redue the time s$ent on mar0in&( ?uh 0nowled&e is most o#ten
#ound in those res$onsible #or the #inanial audit(
)he internal audit head there#ore need to balane the various s0ills and abilities o# their
sta##(
Ti#e 6ud(e'1 $%d Deli=ey D$'e1
3(135 )he internal Audit head should develo$ ti&ht time bud&ets and delivery dates( Hhilst
it may be reasonable to have relatively #ree bud&ets in the #irst year% mana&ement
should be loo0in& to ma0e these more limited% but still reasonable% as #amiliarity
develo$s with the entity under audit% $er#ormane audit &enerally and the
methodolo&y o# mar0in&( Delivery a&ainst time bud&ets re*uires sensible and
$ositive $lannin& and ontrol by mana&ement(
A%%u$l O7e$'i"% Pl$% A%d S'$'e(i& Pl$%
3(13< )he aim o# a strate&i $lan is to $rovide a basis #or what should be done in #uture with
available resoures( )he strate&i audit $lan is the main vehile #or"
251( ?eurin& a re&ular annual review o# audit sta##in& re*uirements #or the whole
ran&es o# ativities>
252( Construtin& #or eah dra#t lo&ial and de#ensible $er#ormane audit strate&y>
35
253( Identi#yin& within these $er#ormane audit strate&ies $ossibilities and
$riorities #or #orwardin& $ro&rams o# investi&ations>
251( -rovidin& a basis #or alloatin& resoures to de$artments(
3(136 Every year in Qune7Quly Internal Audit should $rodue a $er#ormane audit strate&i
and annual $er#ormane $lan( )his is an internal deision ma0in& doument #or
disussion and a&reement between Internal Audit and the head o# $ubli body on"
25@( )he internal audit strate&y #or the omin& @ years>
255( ?$ei#i $er#ormane audits #or the #ollowin& 21 months>
25<( Conse*uential sta##in& needs and other resoures(
3(13D )o$ mana&ement2s a$$roval o# the $lan% revised as neessary% $rovides the Internal
Audit with a number o# out$uts"
256( It onstitutes a$$roval by to$ mana&ement to ta0e s$ei#i audits #orward to
the #easibility sta&e>
25D( )a0en to&ether the strate&ies within the $lans onstitute the Internal Audit
$ro$osed strate&y #or ahievin& the $er#ormane audit ob'etives>
2<8( )he a$$roved audit $lan #or the $ro&ram o# $er#ormane audit that the Internal
Audit e!$ets to $rodue over the ne!t 2 years>
2<1( )a0en to&ether the $lans de#ine the Internal Audit $er#ormane audit sta##in&
and other resoure re*uirements #or the ne!t 2 years(
I%'e%$l Audi' S'$'e(i& Pl$%%i%( T$1?1
3(118 )here are si! main $lannin& tas0s involved in $re$arin& the $lans"
2<2( E!amine the $er#ormane audit #ield in the li&ht o# on&oin& survey and
mar0in& wor0>
2<3( Analyze materiality o# the #ields% the ris0 to value #or money and other #ators>
2<1( Con#irm or revise the audit strate&y as a$$ro$riate>
2<@( Com$ile $ro$osed $ro&rams o# investi&ation within the s$ei#ied $lannin&
$eriod>
2<5( Review issues identi#ied by #inanial audit team whih need #urther attention
by the $er#ormane audit team>
2<<( Calulate the resoure re*uirements #or all as$ets o# wor0 within the $lannin&
$eriod(
I%'e%$l Audi' S'$'e(i& Pl$% Re7"'
3(111 Internal Audit strate&i $lan re$ort should inlude"
A brie# desri$tion o# the so$e o# the audit #ield and the internal audit $ro$osed
strate&y #or $er#ormane auditin&>
A brie# desri$tion o# the $ro$osed $ro&ram o# audit assi&nments>
A short ommentary on $er#ormane a&ainst the $revious year2s $lan% inludin& an
e!$lanation o# any $roblems enountered>
A statement o# the neessary sta## and other resoure re*uirements #or the $ro$osed
$er#ormane audit assi&nments>
A statement o# sta## availability within the internal audit>
3<
A detailed sta## bid to meet the &a$ between sta## re*uirements and availability
$lus a bid #or other e!ternal resoure re*uirements not available within the internal
audit(
3(112 )he head o# the $ubli body re*uires onise $lannin& doument whih will"
261( -rovide su##iient in#ormation>
26@( Identi#y $er#ormane audit delivery>
265( O##er o$tions>
26<( -rovide a satis#atory basis #or deisions ma0in&(
)o meet these re*uirements internal audits should $re$are a short $lan whih has the
#ollowin& ase materials"
-art I" overa&e summary
-art II" wor0 $ro$osal
-art III" overhead tar&ets
-art IG" resoures
-art G" a$$endies
Hithin a$$endies"
A s$readsheet o# the $riority under eah ris0 riteria o# eah $ro$osed $er#ormane
audit assi&nments in the #ield% also showin& $ro$osal #or timin& 9$roA #orma in
+uide 2 a$$endi! 18>
B$ to a 3A$a&e $ro$osal #or eah reommended audit assi&nment( Re*uirements
#or $ro$osals are in +uide 2 a$$endi! 12>
A de$artmental .inome and e!$enditure/ aount #or sta##in& showin& sta##
availability and main usa&e and hi&hli&htin& .#ree a$aity/ available #or
$er#ormane audit in +uide 2 a$$endi! 13>
A statement on the need #or onsultants or other outside resoures 9+uide 2
a$$endi! 11:>
A wor0 $lan overin& the ne!t 2 years% by month% showin& the time s$ent on eah
sta&e o# eah audit assi&nment(
3(113 -lans should be $re$ared #rom"
2D3( )he in#ormation and analysis o# the overview and mar0in&>
2D1( An assessment o# resoure re*uirements>
2D@( Monitorin& and analysis o# $resent sta## usa&e(
2D5( In normal situations the $lan an be rolled #orward eah year" where no ma'or
revision o# the audit strate&y is needed the $lan will vary little #rom one year to the
ne!t% merely re*uirin& the addition o# a new @
th
year o# audit $lan(
3(111 Res$onsibility #or $ro$osin& strate&y and #or im$lementin& the $ro&ram o# audit
assi&nments rests with internal audit head( One disussed and a&reed by the head o#
$ubli body the $lans onstitute .aountability douments/ whih the head o#
Internal audit is answerable #or deliverin&( )o avoid $roblems at the #easibility%
$lannin& and main investi&ation sta&es internal auditors must satis#y themselves that
their $lans are viable(
Sele&'i%( $% Audi'
36
3(11@ A#ter the $roess o# movin& #rom &eneral in#ormation about an or&anization to the
$oint where the e!at se*uene and timin& o# studies is wor0ed out% it is $ossible to
selet a study #rom number o# o$tions(
3(115 )he #ollowin& are su&&ested riteria #or seletin& a study #rom a number o# o$tions(
)hus a &ood $er#ormane audit study is that whih"
2D<( )a0les im$ortant and to$ial issues and areas o# strate&i im$ortane to
&overnment $oliies and $ro&rams>
2D6( +ets to the heart o# the matters e!amined>
2DD( Is well arran&ed and evidened to $rovide Internal Audit im$at> and .added
value/
388( )a0es onstrutive a$$roah whih is relevant to the auditee mana&ement in
the real world>
381( Is valuable and redible to 0nowled&eable users>
382( Is understandable to $eo$le who 0now about the sub'et(
3ene% divisions should bear these #ators in mind when $re$arin& their strate&i
$lans(
O7e$'i"%$l P"($# i% MOFED
3(11< )he O$erational $ro&ram is the 1
th
ste$s o# the $lannin& $roesses whih is used by
MOFED to #ollow u$ the o$eration o# the $er#ormane audit by $ubli bodies(
3(116 Its $ur$ose is to $rovide a balaned and timely submission o# re$orts to the e!eutives
to monitor the $ro&ress o# re$orts( It ensures that% whilst allowin& #or neessary
#le!ibility #or the ondut o# the ma'or elements o# the audit wor0> there would be a
balaned $ro&ram #or the submission o# re$orts to the e!utives on a$$ro$riate time(
Fe$1i5ili'y S'$(e
3(11D )he $ur$ose o# a #easibility study is to $rodue a worthwhile and viable $ro$osal #or
the main investi&ation( )he ob'etives o# a #easibility study are"
)o de#ine the audit ob'etives% #or the main investi&ation% the issues% so$e%
evaluative riteria% li0ely onlusions and e!$eted reommendations>
)o desi&n an audit methodolo&y a$able o# deliverin& the main investi&ation
ob'etives>
)o assess the ability o# the internal audit to e!eute the methodolo&y suess#ully>
)o estimate realisti time and ost bud&ets and $rodue a wor0 $lan #or the main
investi&ation(
3(1@8 )he #easibility study is a ma'or element o# the $er#ormane audit $roess( It is entral
to the e##etiveness and e##iient e!eution o# the main investi&ation( Bnless due are
is ta0en and e##ort is e!erted durin& the #easibility sta&e it may $rove di##iult%
e!essively ostly or% in e!treme ase% im$ossible to $rodue a satis#atory
$er#ormane audit re$ort(
3D
3(1@1 On om$letion o# the #easibility sta&e the internal auditor should re$ort results to the
head o# internal audit( )he re$ort should over the ob'etives o# the main
investi&ation% its #easibility and e!$eted ost 9#ull re*uirements are detailed below:(
It is then #or to$ mana&ement to deide whether a study should $roeed(
3(1@2 )he #easibility study may lead to deision that a main investi&ation is not 'usti#ied at
this sta&e" )he #ollowin& ould be some o# the reasons #or not arryin& out the
$ro$osed $er#ormane audit"
Bnavailability o# data>
Cost o# arryin& out the audit may be more than the bene#its e!$eted #rom the
audit>
Finanial audit results have overed most o# the &round>
)he internal ontrols and $er#ormane o# mana&ement are satis#atory>
)he ob'etives o# the auditee are bein& met satis#atorily>
)he audit is not e!$eted to lead to si&ni#iant #indin&s and reommendations(
SeGue%'i$l S'e71
3(1@3 )he ste$s involved in the #easibility study are shown in dia&ram 3(1( )hese are li0ely
to be iterative% with re#inement omin& throu&h a number o# yles(
18
11
DIAGRAM 3;1 - STEPS IN T)E FEASI6ILIT4 STAGE
Reonsider
#easibility o#
study or rede#ine
ob'etives%
issues and so$e
1( De#ine ob'etives% set
issues and so$e
Reonsider
#easibility o#
study or rede#ine
ob'etives%
issues and so$e
2( Establish evaluative
riteria
or
Rede#ine
methodolo&y
Ahievement
unli0ely
3( Identi#y li0ely onlusions
1( Identi#y e!$eted
reommendations
@( Delineate methodolo&y
5( Assess in#ormation
re*uirements
<( E!amine availability%
*uality and aess to
in#ormation
6( Assess resoure re*uirements
D( E!amine availability o#
resoures
18( -re$are wor0 $lan% time and ost
bud&et
11( Review li0ely ahievement
o# study ob'etive
12( Evaluate li0ely im$at o# study
and ontribution to the Internal audit
$er#ormane audit ob'etives
13( -re$are re$ort to the head o#
$ubli body
In#ormation
not available
Resoures
not available
Im$at limited
or little
ontribution
S'e7 1 '" 3B De!i%i%( "5Ee&'i=e1, i11ue1 $%d 1&"7e, e1'$5li1Di%( e=$lu$'i=e
&i'ei$, ide%'i!yi%( li?ely &"%&lu1i"%1 $%d eC7e&'ed e&"##e%d$'i"%1
3(1@1 ?te$s 1A1 involve re#inin& the ris0 assessments made durin& the overview or mar0in&
to establish ob'etives #or the main investi&ation(
Audi' O5Ee&'i=e@I11ue1
3(1@@ Audits must have lear ob'etives that an be onluded a&ainst( Audit ob'etives are
normally e!$ressed in terms o# what *uestions the audit is e!$eted to answer about
the $er#ormane o# an ativity% #or e!am$le% results ahieved% eonomy or e##iieny(
Ideally% audit ob'etives would be onsistent with the ahievement o# results o# the
entity% setor or #untional area( In &eneral terms% the ob'etives o# the ty$ial GFM
audit are om$atible with the o##ie2s mission(
Audi' S&"7e
3(1@5 Audits must have a lear so$e that #ouses the e!tent% timin& and nature o# the audit(
?o$in& the audit involves narrowin& the audit to a relatively #ew matters o#
si&ni#iane that $ertain to the audit ob'etive% an be audited with the resoures
available% and are ritial to the ahievements o# the intended results o# the audit
sub'et(
E=$lu$'i=e Ci'ei$
3(1@< Audits must have suitable evaluative riteria that #ous the audit and $rovide a basis
#or develo$in& observations( Auditors need a means o# measurin& or 'ud&in& the
$er#ormane o# the matters sub'et to audit( )he standards used #or this $ur$ose are
re#erred to as evaluative riteria( ;ormally% auditees should have $er#ormane
measurement riteria whih the auditor mi&ht ado$t as evaluative riteria( I# the
auditees do not have a$$ro$riate $er#ormane measurement riteria or they do not have
at all% the auditor should develo$ his own evaluative riteria in whih ase he needs to
disuss and a&ree with head o# $ubli Kody(
3(1@6 Main investi&ations should be tar&eted on between 2A 1 s$ei#i and wellAde#ined
issues whih re#let the main ris0s to value #or money or $ubli aountability( )o hel$
the auditor develo$ the audit ob'etives and #undamental issues% +uide2 A$$endi! @
$rovides a list o# 11 basi *uestions( Eah issue should be su$$orted by a set o#
evaluative riteria a&ainst whih to 'ud&e the auditee2s $er#ormane( Evaluative riteria
are disussed in de$th in +uide2 a$$endi! 1(
3(1@D Ci0ely onlusions are the auditor2s $reliminary assessment o# the audited entity2s
$er#ormane a&ainst eah evaluative riterion( )a0en to&ether they &ive a #ull aount
o# the auditee2s ahievements( Ky assessin& the si&ni#iane o# the li0ely onlusions%
the auditor an ran0 evaluative riteria suh that the main investi&ation onentrates on
the &reatest ris0s to value #or money and7or $ubli aountability( E!$eted
reommendations are the li0ely im$rovements in the ondut or mana&ement o# the
audited ativity whih are re*uired to seure &ood value #or money and7or $ubli
aountability(
3(158 For eah issue% ste$s 1A1 will &ive a hierarhy o# evaluative riteria% li0ely onlusions
and e!$eted reommendations similar to the #ollowin&"
12
1( Issue 2( Evaluative 3( Ci0ely 1( E!$eted
Criteria onlusion reommendation
;ote" .ne&ative/ li0ely onlusions are where there are indiations o# $oor value #or
money% and7or inade*uate $ubli aountability( In eah ase there are orres$ondin&
reommendations to im$rove $er#ormane( )hus ste$s 1A1 &ive a number o# layers o#
ob'etives #rom broad issues to s$ei#i li0ely onlusions and e!$eted
reommendations(
All onlusions% both $ositive and ne&ative% should be re$orted(
S'e7 +B Deli%e$'e Me'D"d"l"(y
3(151 Ky the end o# the #easibility sta&e the auditor should have a om$lete s$ei#iation o#
the methodolo&y that will be used durin& the main investi&ation to ahieve the audit
ob'etives( )his should over all neessary audit tests% inludin& any analytial and
#inanial tehni*ues% and should show how"
)o assess the auditee2s $er#ormane a&ainst eah evaluative riterion>
)o a$$raise the viability and ost e##etiveness o# reommendations(
3(152 In -ratie% the methodolo&y will enter on the li0ely onlusions and e!$eted
reommendations( As noted above% these re#let the auditor2s best assessment o# the
$riority areas #or the main investi&ation% that is% where there is the &reatest ris0 to value
#or money and7or $ubli aountability and% onse*uently% the &reatest need #or
worthwhile reommendations( )he methodolo&y must"
+ive om$lete overa&e to all li0ely onlusions and e!$eted reommendations(
All onlusions and7or reommendations made in the #inal Internal Audit re$ort
will be o$en to hallen&e by the auditee and must% there#ore% be su$$orted by
su##iient audit wor0>
Qusti#y the onlusions and reommendations $reisely% as written in ste$s 3 and 1(
For e!am$le% i# we wish to ma0e a broad onlusion overin& $er#ormane in
&eneral% in a $artiular audit area we will need to em$loy a statistially valid
sam$lin& method( I#% however% we only want to illustrate the $otential #or #ailure
o# a ontrol a more limited% less statistially ri&orous a$$roah% $ointin& out a #ew
e!am$les% may be ade*uate(
3(153 )his is illustrated in +uide 2 a$$endi! 1@( Hhih inludes evaluative riteria% li0ely
onlusions and e!$eted reommendations( Audit tests are detailed a&ainst eah
li0ely onlusion and7or reommendation( In eah ase the nature o# the audit test
su$$orts the #orm o# the e!$eted onlusion and7or reommendation(
13
A
K
C
1(
M 9ne&ative:
; 9$ositive:
- 9$ositive:
J 9ne&ative:
R 9$ositive:
R
S
S'e7 . $%d 0B E1'$5li1D e=ide%&e eGuie#e%'1 $%d eC$#i%e $=$il$5ili'y,
Gu$li'y $%d $&&e11
3(151 Ke#ore determinin& whether a study $ro$osal is #easible the internal auditor must
establish whether there is relevant and reliable evidene% su##iient to ondut the
$ro$osed methodolo&y(
3(15@ In ste$ 5 establishin& evidene re*uirements internal auditor should analyze eah
element o# the methodolo&y to identi#y evidene re*uirements( )his should be as
om$lete and $reise as $ossible so that there are no ambi&uities about what is needed(
)he $rini$les o# audit evidene are outlined in +uide 2 a$$endi! 16(
3(155 In ste$ < the internal auditor should asertain whether it an obtain the evidene it
re*uires at reasonable ost( )his inludes"
)he availability o# the evidene>
Its *uality> and
Hhether the Internal audit has aess to it(
3(15< Availability overs whether there is su##iient evidene in e!istene to e!eute the
methodolo&y and ahieve the study ob'etives( I# the internal auditor #inds that there
are si&ni#iant &a$s% it an"
?ee0 &uidane #rom relevant audit ommittee be#ore tryin& to #ill them itsel#( For
this may $rove di##iult or ostly and the internal auditor needs to be sure that it is
realisti within the $ro$osed audit e!$enditure> or
Rede#ine the issues% so$e et( And the methodolo&y to &ive a study whih is
#easible &iven the &a$s( In this ase the internal auditor must be satis#ied that the
rede#ined study is still worthwhile and ontributes to the Internal audit2s
$er#ormane audit ob'etives(
3(156 Evidene must be both relevant and reliable( -oor *uality evidene may ma0e the
Internal Audit re$ort #indin&s and reommendations o$en to hallen&e #rom the
auditee( Fators to onsider when onsiderin& the *uality o# evidene inlude whether"
It is aurate>
It is u$AtoAdate>
It is om$lete>
It an reasonably be used in the manner intended(
9see +uide 2 a$$endi! 16 :
3(15D Aess to in#ormation inludes"
I%'e%$l $udi'1 le($l i(D' '" $&&e11 '" i%!"#$'i"%" Hhilst the Internal Audit
has a le&al ri&ht to aess to in#ormation #rom with in or outside the entity with
matter related to the audited area it will o#ten re*uire evidene #rom individuals or
or&anizations(
TDe l"&$'i"%, e$1e $%d #e'D"d "! &"lle&'i"% "! 'De i%!"#$'i"%"
)he internal auditor should identi#y where neessary in#ormation is held and in
what #orm% and $rodue a $lan #or olletion()he auditor may need to ondut $ilot
olletion e!erise to he0 the #easibility o# the $ro$osed methodolo&y(
3(1<8 At the om$letion o# sta&e <% the internal auditor should $rodue a summary as in
+uide 2 a$$endi! 15( A&ainst eah li0ely onlusion and e!$eted reommendation%
and the orres$ondin& methodolo&y% the auditor is needed to s$ei#y the in#ormation
needed and &ive details o# its availability( Hhere re*uirement and availability do not
math e!atly the auditor should omment on the im$liations% to draw mana&ement2s
11
attention to any im$at( )his may have a onsiderable e##et on the investi&ation2s
onlusions and reommendations( +uide 2 A$$endi! 15 should aom$any the
#easibility sta&e re$ort to senior mana&ement(
S'e7 2 $%d ,B A11e11 e1"u&e eGuie#e%'1 $%d eC$#i%e 'Dei $=$il$5ili'y
3(1<1)he internal audit should a$$ly the same a$$roah to e!aminin& the need #or and
availability o# resoures as #or evidene( Resoures will be needed to &ather evidene%
analysis% evaluation o# results and to $rodue the Internal audit re$ort(
3(1<2 In ste$ 6 A assessin& resoure re*uirements A the Internal audit should identi#y"
)he nature o# the wor0 to be arried out at eah ste$ o# the main investi&ation>
)he ty$e o# resoures re*uired to e!eute the wor0( )hese may be available within
the audit team but o#ten assistane will be needed #rom other setions o# the
Internal audit 9e(&(% s$eialist statistial s0ills: or #rom outside the Internal audit
9e(&(% onsultants or other s$eialists:>
)he *uantity and timin& o# all in$ut>
)he $reise terms o# re#erene% e!$eted results and out$uts #or any e!ternal
onsultants>
Estimated osts #or all in$uts(
Detailed &uidelines #or the seletion and use o# e!ternal onsultants are ontained in
+uide 2 a$$endi! 1D(
3(1<3As with in#ormation% the auditor must he0 that all the neessary resoures will be
available as and when re*uired( )his overs all ty$es o# sta## A the audit team size%
&radin& and s0ills needed% s$eialist% Internal audit sta## and e!ternal onsultants( I# any
$roblems are identi#ied the auditor should onsider the hoies o# either #indin& other
soures #or resoures or rede#inin& the audit issues and so$e to #it resoure availability(
3(1<1Ky the end o# the #irst D sta&es the auditor should have a #ull set o# ob'etives #or the
main investi&ation% a methodolo&y #or ahievin& these and assurane that all neessary
evidene and resoures are available( I# this is not the ase the auditor should rede#ine
the audit issues and so$e and reonsider the methodolo&y so that a #ully de#ensible
audit a$$roah an be develo$ed(
3(1<@In e!treme ases $roblems with in#ormation or resoures may lead the auditor to
onlude that it is not $ossible to ondut a worthwhile study( Althou&h this deision
should not be ta0en li&htly% and should always be #ully 'usti#ied% it is $re#erable to
ontinuin& with the study that is ina$able o# $roduin& an in#ormative and use#ul
re$ort( Main investi&ations onsume valuable audit resoures and should only be
entered into i# there is a realisti $ossibility o# $roduin& a valuable out$ut( In all suh
ases the auditor must re$ort her7his #indin&s to audit o##ie senior mana&ement at the
earliest o$$ortunity(
S'e7 10B Pe7$e >"? 7l$%, 'i#e $%d &"1' 5ud(e'1
3(1<53avin& develo$ed a viable methodolo&y% and ensured that the neessary evidene and
resoures are available% the auditor should $re$are a wor0 $lan% time and ost bud&ets
#or the main investi&ation( )hese should be inluded in the #easibility study re$ort to
the head o# $ubli body( )hey allow mana&ement to assess% in addition to the #easibility
o# the audit% whether it is% in their view% ost e##etive(
1@
3(1<<)he wor0 $lan involves shedulin& wor0 and resoures to &ive the most e##iient
e!eution o# the methodolo&y within the desired time #rame( )he $lan should show%
by wee0"
TDe 'i#i%( "! 'De =$i"u1 '$1?1" these should be arran&ed in their lo&ial
se*uene ta0in& into aount the interde$endene between them( For e!am$le%
review o# the sam$le o# ases an only ta0e $lae a#ter the wor0 has been
om$leted to draw u$ the s$ei#iation o# need on whih the review is based>
ReGuied i%7u'1 !"# I%'e%$l $udi' $%d eC'e%$l 1"u&e" the neessary in$ut%
by $ost level% should be sheduled over the li#etime o# the investi&ation( )here
will normally be o$$ortunities to trade o## levels o# sta##in& with delivery dates(
For e!am$le% one less auditor ould be used 9on the review o# the sam$le ases
and survey o# &rant rei$ients: but at the ost o# a later overall om$letion o# the
main investi&ation( Due re&ard must be &iven% however% to the neessary
se*uenin& o# tas0s>
Iey d$'e1" start and om$letion o# $lannin& sta&e% start o# main study% delivery o#
dra#t re$ort to the mana&ement% re$ort to auditee body(
3(1<6 )he time bud&et should show the total manAday in$ut re*uired #or eah &rade within
the audit team% $lus Internal audit s$eialist assistane and e!ternal resoures( )he
ost bud&et should show the total e!$eted ost o# eah o# these( )hese allow the head
o# internal audit to om$are the value o# the out$uts #rom the $ro$osed study with the
ost o# underta0in& it( An e!am$le o# a time and ost bud&et is in +uide 2 a$$endi!
1<(
S'e7 11 $%d 12B Li?ely $&Die=e#e%' "! 1'udy "5Ee&'i=e1 $%d i#7$&' "! 'De
1'udy $%d &"%'i5u'i"% '" 'De I%'e%$l $udi' 7e!"#$%&e $udi' "5Ee&'i=e1
3(1<D -rior to $roduin& the #easibility sta&e re$ort to the internal audit head% the senior
auditors should review all the sta&es to date to assess whether"
)he study $roedures #rom ste$s 1A1 an be ahieved usin& the methodolo&y
de#ined and with the assessed in#ormation and resoure availability>
)he study will be worthwhile and is li0ely to have a si&ni#iant im$at> and
It will ontribute materially to the ahievement o# the Internal Audit $er#ormane
audit ob'etives(
I# this is the ase% the team is in a $osition to re$ort to the mana&ement( I# not% there
will be no 'usti#iation #or $roeedin& with the main investi&ation% and the team should
either reonsider the #easibility o# the study or rede#ine either the audit issues and
so$e or methodolo&y% as neessary% and then re$er#orm all subse*uent ste$s(
S'e7 13B Re7"'i%( '" 'De De$d "! 'De 7u5li& 5"dy
3(168 At the end o# the #easibility sta&e the Internal audit should $rodue a re$ort to head o#
internal audit( )he in#ormation should be re$orted as brie#ly as $ossible usin& the
#ollowin& headin&s"
Se&'i"% 1B 6$&?("u%d '" 'De i%=e1'i($'i"%
+eneral ob'etives o# the investi&ation>
Area under investi&ation in the onte!t o# other relevant wor0 o# the audited
entity>
?tatement o# the audited entity2s $oliy ob'etives and $oliy instruments #or
the area bein& investi&ated>
15
Reasons #or the investi&ation in terms o# $ubli aountability% ris0 to GFM
materiality% indiatin& $otential im$at>
An assessment o# the li0ely shortAterm and lon&Aterm im$at that the
investi&ation mi&ht have>
Kene#its to Internal Audit in terms o# its $er#ormane audit ob'etives(
Se&'i"% 2B I11ue1 $%d eC7e&'ed e&"##e%d$'i"%1
A statement o# the so$e and main study issues>
A brie# and onise statement o# evaluative riteria 9detailed evaluative riteria
attahed in +uide 2 A$$endi! 1:>
A brie# statement o# e!$eted reommendations>
A statement o# any $reliminary #indin&s(
Se&'i"% 3B E=ide%&e '" 5e 1"u(D'
Audit a$$roah 9ty$es o# evidene% aessibility% loation% olletion%
tehni*ues% relevane:>
Audit resoures 9audit team% &radin&% e!$eriene leader:>
?$eialist resoures 9onsultants:(
Se&'i"% 3B $(ee#e%' >i'D $udi'ed e%'i'y
Con#irm that the audited entity has ae$ted the investi&ation
E!$lain any $roblems 9$otential delays% disa&reements% la0 o# aess:>
In#orm i# the use o# onsultants are to be em$loyed(
Se&'i"% +B 6ud(e' $%d 1u5#i11i"% d$'e1
Cost bud&ets 9by &rade u$ to de$artment head inludin& onsultants:>
)imetable $ro'eted delivery dates o# dra#t re$ort to internal audit% re$ort to the
head o# audited entity>
D"&u#e%'$'i"%
3(161 )he su$$ortin& doument o# the re$ort should be or&anized as wor0in& $a$er #olders
as su&&ested in +uide 2 a$$endi! 5(
A$%(e#e%'1 >i'D 'De Audi'ed E%'i'y
3(162 )he area o# #ous is more limited and should start in $revious sta&es at the to$ o# the
audited entity ( Auditee to$ mana&ement should be in#ormed o# the intention% $ur$ose%
timin&> and resourin& o# the #easibility study and ade*uate arran&ement should be
established(
3(163)he #easibility sta&e is $rini$ally an internal audit $lannin& ativity( It does not lead to
a #ormal re$ort to any e!ternal body( 3owever% the audit team should maintain lose
ontat with a$$ro$riate senior &rades within the audited entity throu&hout the
#easibility sta&e( )he suess o# the main investi&ation will% in $art% de$end u$on their
reation to it and the assistane they &ive( Hithout ae$tane by them% the main
investi&ation may &et bo&&ed down in dis$utes% ausin& delay and addin& to osts(
)here#ore% a#ter obtainin& the a$$roval o# the audit onsultin& ommittee the audit
team should ta0e a $ositive a$$roah to disussin& the basis and methods o# the
1<
$ro$osed main investi&ation with the audited de$artment and should see0 the head o#
the auditee entity(
Comments and7or onerns about the so$e and issues>
Ae$tane o# internal auditor evaluative riteria and methodolo&y as a #air and
reasonable #oundation #or an investi&ation( )he internal auditors should disuss
the riteria with mana&ement be#ore ado$tin& them( ?ometimes% the mana&ement
would dis$ute the riteria laid down by the internal auditors( In suh a situation
the matter is resolved by disussion( Kut i# the auditee mana&ement is adamant on
some $artiular riteria about whih the auditor #eels sure they 9auditors: should
re$ort the matter to Ministry o# Finane and Eonomi Develo$ment(
3(161 Ade*uate ontat should also be made with other de$artment heads #rom whom
in#ormation will be re*uired durin& the ourse o# the #easibility sta&e( In eah ase
they should be in#ormed o#"
)he role and $ur$ose o# the #easibility sta&e and% i# neessary% o# the subse*uent
main investi&ation>
Krie#ly% the methodolo&y>
Hhat in#ormation is re*uired #rom them and why>
Our sta##in& and timetable>
Hhat we will do with our results(
I# they are new to either the Internal audit or $er#ormane auditin& they should also be
in#ormed o#"
)he role and $ur$ose o# the Internal audit(
)he ob'etives o# $er#ormane audit(
3(16@ As with the $revious $er#ormane audit sta&es% $reise methods o# #amiliarizin&
auditee2s sta## will de$end u$on the arran&ements a&reed with the auditee mana&ement(
In some ases the auditee will ta0e res$onsibility% in others it will be le#t to the Internal
audit( Hhihever is the ase% the auditor must he0 that auditee2s sta##s are #ully and
aurately brie#ed at an early sta&e(
3(165 In most ases it will be &ood $ratie to disuss the outome o# the #easibility sta&e
with auditee2s o##iials( 3owever% are should be ta0en to avoid introduin& any
one$t o# .li0ely onlusions/ or .e!$eted reommendations/ into the disussion(
Auditees may #eel that these indiate that the Internal audit is $re'ud&in& the main
investi&ation and enterin& into it with bias( Disussions should there#ore be limited to
issues% so$e% evaluative riteria% methodolo&y% timin&% in#ormation availability and
audit resourein&( Res$onsibility #or this a&reement lies with the internal audit head in
har&e(
I%'e%$l $udi' Pl$%%i%( $%d C"%'"l
3(16< )he internal audit head should $lan and ontrol eah main tas0 o# the #easibility sta&e(
)his allows the head to monitor and review $ro&ress and intervene at 0ey deision
$oints( )he main tas0s are"
Initial 'ob s$ei#iation" be#ore any wor0 starts on the ste$s in dia&ram 3(1%
mana&ement must are#ully desi&n the 'ob% de#inin& the so$e% overall ob'etives%
time and ost bud&ets% and resoure re*uirements% inludin& s$eialist sta##in&
s0ills>
Early a&reement with 3ead o# $ubli body" normally underta0en by the head o#
internal audit(
16
All the ste$s detailed in dia&ram 3(1(
?te$ 11A13 are% as disussed above% the res$onsibility o# internal audit((
3(166 As the #easibility sta&e is relatively short it will normally be unneessary to $lan eah
ste$ in &reat detail( 3owever sta## should be le#t in no doubt o# what is re*uired o#
them and% in $artiular% o# the"
Ob'etives o# their wor0>
Methodolo&y% data soures and analytial re*uirements>
)ime and ost bud&ets>
Milestones% i# any> and
E!$eted out$uts and doumentation re*uirements% inludin& deadlines(
Further% mana&ement must ensure that the #easibility sta&e ahieves its ob'etives
without tres$assin& into detailed auditin& whih is more a$$ro$riate to the main
investi&ation(
3(16D As with eah $revious sta&e o# the $er#ormane audit a$$roah the internal audit must
maintain ade*uate ontrol throu&hout the #ieldwor0( )his relies u$on"
Monitorin& $ro&ress and reviewin& outomes and out$uts" mana&ement should
retain su##iiently lose ontat with the $ro&ress% outomes and out$uts o# the
various tas0s as to be on#ident that ob'etives #or *uality% time and ost are bein&
ahieved>
Atin& at eah 0ey deision $oint" internal audit must maintain the diretion o# the
study by ma0in& well in#ormed% $rom$t and a$$ro$riate deisions as neessary>
and
Ade*uate ommuniation within the team and with internal audit" beause the
#easibility sta&e is meant to be short in duration% ommuniations within the team
are best onduted by the use o# re&ular team meetin&s% su$$orted by ade*uate
doumentation% rather than relyin& solely on #ormal doumentation and minutes
ta0in&(
Ti#e 5ud(e'1 $%d deli=ey d$'e1
3(1D8 Internal audit should develo$ ti&ht time bud&ets and delivery dates #or eah main tas0(
)hese should be ommuniated learly to sta##% and should be ba0ed u$ by sensible
and $ositive $lannin& and ontrol by internal audit(
S'$!!i%(
3(1D1 As with every other audit tas0% deisions on sta##in& revolve around &ettin& the best
mi! o# s0ills to the 'ob( )he #easibility sta&e will bene#it #rom ombinin&"
-er#ormane audit s0ills% es$eially a 0nowled&e and understandin& o# the ondut
o# main investi&ations>
B$ to date 0nowled&e o# the relevant setion o# the auditee" this will aid
a&reement and ste$ < o# the a$$roah( ?uh 0nowled&e is most o#ten #ound in
those res$onsible #or the #inanial audit>
An a$$reiation and understandin& o# the sub'et matter o# the audit% inludin&
relevant mana&ement $rini$les" to draw u$ issues and evaluative riteria and to
identi#y li0ely onlusions the team will need e!$ertise in the area bein& audited%
be it housin&% human resoures et(>
Any neessary s$eialist s0ills in audit methodolo&y" this may be inlude statistis%
surveyin& o# lient &rou$s et(
1D
M$i% I%=e1'i($'i"% Pl$%%i%(
3(1D2 -lannin& is a deision ma0in& $roess( It involves the #ormulation o# aims and
ob'etives and the develo$ment o# the means #or ahievin& them( Aordin&ly%
$lannin& has an im$ortant role in $er#ormane audit wor0( Detailed main
investi&ation $lannin& should ta0e $lae a#ter the #easibility study re$ort has been
submitted to head o# internal audit but be#ore the #ieldwor0 ommenes( )he $ur$ose
o# the main investi&ation $lannin& is to develo$ a om$lete $a0a&e o# tools with
whih to e!eute and mana&e the main investi&ation( Main investi&ations need to be
$lanned thorou&hly as they o#ten involve a lar&e number o# tas0s% e!euted at a
variety o# loations% over a len&thy $eriod o# time 9u$ to 5 months:% by sta## who are
either new to $er#ormane audit% the $artiular audit or the sub'et matter in *uestion(
3(1D3 Detail $lan should show a lo&ial $ro&ression #rom the audit issues to the individual
audit tas0s and the e!$eted onlusions and reommendations( Criteria% broad and
om$rehensive tas0 outlines and audit issues are related and should be lin0ed to the
e!$eted onlusions and reommendations(
3(1D1 In develo$in& &ood $ratie a$$roah to $lannin&% the #ollowin& issues should be
addressed"
i: Hhat are the re*uirement o# a main investi&ation $lan>
ii: 3ow mi&ht the issues $ro$osed in the #easibility study re$ort be develo$ed
to $rodue a detailed $lan>
iii: 3ow $lannin& mi&ht hel$ redue some o# the ommon $roblems that arise
durin& the main investi&ation(
ReGuie#e%'1 "! $ M$i% I%=e1'i($'i"% Pl$%
3(1D@ )he internal audit is enoura&ed to a$$ly &ood $ratie thin0in& to how $ubli bodies
mana&e their resoures( It an also a$$ly to the mana&ement o# $er#ormane audit
studies and in $artiular the $lannin& sta&e( )here are a number o# $rini$les whih
should be a$$lied to the main investi&ation $lan( )he main investi&ation $lan should"
In#orm all involved o# the $ur$ose and methods o# the investi&ation>
?tate the study ob'etives and the wor0 needed to su$$ort the li0ely onlusions
and e!$eted reommendations>
Fous on what an be done% usin& the resoures available a&ainst what mi&ht be
desirable to do>
Identi#y 0ey out$uts and milestones>
Identi#y the roles and res$onsibilities o# the audit team>
Antii$ate $roblems and ma0e $rovisions #or them>
3el$ the audit team to see how the study will develo$ and how their wor0 will
ontribute to the re$ort>
3el$ minimize so$e #or olletin& and analyzin& irrelevant data and hel$
minimize the oasions where insu##iient data is olleted>
-rovide mana&ement with the means to monitor% ontrol and rediret the audit>
Form the basis #or obtainin& the a&reement o# senior sta## #or the #ieldwor0 to
ommene>
Ma0e su&&estions #or the struture and ontent o# the re$ort>
Enhane the *uality o# re$orts by hel$in& the audit team to $rodue lear% well
researhed and su$$orted #indin&s onlusions and reommendations>
Assist learane o# the #inal re$ort with the audited entity>
@8
Assist a&reement with the audited entity>
+uide the doumentation and re#erenin& o# the investi&ation(
M$i% I%=e1'i($'i"% Pl$%%i%( Me'D"d"l"(y
3(1D5 )here are two $hases to $rodue a $lan that meet these $rini$les( First% the
develo$ment o# the details within that struture and seond develo$in& a detailed $lan(
I; De=el"7i%( $ !$#e>"? !" 'De de'$iled 7l$%
3(1D< Develo$in& a #ramewor0 #or the detailed $lan will de$end u$on the ty$e o# issues bein&
e!amined( Hhatever a$$roah is ado$ted it should learly show"
3ow the audit issues have been bro0en down into disrete areas o# wor0 9these an
be thou&ht o# as subAissues or tas0s:>
3ow these subAissues or tas0s have been $ro&ressively bro0en down into smaller
units o# wor0 to eventually $rodue individual audit tas0s 9audit tests:(
3(1D6 )he #irst ste$ in $roduin& a $lannin& $a0a&e is to brea0 down the issues into disrete%
di&estible tas0s( -er#ormane audits are o#ten lon& and om$le! and an only be
mana&ed e##etively i# the investi&ation is s$lit u$ in this way( -ro&ress on eah tas0
an then be monitored and ontrolled se$arately durin& the main investi&ation% allowin&
the audit as a whole to ahieve its ob'etives on time and to ost(
3(1DD )he study an be or&anized into tas0s by main issues% evaluative riteria% li0ely
onlusions or by the loation o# evidene% or a ombination o# any o# these( )he
struture will vary #rom study to study% but tas0s must"
+ive om$lete overa&e o# the audit ob'etives7issues a$$roved by senior
mana&ement at the end o# the #easibility sta&e>
Reo&nize the interArelationshi$ o# se$arate tas0s% inludin& the im$ortane o#
timin&( )as0s will rarely be sel#Aontained> the #indin&s o# one will o#ten a##et
another( )hey o#ten have to be done in a $artiular se*uene with later ones only
bein& $ossible one the out$ut o# earlier tas0s is available>
Allow mana&ement su##iient o$$ortunity to onsider $ro&ress( Mana&ement ta0es
time and should $lan the audit alon& with all other neessary wor0(
II; De=el"7i%( 'De de'$il 7l$%
3(288 -lannin& in detail #or the main investi&ation is about balanin& what an be done
a&ainst what is desirable to do &iven the availability o# time and resoure( )he
om$onents o# any $er#ormane audit $lan are"
Audit ob'etives% issues and evaluative riteria>
In#ormation to be olleted>
?oures o# in#ormation>
Methods o# evidene olletion>
Alloation o# $riorities>
Analysis $lan>
-resentation o# evidene>
Detailed bud&ets #or eah tas0>
Audit $ro&rams #or eah tas0>
)imetables #or all as$ets o# the wor0>
@1
A $lan #or a&reement with the audited entity>
Full terms o# re#erene #or any e!ternal onsultants>
Revision o# the $lan>
Doumentation(
O5Ee&'i=e I11ue1 $%d E=$lu$'i=e Ci'ei$
3(281 )he audit ob'etive are to be are#ully onsidered and learly stated( )hey must be
de#ined in a way that will allow the internal audit at the end o# the audit to onlude
a&ainst eah o# the ob'etives( Future audit e##ort will be direted toward answerin&
the *uestions raised in the ob'etives( )he audit ob'etives should there#ore be
de#ined as $reisely as $ossible in order to avoid unneessary and e!$ensive audit
wor0( Any han&es to the audit ob'etives% and the ma'or onsiderations and rationale
#or suh han&es% should be brou&ht to the attention o# the head o# the $ubli body or
Ministry o# Finane , Eonomi Develo$ment(
3(282 Evaluative riteria are reasonable and attainable standards o# $er#ormane and ontrol
a&ainst whih om$liane% the ade*uay o# systems and $raties% and the eonomy%
e##iieny and e##etiveness o# o$erations an be evaluated and assessed( ?uitable
evaluative riteria are riteria that are a$$ro$riate to the $artiular harateristis o#
the audited or&anization( )hey #ous% wherever $ossible% on the results e!$eted to be
ahieved by the o$eration% system% ontrol% et( )he assessment o# whether or not
riteria are met results in audit observations(
I%!"#$'i"% '" 5e &"lle&'ed
3(283 Durin& $er#ormane audit studies there is a tendeny to ollet too muh in#ormation(
O#ten beause o# our limited 0nowled&e o# the sub'ets bein& e!amined% it is di##iult
to ensure that only su##iient% relevant and reliable evidene is olleted( )he #rame
wor0 su&&ested above o# the audit issues bein& systematially bro0en down into a
hierarhy o# audit tas0s leadin& to a series o# audit tests an hel$ #ous attention on
what is the minimum evidene needed to $rove the e!$eted onlusions( In this way
the so$e #or olletin& irrelevant data mi&ht be redued( )he #ramewor0 also
$rovides a use#ul re#erene $oint #or the team members durin& the audit beause it
on#irms that the wor0 bein& done is su$$ortin& the issues(
S"u&e1 "! I%!"#$'i"%
3(281 Durin& the #easibility study the Internal Audit will have onsidered the evidene the
$ubli body"
Is 0nown to hold and whih will be olleted>
?hould hold but may not and there#ore needs to be &enerated>
Does not hold but whih is neessary #or the re$ort(
Eah o# the di##erent soures o# in#ormation will have im$liations #or the audit
e(&(% time 4 i# a survey is to be used>
Cost 4 where loal audits are needed(
)hese will need to be disussed and the most a$$ro$riate soure used &iven the
resoures available(
Me'D"d "! E=ide%&e C"lle&'i"%
3(28@ )he in#ormation needed to be olleted will de$end on many #ators suh as the
*uantity% its loation and struture( Certain methods are more time onsumin& than
others e(&(% *uestionnaire and surveys% and $rovision may need to be made in the time
table #or develo$ment wor0 where this has not already been underta0en earlier( Most
@2
$lans ontain some #orm o# test $ro&rams( )hey are a use#ul method o# olletin&
data( )hey an $rovide audit team with lear instrutions o# the wor0 to be done and
$rovide the internal audit head with a means o# monitorin& $ro&ress( 3owever they
an beome lon& and unwise to use(
All"&$'i"% "! Pi"i'ie1
3(285 )wo o# the ommon $roblems on audit studies are overrunnin& on bud&ets and a
#ailure to meet tar&et dates( )hese may our beause there is insu##iient time
available to om$lete the $lanned wor0( In this situation a deision may need to be
ta0en on whether to redue the #ieldwor0 and meet the bud&et7tar&et date or om$lete
the #ieldwor0 and overrun the bud&et and miss the deadline( )o hel$ this $roess the
#ieldwor0 ould be $rioritized to allow #le!ibility in the shedulin& o# the wor0(
A%$ly1i1 Pl$%
3(28< -lans are deision douments( )hey need to show not only what will be done but why(
An analysis $lan mi&ht #orm $art o# the neessary e!$lanation( It ould state how the
data olleted would be analyzed to $rovide the evidene to su$$ort the li0ely
onlusions and e!$eted reommendations(
3(286 Analytial tehni*ues mi&ht be used in audit studies( Certain o# them re*uire data to
be sam$led and olleted in a s$ei#i way( Failure to do so may $revent the tehni*ue
bein& used( An analysis $lan there#ore hel$s avoid suh oasions arisin&(
Pe1e%'$'i"% "! E=ide%&e
3(28D)he struture o# the $lan outlined so #ar has been based on the audit issues alone( )here
may be oasions thou&h when additional in#ormation is re*uired #or say the $ur$oses
o# om$arison% illustration o# events et( It is easy to overloo0 these and i# the
in#ormation is not olleted durin& the #ieldwor0 the o$$ortunity to ma0e the
om$arison or the illustration may be lost( Consideration o# the struture and ontent
o# the #inal re$ort should #orm $art o# the $lannin& $roess(
6ud(e'
3(218)he $rovisional bud&et 9sta## and time: #or the main investi&ation% bro0en down by
&rade% will have been $ro$ose in the #easibility study re$ort( Althou&h based on an
outline o# the main investi&ation it an at best only be an estimate( It should there#ore
be reassessed in li&ht o# the detailed $lannin&(
3(211Bnrealisti bud&etin& an be as muh a $roblem on audits as the #ailure to ontrol data
olletion( It is im$ortant there#ore that the $lan #ous on what is reasonable and
realisti and not what is desirable(
3(212?ee0in& senior mana&ement2s a$$roval be#ore the #ieldwor0 ommenes enables them
to see what the team are aimin& to ahieve and how( It &ives them the o$$ortunity to
introdue their own ideas at an early sta&e and &uide the diretion o# the audit study(
3(213Durin& the main investi&ation% mana&ement and the team will need resoure bud&ets to"
-lan in$uts into the audit>
Assess $ro&ress o# wor0 a&ainst the resoures used(
Kud&ets will normally be re*uired #or eah si&ni#iant element o# wor0 as well as #or
the audit as a whole( E!$eriene su&&ests that it is advisable to dese&re&ate totals into
se&ments o# wor0 that an be monitored and ontrolled easily durin& the main
investi&ation(
3(211 Hhilst the e!at struture o# the bud&ets #or the various tas0s will vary #rom study to
study% they should inlude"
@3
Full details o# internal audit sta## resoure re*uirements% by &rades% s0ills and
e!$eriene needed% inludin&"
-lannin& and ontrollin& the tas0 durin& the main investi&ation>
E!eutin& the wor0 as s$ei#ied in eah audit $ro&ram>
Doumentation and
Mana&ement
Kud&ets should identi#y internal audit s$eialist assistane se$arately(
Any onsultant or outside assistane( )his should inlude the Internal audit in$ut
into the onsultany 9e(&(% #or a&reement with the onsultant% $rodution o#
in#ormation% assessment o# results et(: As well as the onsultant2s own time(
+uidane and e!am$les o# both time and ost bud&ets #or the main investi&ation
are in +uide 2 a$$endi! 21(
3(21@ )he bud&et #or the audit as a whole will onsist mainly o# the a&&re&ation o# the
individual tas0 bud&ets( 3owever% additional allowane should be made #or the
#ollowin&% where not inluded in individual tas0s"
?ta## #amiliarization with the audit>
-ro&ress monitorin& and review% e(&( )eam meetin&s>
Internal audit senior mana&ement involvement>
Administration o# the audit(
3(215 Hhat is the most a$$ro$riate level o# $lannin&F )his de$ends u$on many #ators(
Insu##iient $lannin& an result in a $oor *uality re$ort and a disillusioned team% whilst
too muh $lannin& is waste#ul and unneessarily restritive( It is also sometimes seen
as $reventin& the use o# initiative( Fators whih in#luene the amount o# time s$end
on $lannin& and the details o# the $lan are"
)he e!$eriene o# sta## who will be wor0in& on the audit>
)he sta##s 0nowled&e o# the audited entity>
Hhether the audit team wor0ed on the #easibility study>
?ize o# the audit team>
Audit a$$roah e(&( Hhether the audit involved olletin& the same data #rom
many loations>
;eed to om$lete the audit *ui0ly(
Audi' P"($#1
3(21<)hese should &ive #ull details o# the audit tests and other wor0 neessary to ahieve the
main investi&ation ob'etives( -ro&rams should over all as$ets o# the audit #rom the
start o# the main investi&ation u$ to $re$aration o# the dra#t re$ort( )hey should be
$rodued in su##iient detail to"
Ensure that all involved in the audit om$rehend the ob'etives and methodolo&y
o# the investi&ation and o# eah tas0>
Allow sta## to $artii$ate e##etively in the main investi&ation and to reo&nize
what is re*uired o# them and by when>
-rovide mana&ement with the means to monitor the investi&ation2s $ro&ress(
)here will normally be one audit $ro&ram #or eah main tas0 or subAtas0(
3(216 Audit $ro&rams should always be written with the abilities% om$etene and
e!$eriene o# the team in mind( -ro&rams are not an end in themselves( )hey are
wor0in& douments whih all must be able to use and are intended to hel$ mana&ement
@1
and the team to move #rom the a$$roved audit ob'etives7issues to the written re$ort
e##iiently and e##etively(
3(21D Eah audit $ro&ram should"
?tate the ob'etive9s: o# the tas0 9or subAtas0:>
?how how the tas0 relates to the audit ob'etives7issues and #its into the audit as a
whole>
Identi#y the evaluative riteria% li0ely onlusions and7or e!$eted
reommendations to whih the wor0 relates and the means o# inter$retin& #indin&s(
All three o# the above enoura&e sta## understandin& o# their wor0 and enoura&e
$ositive ommuniation within the audit team>
?$ei#y all wor0 neessary to im$lement the audit methodolo&y% inludin&"
Audit tests>
)he nature o# evidene re*uired>
Indiate sam$le sizes or other indiations o# *uantity o# evidene"
Coation o# evidene>
Method o# olletion>
Means o# analysis>
Mana&ement>
E!$eted out$uts>
Identi#y 0ey milestones% inludin& delivery dates #or out$uts and the $oints within
the audit when deisions need to be made to advane the wor0>
Contain rossAre#erenin& o# eah audit $ro&ram to the relevant #easibility study
wor0in& $a$er #olders( Cist ontats made in the auditee and elsewhere durin& the
#easibility sta&e to&ether with re#erenes to all relevant evidene( )his &ives sta##
new to the investi&ation a &ood startin& $oint #or their wor0>
Ma0e sure that the struture o# the audited entity is onsidered when $a0a&in& the
wor0( Minimize the burden on de$artmental sta## to that onsistent with an
e##iiently run investi&ation>
Identi#yin& the interArelationshi$ between di##erent elements o# the wor0( )his is
neessary to $lan the timin& o# sta## in$ut on a lo&ial basis>
Establish $riorities #or the wor0( At the start o# the investi&ation the team may have
only a limited idea o# the time it will ta0e to arry out eah test( I# a tas0 has to be
dro$$ed subse*uently this should be done on a onsistent and onsidered basis>
Ma0e reommendations #or the $resentation o# #indin&s and doumentation o#
wor0in& $a$ers( )his will aid the ollation o# results and $re$aration o# the dra#t
re$ort( +uidane on doumentation is ontained in +uide 2 a$$endi! 5(
Ti#e'$5le1
3(228 Eah audit will normally have two timetables"
Hor0 based" showin& the timin& and se*uenin& o# tas0s and other wor0>
?ta## based" showin& the involvement o# all Internal Audit sta## and onsultants(
Durin& the main investi&ation% mana&ement will use these to $lan in$ut and monitor
$ro&ress(
3(221)imetables should be based on the estimated ela$sed time #or eah tas0 and re#let the
se*uenin& o# tas0s identi#ied in the audit $ro&rams( )hey should show the timin&%
#rom start o# the main investi&ation to $re$aration o# the dra#t re$ort% o#"
All elements o# the wor0>
)he in$ut o# resoures>
@@
Eah individual sta## member2s involvement in the audit( )he timetable% in
on'untion with the audit $ro&rams and bud&ets% should identi#y the roles and
res$onsibilities o# eah member o# the team and hel$ them see how their wor0
should develo$% how it will advane the study ob'etives7issues and ontribute to
the issued re$ort>
Ma'or deadlines and tar&et dates inludin& e!$eted delivery dates #or dra#t re$ort
to the head o# internal audit% and estimates o# the onse*uent $rodution dates o# a
dra#t #or the head o# $ubli body((
+uidane and e!am$les o# the $rodution and use o# timetables and milestones are in
+uide 2 a$$endi! 22(
Pl$% "! $(ee#e%' >i'D 'De $udi'ee
3(222+ood relations with the audited entity are essential #or an e##iient main investi&ation(
)here should be #ree #low o# in#ormation between both $arties with eah #eelin& seure
that no si&ni#iant in#ormation is bein& withheld% either $ur$ose#ully or by omission(
3(223+ood a&reement does not ha$$en o# its own aord> it needs $lannin& 'ust li0e any other
as$et o# the wor0( Ky the start o# the main investi&ation the audit team should have
develo$ed a $lan #or a&reement with all relevant $arties within the audited entity( )he
$lan should ensure that arran&ements e!ist whih allow"
Internal Audit to be 0e$t in#ormed o# any si&ni#iant han&es in the audit area and
o# any onerns the audited entity has re&ardin& the audit>
)he audited entity to be a*uainted with the ob'etives% so$e and methodolo&y o#
the investi&ation and be 0e$t in#ormed o# any han&es and o# si&ni#iant #indin&s
and onlusions(
3(221 )o ahieve these ob'etives the $lan should over"
Hho to a&ree with" this will normally inlude the audited entity2s to$ mana&ement%
the #inane branh% sta## in the audit area o# the auditee and% where a$$ro$riate% any
o##iial a&reement o##ier a$$ointed by the auditee>
)heir in#ormation re*uirements" as with all $revious sta&es o# the $er#ormane
audit a$$roah% the audit team should assess eah o# the auditees2 in#ormation
re*uirements( )his will inlude"
)heir 0nowled&e o# the role and wor0in& o# the Internal Audit>
)heir understandin& o# $er#ormane audit>
)heir a$$reiation o# the audit in hand% inludin& what our ob'etives are% why
we need to wor0 with them and what we will re*uire #rom them 9in#ormation%
assistane and #ailities% as a$$ro$riate:>
Arran&ements #or internal audit aess to in#ormation and &eneral liaison with
the auditee>
Communiation and a&reement o# the #indin& and onlusions o# the
investi&ation>
)he Internal audit2s additional in#ormation re*uirements" as noted above% beyond
the normal audit evidene% the internal audit will need in#ormation on the auditee2s
$lans #or the audit area and any onerns they have re&ardin& the ob'etives% so$e
and ondut o# the audit>
3ow to #ailitate e!han&e o# in#ormation e##iiently and e##etively> this may
involve"
Fae to #ae meetin&s" both to introdue the Internal Audit% the auditee And7or%
subse*uently% to a&ree #indin&s>
@5
A standard letter o# introdution #rom the Internal Audit or to$ mana&ement>
?ite visits to lay the &round wor0 #or subse*uent audit wor0>
?$ei#i in#ormation on individual audit tests 9e(&(% a letter o# e!$lanation
aom$anyin& a *uestionnaire:(
)he use o# #at sheets to a&ree #indin&s(
Pey dates within the audit timetable% e(&(% start o# main investi&ation% a&reement
meetin&s et( Hherever $ossible the internal auditor should &et the audited entity2s
ommitment to meetin& these dates(
C"%1ul'$%' Te#1 "! Re!ee%&e
3(22@As a se$arate% but related e!erise% the internal auditor should draw u$ terms o#
re#erene #or eah onsultant or other outside e!$ert( )hese will be based on the
analysis o# neessary wor0 and resoure re*uirements 9inludin& both total and ela$sed
time: underta0en to $rodue the audit $ro&rams% bud&ets and timetables( )he terms o#
re#erene will #orm the basis #or both #ormal ontrats and wor0in& relationshi$s with
the onsultants and should state"
All re*uired wor0% inludin& a&reement with the Internal Audit and the audited
entity% as neessary>
Juali#iations7s0ills o# onsultant sta##>
)otal in$ut re*uired and e!$eted timin&>
E!$eted out$uts and delivery dates 9both #inal and interim% as neessary:>
Methods o# handlin& o# the onsultany% inludin& internal audit in$ut(
Detailed &uidane on the seletion and use o# onsultants is ontained in +uide 2
a$$endi! 1D(
Re=i1i"% "! 'De Pl$%1
3(225 -lans need onstant review( )hey are at best an estimate o# what is ho$ed to be
ahieved( Cirumstane an han&e and the $lans may need to re#let those han&es(
)hey% there#ore% need to be #le!ible(
3(22<Hhen should the main investi&ation $lan be $re$aredF Only limited $lannin& should be
arried out durin& the #easibility study but it should inlude a ost bud&et and a re$ort
submission date( Detailed $lannin& should ta0e $lae a#ter the #easibility study re$ort
has been submitted to head o# $ubli body but% be#ore the #ieldwor0 ommenes( )he
auditor is #aed with the dilemma o# havin& to set bud&ets and deadlines without
onsiderin& in detail the wor0 needed to be arried out(
Me'D"d"l"(y - e=ie>
3(226 On om$letion o# the $lannin& $a0a&e the internal auditor and mana&ement should
review the $lannin& $a0a&e to ensure that it"
Ahieves the audit ob'etives7issues>
Does not di##er si&ni#iantly% in terms o# e!$eted use o# resoures and delivery
dates #or out$uts% #rom the bud&ets $reviously a$$roved by internal audit senior
mana&ement at the #easibility sta&e(
3(22D In the normal ourse o# events% the $lannin& sta&e should lead to broadly the same
onlusion as the #easibility sta&e( 3owever% there may be oasions when this more
detailed $lannin& asts doubt on the #easibility o# the investi&ation% the Internal Audit
ability to draw the onlusions e!$eted or on the ost or delivery dates o# the study(
In suh ases% the senior auditor har&e should in#orm Internal Audit head and ma0e
reommendations about the ontinued viability o# the audit( ;o wor0 should start on
the main investi&ation until the head have &iven his a$$roval(
@<
D"&u#e%'$'i"%
3(238 Doumentation durin& the $lannin& sta&e onsists $rimarily in the $rodution o# the
various elements o# the $lannin& $a0a&e 4 audit $ro&rams% bud&ets% timetables% $lan
o# a&reement and onsultant2s terms o# re#erene(
A(ee#e%' >i'D 'De Audi'ed E%'i'y
3(231 )he $lannin& sta&e is $rini$ally an internal audit $roess and will o#ten re*uire little
ontat with the audited entity( 3owever% some ontat may be neessary to obtain
aurate in#ormation to $rodue the audit $ro&rams and an ade*uate a&reement $lan(
3(232Hhere there is a need #or si&ni#iant ontat the internal auditor should #ollow the same
basi $roedures o# &ood a&reement as in $revious sta&es"
In#orm the audited entity2s to$ mana&ement o# the intention to arry out $lannin&%
e!$lain its $ur$ose% the wor0 involved and establish arran&ements>
Ensure that all other sta## ontated are #ully brie#ed as to the role o# the internal
audit% $er#ormane audit and the $lannin& sta&e% and e!$lain what is re*uired o#
them(
3(233 )he internal auditor should also onsider disussin& the outome o# the $lannin& sta&e
with the mana&ement( In $artiular% the internal auditor will #ind it use#ul to obtain
their reation to the im$at that the audit will have on their wor0load and that o# their
sta##( Main investi&ations $lae a heavy burden on audited entities 4 in $rovidin&
in#ormation% reviewin& out$ut and a&reement 4 and unless they are able to handle this
the audit is unli0ely to meet its $lanned deadlines(
Disussions should over"
)he so$e and ob'etives o# the main investi&ation>
)he audit methodolo&y>
)he $ro$osed timetable and bud&ets>
Internal audit resourin&% inludin& the use o# any e!ternal onsultants>
)he a&reement $lan>
Re*uirements #rom the auditee $ubli body((
As #ar as $ossible the internal auditor should aim to obtain the audited entities to$
mana&ement2s #ull a&reement to the $ro$osals( Hhere si&ni#iant $roblems arise the
internal auditor should onsider its li0ely im$at on the study ob'etives% timetable and
bud&ets(
M$%$(e#e%'
3(231 )he $lannin& sta&e does not re*uire e!tensive mana&ement( It an be limited to
alloation o# tas0s amon&st the audit team 9audit $ro&rams% timetables% et(: And
monitorin& o# $ro&ress( Detailed $lannin& and ontrol o# eah tas0 will not normally be
neessary(
3(23@Althou&h there is no need #or detailed mana&ement o# the $lannin& sta&e itsel#% Internal
Audit head must be heavily involved in review o# the out$uts o# the $lannin& $roess(
)hey must ensure that they are in #ull a&reement with the out$ut o# the $lannin& sta&e
as the basis #or ondutin& the main investi&ation( Hor0 should not start on the main
investi&ation until mana&ement have &iven their #ormal a$$roval to all as$ets o# the
$lannin& $a0a&e(
@6
C)APTER 3B MAIN IN-ESTIGATION
1(1 Main investi&ation sta&e is one o# the 0ey $er#ormane audit sta&e> where the
auditor should obtain relevant and reliable audit evidene that is su##iient to enable
the auditor to draw reasonable onlusions on the ahievement o# GFM in the main
issues seleted #or e!amination( )he investi&ation should be based on the audit
issues% so$e and time table determined at the #easibility sta&e to&ether with the audit
$ro&ram% develo$ed at the $lannin& sta&e(
1(2 )his ha$ter% there#ore% desribes the main investi&ation sta&e and inludes a brie#
desri$tion on the $ur$ose o# the investi&ation% the methodolo&y to be ado$ted% the
relevant doumentation% the a&reement with the audited entity% method o# mana&in&
the investi&ation and the review o# wor0in& $a$ers(
1(3 )he $ur$ose o# the main investi&ation is to ondut a well researhed e!amination o# the
audit issues and% throu&h a$$ro$riate and $ro#essionally e!euted evidene olletion%
analysis and evaluation% to draw reasonable onlusions and reommendations( )he
main investi&ation should $rovide the neessary in#ormation #or the internal audit to
$rodue an innovative% #air% unbiased and in#ormative re$ort to the le&islature whih
adds to $ubli aountability and7or leads to im$rovements in value #or money(
Me'D"d"l"(y
1(1 Durin& the $lannin& sta&e the internal auditor will have $rodued a $lannin& $a0a&e #or
the main investi&ation( )his should ontain all that the internal auditor and
mana&ement re*uire to arry out a suess#ul investi&ation A audit $ro&rams% bud&ets%
timetables% a $lan #or a&reement with the audited entity and use o# onsultant 9see
+uide 2 A$$endi! 1D:( In the sim$lest ases% there#ore% all the team needs to do is to
im$lement the $a0a&e% inludin&"
1<1( Cimited initial $lannin& and setAu$ o# the main investi&ation>
1<@( E!eution o# audit $ro&rams>
1<5( Evidene olletion>
1<<( Monitorin& o# $ro&ress>
1<6( Control and
1<D( Doumentation
More o#ten% however% as the audit team obtains in#ormation not available at the
#easibility and $lannin& sta&es% the main investi&ation will also re*uire some element
o# reA$lannin&% reAshedulin& o# resoures% or even reAde#inition o# the diretion and
$riorities o# the e!amination(
I%i'i$l Pl$%%i%( $%d 1e'-u7
1(@ Ke#ore detailed audit wor0 starts mana&ement needs to"
168( )ailor the $lannin& $a0a&e to the irumstanes e!istin& on day one o# the
main investi&ation( )he $reise start date o# the investi&ation and availability o#
sta## may not have been 0nown when the $a0a&e was $rodued( )ailorin& the
$lannin& $a0a&e is only a limited tas0 involvin&"
Assi&nment o# wor0 and bud&ets to individual sta## members>
ReAastin& the timetables #orwards #rom day one> and
Identi#iation o# all 0ey dates(
Communiate all re*uirements to the internal auditor" eah member o# sta## should
be in#ormed o# what is re*uired o# him7her 9inludin& e!$eted out$uts% and
re$ortin& and doumentation arran&ements:% by when% and how their wor0 #its in
with that o# others>
@D
A&ree with the audited entity to ensure that all auditees are #ully aware o# the main
investi&ation(
ECe&u'i"% "! 'De Audi' P"($#1
1(5 Internal audit has overall res$onsibility #or deliverin& the audit on time and to ost(
Hithin this% eah member o# sta## is res$onsible #or e!eutin& the tas0s alloated to
her7him by internal audit( It is only by the $ro#essional e!eution o# both these
res$onsibilities that the investi&ation an be suess#ul(
1(< Auditors should use both 'ud&ment and initiative in e!eutin& audit $ro&rams( Eah audit
$ro&ram has a stated ob'etive and it is this that the auditor is strivin& to ahieve( )he
auditor may #ind that the $lanned audit tests need to be reonsidered to ade*uately
address the ob'etive or that de#ensible onlusions an be drawn with a redued
amount o# wor0( Audit $ro&rams should not be e!euted unthin0in&ly and the auditor
should evaluate results as the wor0 $ro&resses% brin&in& any si&ni#iant #ators to
mana&ement2s attention at the earliest o$$ortunity(
E=ide%&e C"lle&'i"%
1(6 Evidene is the s$ei#i in#ormation% obtained durin& the main investi&ation throu&h suh
ativities as% analysis o# reords and other data% interview% survey% ase studies and
observations( ?uh evidene% to su$$ort $er#ormane audit re$orts% must be relevant%
reliable and su##iient to draw reasonable onlusions( In the $roess o# the
investi&ation% there#ore% evidene olletion should be direted towards e!aminin&
*uestions o# eonomy% e##iieny and e##etiveness on the issues under review(
1(D Ke#ore startin& evidene olletion% it is &ood $ratie #or the internal auditor to sto$ and
thin0 about the ty$e and *ualities o# the evidene( Bnneessary time wasta&e and ost
should not be sustained in olletin& irrelevant and unreliable evidene( Conse*uently%
in olletin& evidenes% the internal auditor should see0 to ollet relevant e!am$le o#
$ereived wea0nesses( In addition to this% eah individual involved in evidene
olletion needs to onsider"
163( Hhat sort o# evidene should be olleted>
161( Hill this #orm o# evidene be the most use#ul>
16@( 3ow will it su$$ort or re#ute the initial onlusions on the issues under
investi&ation>
165( 3ow an this evidene be translated into #ats #or the internal audit re$ort(
It is only a#ter suh onsiderations and assuranes% on the relevane and use#ulness o#
the evidene% olletion should $roeed(
1(18 )here are #our ate&ories 9ty$es: o# evidene% .-3T?ICAC% )E?)IMO;IAC%
DOCBME;)ART and A;ACT)ICAC/% eah o# whih has di##erent *ualities o#
whih the auditor should be aware( Detailed &uidane on the ty$es o# evidene and
some o# the tehni*ues used to obtain evidene are &iven in +uide 2 a$$endi! 16(
1(11 Colletion o# evidene by itsel# is not su##iient( )he #indin&s observed should be
evaluated a&ainst the riteria set( Hhen the internal auditor identi#y a deviation #rom a
detailed riterion% they should &ather and analyze additional evidene to su$$ort
onlusion at the level o# the om$onent and the entity as a whole( +enerally% eah
auditor needs to"
16<( Determine the #re*ueny o# the deviation% to assess whether the de#iieny is
an isolated instane or re$resents a systemi or &eneral wea0ness>
58
166( Identi#y the #undamental ause o# the de#iieny( )his is im$ortant in
a$$reiatin& the si&ni#iane o# the #indin&s and in develo$in& a basis #or
reommendin& remedial ation>
16D( Assess and *uanti#y the e##et or $otential e##et o# the $roblem% where
$ratial( Juanti#yin& the e##et o# a $roblem hel$s to determine its si&ni#iane(
1D8( Consider the relative si&ni#iane o# the #indin&s in relation to the audit issues
and in relation to the audited entity(
1D1( Develo$ one or more e!am$les or ases #or inlusion in the re$ort to learly
illustrate the nature o# the $roblem( E!am$les hel$ the re$ort user to understand
the .?o what/ o# $roedural or ontrol de#iienies>
1D2( Determine i# the audited entity2s mana&ement de#iieny and i# orretive
ation is underway( )his may hel$ the auditor to deide the re$ortin& strate&y and
to ensure #airness in the re$ort( A matter that has been identi#ied by the audited
entity2s mana&ement and is bein& orreted and7or dislosed to MOFED may be
less si&ni#iant #or re$ortin& $ur$oses than a $reviously un0nown% unresolved
$roblem>
1D3( Identi#y best $raties that an be emulated or trans#erred to other entities(
M"%i'"i%( "! P"(e11
1(12 Ade*uate monitorin&% to&ether with e##etive ontrol are $robably the most im$ortant
#ators in determinin& the suess o# the investi&ation( )hey are the $roess throu&h
whih mana&ement ensure% as #ar as $ossible% that atual ahievements on#orm to
$lanned ahievements within a&reed deadlines and bud&ets( I# we do not monitor and
ontrol the investi&ation $ro$erly we are unli0ely to deliver a satis#atory end $rodut
on time and to ost(
1(13 It is not $ossible to monitor the $ro&ress o# every as$et o# an investi&ation A they are
too lar&e and over too many variables( Mana&ement should #ous% there#ore% on the
study2s 0ey $er#ormane areas"
1D1( Ahievement o# the audit ob'etives7issues" Mana&ement should monitor
develo$ments whih may a##et the ahievement o# the audit ob'etive7issues(
Che0s should involve *uestions suh as"
Are there develo$ments% or new in#ormation% whih may a##et the audit issues%
methodolo&y and $lans #or olletin& evideneF
Are we olletin& the evidene we $lanned to olletF
Are there #indin&s we had not e!$etedF
Does the evidene olleted or #indin&s re*uire us to han&e the diretion or
$riorities o# the investi&ation or individual tas0sF
3ow an the evidene be used in the #inal re$ortF
Juality o# the audit" Internal audit should monitor and review the *uality o# wor0
to ensure that the internal audit investi&ation is de#ensible( Juestions to as0
inlude"
Is the team arryin& out the audit in a $ro#essional manner and in om$liane
with the Internal Audit $er#ormane audit o$erational ob'etives% the
-er#ormane Audit Manual% $roedures and in aordane with standards(
In the li&ht o# evidene olleted% do the evaluative riteria and methodolo&y o#
the investi&ation remain a$$ro$riate to the audit issuesF
Is the evidene olleted relevant and reliableF
51
Is the evidene in su##iient *uantity #or us to ma0e de#ensible onlusions and
reommendationsF
Is the evidene analyzed a$$ro$riately and is the analysis arried out $ro$erlyF
Are we evaluatin& the evidene ob'etively and are we drawin& reasonable
onlusions and reommendationsF
Is the evidene% analysis et( -ro$erly doumentedF
Is the *uality o# onsultant2s wor0 in aordane with audit o##ie re*uirements
)imin&" Internal audit should monitor $ro&ress to see whether the audit is on
shedule and onsider whether deisions and e!ternal develo$ments may a##et the
investi&ation2s timin&( )his involves *uestions suh as"
Is the study $ro&ressin& as $er the $lan and timetableF A Are internal audit sta##
and e!ternal onsultants ahievin& milestones and are they deliverin& out$uts
on time 9or is $ro&ress on tas0s su##iient to lead mana&ement to believe
out$uts will be delivered on time:F
Hill the investi&ation be om$leted on timeF
Are there e!ternal develo$ments whih ould a##et the om$letion dateF
Does the evidene olleted or #indin&s neessitate the addition o# e!tra tas0s or
audit tests 9e(&(% to inrease the on#idene we an have in our onlusions:F
Does the evidene olleted or #indin&s neessitate reduin& the so$e o# some
tas0s 9e(&(% beause it is a$$arent that the audited entity2s ontrol systems are
better than #irst e!$eted:F
Are there any other li0ely han&es to the investi&ation whih mi&ht a##et the
om$letion dateF
Cost and sta##in&" Internal audit should monitor the outrun o# sta## and other osts
to asertain whether the audit is within bud&et( )his involves *uestions suh as"
Are tas0s om$leted within the a$$roved hours and by the $lanned &rade o#
sta##F
Are han&es in the diretion or $riorities o# the study% or o# the *uantity o#
evidene olleted% li0ely to si&ni#iantly a##et the ost o# the auditF
?hould tas0s be reAalloated within the team to more losely re#let sta## abilities
and s0ills and to ahieve the study2s issues or deadlinesF
Are additional sta## re*uired to ahieve the audit2s ob'etives or deadlinesF
Are we 0ee$in& anillary osts 9e(&(% travel and subsistene: within bud&etsF
Are onsultany osts as bud&etedF
Is there a need #or additional e!$enditure on onsultants or other e!ternal
assistane to ahieve the study2s ob'etives or deadlinesF
1(11 E##etive monitorin& de$ends u$on &ood ommuniation between the team and internal
audit( )his needs to &o beyond the traditional $roess o# mana&ement review o#
om$leted tas0s and wor0in& $a$ers whih% whilst a neessary element o# *uality
assurane% will rarely be su##iient #or e##etive monitorin&( Monitorin& o# the
$ro&ress% ahievement o# study ob'etives and the *uality o# the audit an be enhaned
by the use o#"
1D6( Main investi&ation summary re$orts> and7or
1DD( Fat sheets>
@88( )eam meetin&s>
@81( Cimited interim review o# wor0in& $a$ers>
52
@82( Kud&et monitorin& #orms% timetables and milestones(
M$i% I%=e1'i($'i"% Su##$y Re7"'1
1(1@ At re&ular intervals the team should $rodue main investi&ation summary re$orts settin&
out the $ro&ress o# the study( )he re$orts should reord in detail% #or eah o# the audit
issues and evaluative riteria"
@83( )he evidene olleted to date>
@81( )he onlusions and reommendations that an be drawn #rom that evidene>
@8@( All #urther wor0 that remains to be om$leted% as $er the main investi&ation
$lannin& $a0a&e% and any su&&estions #or revision o# the $lanned wor0(
1(15 )he value o# summary re$orts is that they &ive mana&ement a *ui0 and onentrated
means o# reviewin& $ro&ress to date( )hey allow mana&ement to see what wor0 has
been om$leted and what remains to be done 9whih an be om$ared to bud&ets and
timetables:% whether ade*uate evidene is bein& olleted and whether onlusions and
reommendations are #air and well &rounded in #ats( )hrou&h the ourse o# the audit
the team will u$ date the re$ort% $erha$s at monthly intervals% thereby &ivin&
mana&ement a re&ular o$$ortunity to monitor $ro&ress and ta0e any neessary ation(
1(1< )he main investi&ation summary re$orts also $rovide a lin0 between related wor0in&
$a$ers #ailitatin& the review $roess by mana&ement% and de$endin& on their de$th
and overa&e may hel$ resolve *uestions whih may arise a#ter the wor0 is om$leted(
HellA$re$ared summaries sim$li#y the dra#tin& o# the #inal re$ort as they will $rovide
the underlyin& rationale and the basis #or the onlusions reahed in the #inal re$ort(
F$&' SDee'1
1(16 Fat sheets are statements that show the evidene olleted durin& the investi&ation
orroborated by the a&reement o# the audited entity( Durin& the main investi&ation
$roess% it is &ood $ratie to $rovide the audited entity with the #at sheets o#
evidene #or them to a&ree% be#ore dra#tin& o# the #inal re$ort( ?uh an e!erise
$rovides the o$$ortunity #or evidenes to be $resented and #or any misone$tion to be
removed( )o ma0e the auditee aware o# the evidene olleted the audit team needs to
$rovide the #ats at re&ular intervals% say at the end o# every month or audit issues
9without re$eatin& what $reviously $resented:( )his ondition minimizes the time
delay in learin& the #inal re$orts with the audited entity throu&h removin&
misunderstandin& and any in#ormation &a$ that mi&ht arise(
1(1D Care should be ta0en not to inlude in the #at sheets any .o$inion/% beause it ould
lead to dis$ute and delay the $ro&ress o# the investi&ation( Only #atual data suh as
out$uts not $rodued% number o# ases et( ?hould be inluded bein& #ree o# any
o$inion( Auditee to&ether with the audit team ould hoose the #ormat o# the #at
sheets( 3owever% #or larity and sim$liity% it is advisable to use two olumn #ormat%
one #or #ats 9the evidenes olleted: and the other #or omment by the audited entity
on#irmin& the #at or not 9with their reasons:( Always #at sheets should be $rovided
and on#irmed by res$onsible head o# auditee( An e!am$le is shown in +uide 2
a$$endi! 28(
1(28 )he use o# #at sheet to internal audit is that they indiate the $ro&ress o# the main
investi&ation to&ether with the reation o# the audited entity on the evidene olleted
to date( From the #at sheets any matters in dis$ute ould be observed early to #urther
e!tend the audit wor0 #or om$leteness and #or su$$ortin& the onlusions to be
53
reahed( It also #ailitates the reviewin& $roess o# the investi&ation by internal audit
leadin& them to onentrate on 0ey issues dis$uted(
Te$# Mee'i%(1
1(21 )he ob'etive o# team meetin&s is to"
@85( Assess $ro&ress to date% inludin& the ahievement o# ob'etives and the
*uality o# the investi&ation> and
@8<( Identi#y the best way #orward% any han&es in $lans and neessary orretive
ation(
Hhen team meetin&s are held re&ularly% #at sheets and main investi&ation summary
sheets should be $re$ared and irulated to eah members in advane(
1(22 Meetin&s should be onduted in a $ro#essional manner( A&endas should be irulated
in advane and sta## should ome $re$ared and able to re$ort on the $ro&ress o# their
tas0s and to answer *uestions( Disussion should be $ro$erly ontrolled and direted
to the a&enda( Internal audit must reate a limate in whih eah member o# sta## #eels
able to ontribute o$enly( Meetin&s should be $ro$erly minuted with a reord o#"
@86( )he main $oints made on $ro&ress to date>
@8D( All deisions on #uture ation>
@18( ?$ei#i alloation o# res$onsibility #or that ation to those $resent(
Meetin&s should normally inlude all sta## involved in the audit% re&ardless o# &rade(
Eah member o# sta## will have in#ormation whih may ontribute to an in#ormed
$iture o# $ro&ress and results and the e!lusion o# sta## will leave internal audit with
less than a om$lete view(
I%'ei# Re=ie> "! *"?i%( P$7e1
1(23 Kased on in#ormation obtained #rom summary re$orts% #at sheets and team meetin&s%
internal audit may #eel it is also neessary to $er#orm some limited interim review o#
wor0in& $a$ers( )his an $rove to be the most e##iient and e##etive means o# &ainin&
assurane on the ahievement o# study ob'etives and the *uality o# the audit( It is not%
however% a mandatory re*uirement o# the main investi&ation sta&e and mana&ement
should balane the need #or detailed assurane with the $robable disru$tion to the wor0
o# sta## whih may entail( Internal audit should assess the need #or interim review on"
@11( )he overall si&ni#iane o# the audit area 9e(&(% its im$ortane in res$et o# the
audit ob'etives7issues% use o# resoures et(:>
@12( )he s0ills% e!$eriene and a$abilities o# sta##>
@13( )he *uality 9relevane% reliability and su##iieny: o# evidene olleted>
@11( )he sensitivity o# onlusions and reommendations(
6ud(e' M"%i'"i%( F"#1, Ti#e'$5le1 $%d Mile1'"%e1
1(21 In addition to monitorin& the li0ely ahievement o# the study2s ob'etives and the *uality
o# the audit% internal audit need to assess whether the audit will be delivered on time
and to ost( )hey should review the use o# resoures and $ro&ress o# tas0s a&ainst the
bud&ets and timetables and u$date them to over the remainin& sta&es o# the
investi&ation% ta0in& into aount any han&es in audit $lans% as neessary( )o revise
bud&ets internal audit will need in#ormation on atual hours s$ent to date on eah tas0
or subAtas0 and an estimate o# the time re*uired to om$lete it( )he total derived an
then be om$ared to the $lannin& bud&et and inluded into revised timetables( Kud&et
51
monitorin& #orms are use#ul in this $roess> &uidane on their use and an e!am$le is in
+uide 2 a$$endi! 21 and 22(
C"%'"l
1(2@ )he value o# monitorin& is lost unless internal audit ta0es a$$ro$riate ation to ontrol
the investi&ation( )his involves"
@1@( Deidin& whether han&es and new instrutions 9audit $ro&rams% bud&ets%
timetables et(: Are needed to ahieve the audit2s ob'etives>
@15( Identi#yin& the han&es and ommuniatin& these deisions to members o# the
audit team>
@1<( In$uttin& the han&es and instrutions into the $lannin& $a0a&e and hene
into the ontrol mehanism #or later sta&es o# the audit(
Control should be e!erised over the ahievement o# ob'etives% the *uality o# the
audit% use o# resoures and the ost and delivery o# the audit( Internal audit should use
the he0list in $ara&ra$h 1(13 to assess what han&es are needed(
1(25 ?i&ni#iant han&es should be ommuniated to auditee senior mana&ement #or
onsideration and a$$roval( )he audit is the res$onsibility o# the relevant team auditor
but internal audit head should be onsulted where team onsider that there will be"
@16( An alteration o# audit issues or ma'or han&es in the $ossible im$at o# the
audit>
@1D( ?li$$a&e in the internal audit re$ort date>
@28( More than a reasonable $erenta&e inrease in bud&eted sta## osts>
@21( Any inrease in e!$enditure on e!ternal onsultanies(
D"&u#e%'$'i"%
1(2< Main investi&ations tend to &enerate a onsiderable amount o# evidene and wor0in&
$a$ers( It is im$ortant% there#ore% to doument the audit well to ensure that"
@22( All evidene% analysis% deisions and a&reement with the audited entity are
$ro$erly reorded
@23( All evidene and analysis are &iven due wei&ht within the audit and Internal
Audit re$ort( 9Bnless they are $ro$erly doumented they may be #or&otten or
overloo0ed:
@21( Evidene and analysis an be easily and *ui0ly loated to su$$ort the Internal
Audit re$ort in disussin& the re$ort with the audited entity( Auditors should be
able to $rodue all neessary evidene to 'usti#y their onlusions and
reommendations>
@2@( Internal audit is able to review wor0 with ease(
1(26 +eneral &uidane on doumentation is ontained in +uide 2 a$$endi! 5( Additional
im$ortant $oints to onsider durin& the main investi&ation are the need to"
@25( Develo$ a lo&ial overall struture to the doumentation o# the study"
Pee$ administrative and evidential doumentation on se$arate wor0in& $a$er
#olders>
Or&anize administrative wor0in& $a$er #olders around the relevant ativity% e(&(%
audit $ro&rams% timetables% monitorin& o# bud&ets% auditee2s a&reement et(>
Or&anize evidential wor0in& $a$er #olders by tas0% audit $ro&ram% loation o#
evidene 9or a ombination o# these: as the needs o# the audit ditate% but
5@
ensure that the struture is oherent and remains onsistent throu&hout the
study>
Pee$ all dra#ts o# the re$ort on a se$arate #older and date re#erene all revisions
suh that internal audit head and sta## an easily identi#y the urrent version>
Ensure that evidential wor0in& $a$er #olders ontain all neessary doumentation(
)hese inlude"
)he relevant audit $ro&rams>
All relevant evidene and analysis>
A lear and onise summary analyzin& the si&ni#iane o# the evidene
inludin& a reord o#% and 'usti#iation #or% the auditor2s onlusions and
reommendations>
A #ull reord o# all mana&erial review $oints% with e!aminer res$onses>
An inde! o# ontents(
Ensure that all evidene obtained #rom the audited de$artment is #ully re#erened
to its soure 9e(&(% de$artmental #ile:% notes the date o# ori&in and ori&inator 9with
&rade:% and shows any subse*uent de$artmental ation% where a$$ro$riate>
Reord all $lannin& and monitorin& ativities and deisions 9e(&(% audit $ro&rams%
main investi&ation summary re$orts% #at sheets% minutes o# team meetin&s: #or
#uture re#erene and ensure that they are irulated to all interested $arties>
Reord all a&reement with the audited de$artment A this may be re*uired at a #uture
date to lari#y #ats or resolve $roblems>
Re#erene every #at% onlusion or reommendation in the dra#t re$ort to the
relevant wor0in& $a$er #older and individual wor0in& $a$er( )his has two
advanta&es" it allows mana&ement to loate su$$ortin& evidene and assess its
stren&th *ui0ly and easily> it also $rovides a he0 #or the audit team that they are
able to 'usti#y all that they have written>
Re#erene all dra#ts o# the internal audit re$ort sent to the audited entity to the
relevant de$artmental soure 9#ile% re$ort% interview et(: From whih in#ormation
was obtained( Care should be ta0en% however% not to in#rin&e the on#identiality o#
interviews with individual members o# the auditee2s sta##% where this is relevant(
A(ee#e%' >i'D $udi'ee
1(2D At the $lannin& sta&e the audit team will have $rodued a $lan #or a&reement durin& the
main investi&ation with the auditee )he details should inlude"
@33( Hho to a&ree with>
@31( )he entity2s in#ormation re*uirements>
@3@( )he internal audit2s own in#ormation re*uirements>
@35( 3ow to #ailitate e!han&e o# in#ormation e##iiently and e##etively>
@3<( Identi#iation o# 0ey dates within the audit timetable% e(&(% start o# main
investi&ation% a&reement meetin&s% et( )he internal audit should have a&reed
these with the audited entity(
1(38 A&reement with the audited entity should #ollow the $lan( 3owever% it is essential that
internal audit and the team"
@36( Monitor and ontrol the wor0in& o# the $lan( )he $lan should not be #ollowed
blindly but should be reviewed and modi#ied% with the to$ mana&ement a&reement%
as irumstanes and e!$eriene ditate>
@3D( Ensure that the audited entity is in#ormed o# any han&es or new
develo$ment2s in the study>
55
@18( Ensure that there are ade*uate arran&ements #or disussion and learane o#
the dra#t internal audit re$ort with the audited entity and that they are 0e$t
in#ormed as to when we will re*uire in$ut #rom them(
Mana&ement
1(31 )he internal audit res$onsible #or ahievin& the audit ob'etives on time and to ost(
)his de$ends u$on ade*uate"
@11( -lannin&" develo$ment o# a main investi&ation $lannin& $a0a&e and initial
setAu$ o# the audit is in $ara&ra$h 1(@ above>
@12( Monitorin&% inludin& &ood ommuniations between sta## and mana&ement"
this is disussed in $ara&ra$hs 1(12 A 1(23 above> and
@13( Control% inludin& ta0in& o# orretive ations% where neessary" see
$ara&ra$hs 1(2@ and 1(25 above(
1(32 In addition to the items disussed in above% internal audit should onsider the need to"
@11( Alloate tas0s amon&st the audit sta## to &et the best $ossible math between
the re*uirements o# the wor0 and the s0ills% e!$eriene and a$abilities o# team
members>
@1@( Ma0e &ood use o# onsultants and ensure that"
)here is a lear understandin& #rom the outset about the so$e o# the
onsultant2s wor0% timetable and deadlines>
)here are ade*uate arran&ements #or a&reement with onsultants% inludin&
timin& o# interim re$orts and meetin&s at 0ey sta&es>
Any $roblems are identi#ied and resolved at an early sta&e>
)here is ade*uate ommuniation between the Internal audit and the onsultants
suh that all evidene is $ro$erly onsidered>
)he wor0 o# onsultants is monitored% ontrolled and reviewed $rom$tly and
$ro$erly( Consultants should ondut their wor0 in a $ro#essional manner% #ree
o# error and bias% allowin& the internal audit to use it in the re$ort with
on#idene( )he mana&ement should ensure that this is so% wor0in& on the
$rini$le that% thou&h onduted by $ersons outside the $ubli body% the wor0
o# onsultants remains the res$onsibility o# the auditee( +uidane on the
mana&ement and use o# onsultants is ontained in +uide 2 a$$endi! 1D>
+ain assurane about the *uality o# the om$leted audit( -ara&ra$hs 1(12 A 1(25
above em$hasized the need #or ade*uate monitorin& and ontrol o# the $ro&ress o#
the audit( )he use o# main investi&ation summary sheets% #at sheets and team
meetin&s% with some limited interim review o# wor0in& $a$ers where neessary%
was reommended( 3owever% this does not remove the need #or mana&ement to
review om$leted tas0s in detail( Ke#ore $roeedin& to dra#tin& o# the re$ort
internal audit must assure them selves that every as$et o# the main investi&ation
aords with Internal audit $ro#essional standards( )his an only be ahieved by a
detailed review o# wor0in& $a$ers( ;ormally the senior auditor should e!amine all
$a$ers> the Internal audit head should ondut a test he0 o# the more im$ortant
or sensitive areas>
Cearn lessons #or the #uture #rom the e!$eriene o# the $resent main investi&ation(
Eah investi&ation will $rovide lessons both #or $er#ormane audit in &eneral 9e(&(%
re&ardin& the om$leteness o# Internal audit $roedures% the value and ondut o#
$artiular audit tehni*ues et(: And #or wor0in& with the audited entity 9e(&(% their
attitude to e##etiveness audits% the &eneral awareness o# their sta## about the audit(
5<
It is im$ortant that we learn #rom these lessons i# the Internal audit ability to
ondut $er#ormane audit e##iiently and e##etively is to im$rove% these lessons
must be reo&nized and $ro$a&ated within the $ubli body(
Re=ie> "! *"?i%( P$7e1
1(33 Hhen the main investi&ation omes to an end% the head o# the internal audit res$onsible
#or the whole audit% should review doumentation on #iles and su$$ortin& wor0in&
$a$ers with the ob'etives o#"
@16( +ettin& assurane that the sub'et has been thorou&hly e!amined in
aordane with the a$$roved $lan>
@1D( -rovin& that no si&ni#iant elements have been omitted>
@@8( Ensurin& the auditors2 onlusions are sound and are based on su##iient%
relevant and reliable evidene> and
@@1( Ensurin& that the main investi&ation summary re$orts% #at sheets and any
other minutes et( Are #atually aurate(
)he senior auditors should also add or &ive o$inion 9omments: on #iles and eah
wor0in& $a$er #older to indiate the e!tent and the result o# the review( Che0list #or
om$letion by the head o# internal audit is &iven in +uide 2 a$$endi! 23(
1(31 Durin& the review senior auditors should not du$liate the wor0 o# the audit team( Any
reAwor0in&% i# onsidered neessary should be restrited to ritial audit ations
involved 9e(&(% matters o# ruial alulation by the audit team:( 3owever% suh reA
wor0 should be done only to the e!tent 'ud&ed absolutely neessary to satis#y the head
o# internal audit and reah the same onlusion as the audit team( Hhere time and
other #ators $ermit% inom$lete or unsatis#atory wor0 should be returned to the audit
team #or #urther e!amination and reAsubmission( On to$ o# the review done by the
head o# internal audit the review by the de$artment% should on#irm the ade*uay o#
the review o# the head o# internal audit(
56
C)APTER +B REPORTING
@(1 Re$orts are the $rini$al means by whih an Internal Audit meets its $rimary $er#ormane audit
ob'etive o# $rovidin& its e!eutive with inde$endent in#ormation% advie and assurane on
the use o# resoures by the audited entity( Re$orts are also s$rin&boards #or ation> they
should not 'ust e!$ose wea0nesses and ritiize% but a0nowled&e auditee2s ahievements and
attem$t to show the way #orward( )hey should not be written to be read as dialo&ue between
the Internal Audit and the auditee( )hey should &et their essential messa&es aross learly
and sim$ly to an audiene who almost ertainly do not 0now% do not need to 0now and do not
wish to 0now the details and om$le!ities whih may surround the sub'ets bein& e!amined(
Conse*uently% to satis#y these onditions attem$ts must be made"
@@2( )o 0ee$ them as brie# as $ossible>
@@3( )o &ive them lear re$ort struture>
@@1( )o use sim$le% diret and unambi&uous lan&ua&e>
@@@( )o selet the minimum in#ormation needed #or a su##iient understandin& o#
the main issues and im$ortant #indin&s% onlusions and reommendation> and
@@5( )o use hard evidene and tellin& e!am$les to rein#ore the messa&es in the
re$orts(
@(2 )his ha$ter% there#ore% $resents the struture% methodolo&y% #indin&s% onlusions and
reommendations o# the $er#ormane audit end $rodut 4 the $er#ormane audit re$ort(
+overnin& Ce&islation and Re$ortin& Ob'etives
@(3 )he Internal Audit &overnin& Caws $laes s$ei#i re*uirements on the )hem #or the way
in whih it re$orts the results o# its audits( )he Internal Audit re$ortin& mandate%
based on its or$orate ob'etives% serves di##erent $ur$oses de$endin& on the
re*uirements o# the various rei$ients o# the re$orts(
@(1 )here#ore% eah Internal Audit re*uired to submit its $er#ormane audit re$orts to the head
o# audited entity% and to Ministry o# Finane and Eonomi Develo$ment in
aordane with the s$irit and the letter o# its enablin& e!eutive on re$ortin&( )he
internal audit ob'etives in doin& so mirror its or&anizational $er#ormane audit
ob'etives% namely"
)o the Audited Entity
)o enoura&e auditees"
)he *uality o# their e!ternal re$ortin&% where this is shown to be neessary> and
)o im$rove value #or money( )o this end the Internal Audit will% within its re$orts%
demonstrate the o$$ortunity and so$e #or bene#iial han&e by"
a: Ma0in& reommendations #or ostAe##etive im$rovements in mana&ement or
$er#ormane> and
b: Identi#yin& well $er#ormin& &overnment or&anizations as $ossible lessons to
be emulated by others(
)o e!eutive throu&h Ministry o# Finane and Eonomi Develo$ment
)o maintain and enhane $ubli aountability by"
5D
a: -rovidin& inde$endent in#ormation% advie and assurane on the use o#
resoures in audited entities>
b: ?ee0in& the e!eutive2s su$$ort in enoura&in& auditees to im$rove the *uality
o# their own e!ternal re$ortin&>
)o at as a #ore #or bene#iial han&e by see0in& the e!eutive2s su$$ort #or the
Internal Audit #indin&s% onlusions and reommendations on auditee2s
ahievement o# value #or money(
@(@ )hese ob'etives must be 0e$t learly in mind throu&hout the dra#tin& $roess and re$orts
should be tailored aordin&ly( Re$ortin& is the #inal main sta&e in Audit a$$roah to
realize its or&anizational $er#ormane audit ob'etives( It is the $rini$al means by
whih the Internal Audit in#orms its users o# its #indin&s% onlusions and
reommendations( It is% there#ore% the main means o# ommuniation by whih the
Internal Audit tries ahieve its ob'etives(
Fi%di%(1, C"%&lu1i"%1 $%d Re&"##e%d$'i"%1
@(5 Many auditors e!$eriene $roblems in se&re&atin& #indin&s% onlusions and
reommendations one #rom the other( Findin&s are the result o# the auditors2
om$arison o# the atual situation with the relevant evaluative riteria( In the #indin&s
$art% audit evidene should be $resented in a orret way without 'ud&ments or
omments by the auditor( )he auditor should avoid disussion here% as well as
introduin& his $ersonal o$inions and omments( )o ma0e it easier to the reader% the
words .aordin& to the auditee7interviewee/ et( May be used here and there(
Auditors also should not #or&et to ensure whether eah #indin& ontains the #our
elements o# #indin&s 9ondition% riteria% ause and e##et: whih are e!$lained in
detail in the re$ortin& standards(

@(< Conlusions re#let the view o# the auditors dedued #rom the #indin&s( Aordin&ly% in
the onlusion $art% auditors re#let their o$inion on the im$liation o# the #indin&s( )o
hel$ the reader to identi#y the onlusion #rom the #indin&s% $hrases li0e .in our
o$inion/ .we #elt that/ et( May be used re$etitively in the onlusion as$et o# the
re$ort(
@(6 Reommendations are auditor2s $ro$osals that all im$rovement in o$erations and7or
$er#ormanes either the audited entity as a whole or o# a $artiular setion or in an area
audited within the entity( Reommendations should neither be too detail nor too
&eneral( In develo$in& the reommendations auditors have to onentrate on what
should be han&ed and leave the *uestions o# how to ma0e han&es to the auditee( )oo
detail reommendations may lin0 the Internal Audit with s$ei#i solutions( On the
other hand% reommendations should be su##iiently detailed that they an be
understood and im$lemented by the auditee and at the same time #ollowedAu$ by the
Internal Audit(
<8
How to Structure Findings, Conclusions and Recommendations
It should be noted that the $resentation o# #indin&s% onlusions and reommendations
must be lo&ial and they must be lin0ed to one another when we write a re$ort(
Alternative struture o# $resentin& in the audit re$orts is $resented below( )he e!am$les
are based on an audit% whih #oused on two di##erent audit issues 9A and K:(
S'u&'ue I S'u&'ue II
Findin&s Findin&s% onlusions and
Reommendations on A
Findin&s on A Findin&s on A
Findin&s on K Conlusions on A
Reommendations on A
Conlusions
Conlusions on A Findin&s% onlusions and
reommendations on K
Conlusions on K
Findin&s on K
Reommendations Conlusions on K
Reommendations on A Reommendations on K
Reommendations on K
)he two strutures both have advanta&es( ?truture I ma0e it $ossible to &et a &ood overview
o# all #indin&s% onlusions and reommendations( ?truture II on the other hand $rovides a
more om$rehensive analysis o# the di##erent audit issues(
Methodolo&y
@(D )he Internal Audit re$orts in two $hases"
First% to the audited entity( A se$arate re$ort will be sent #or eah $ubli body(
?ubse*uently% to the MOFED( )he re$orts on all $er#ormane audits onduted in
a year are inor$orated in MOFED annual re$ort to the ounil o# ministers(
)his allows the MOFED to inlude the audited entity2s views% omments and $ro$osed
res$onse in the re$ort to the ounil(
@(18 )here are a number o# sta&es in the dra#tin& $roess"
9a: Outline Re$ort
9b: Re$ort to the head o# the $ubli body
Condut audit on#erene on audit #indin&s(
First dra#t by the audit team>
Review and revision by head o# the internal audit>
Co$y sent to MOFED>
U Re$ort to ounil o# ministers
First dra#t by Ins$etion>
Review and revision by mana&ement>
Inlusion within MOFED annual re$ort(
<1
9a: Outline Re$ort
@(11 )he #irst ste$ in the dra#tin& $roess is to $rodue an outline re$ort( )he aim o# this is
to"
Delineate the struture and broad ontent o# the re$ort>
-rovide senior mana&ement with the o$$ortunity to omment on the &eneral
diretion% onlusions et( O# the re$ort at an early sta&e( )he outline should be
a&reed on with head o# internal audit level be#ore any detailed dra#tin& starts( )his
will redue the need #or revision and amendment at later sta&es o# the dra#tin&
$roess(
@(12 In the outline% the audit team should"
?0eth out the struture o# the re$ort( A well thou&ht out and lo&ial struture is an
essential element o# any Internal Audit re$ort( It allows us to ommuniate
in#ormation to auditee in a lear and intelli&ible manner>
Identi#y "
)he #indin&s and onlusions to be inluded within eah main setion% to&ether
with su$$ortin& evidene>
Any tables% harts or other &ra$hial re$resentation o# in#ormation> and
All neessary a$$endies(
He need to deide whih o# the in#ormation we have olleted durin& the main
investi&ation to inlude in the main body o# the re$ort% whih in a$$endies% 9and
whih to e!lude:% and how best to $resent it(
@(13 A use#ul aid to $roduin& the outline is the latest version o# the main investi&ation
summary sheets% 9see Cha$ter 1% $ara&ra$hs 1(1@ and 1(1< :( I# the summary sheets
have been $rodued $ro$erly durin& the main investi&ation they will detail the u$ to
date $osition on the audits"
Findin&s% onlusions and reommendations> and%
Material evidene a&ainst eah audit issue(
)hese will ontain% there#ore% the main items #or inlusion in the outline(
@(11 Althou&h the summary sheets should inlude all the more im$ortant #ats% et(% it is
&ood $ratie to allow all sta## who have had a si&ni#iant $art to $lay in the audit to
have the o$$ortunity to $artii$ate in $re$arin& the outline( )his &ives added
assurane that the outline is om$lete and also ensures that a balaned inter$retation is
&iven to the evidene( ?ta## an $lae evidene in its $ro$er onte!t 4 somethin&
whih a bare readin& o# the summary sheets may not be able to do(
@(1@ One a$$roved% by mana&ement% the outline re$ort should be $assed to the auditte
entity as the basis #or disussin& views on the main matters to be raised in the #inal
re$ort( ?uh disussions must in no way be allowed to beome a learane e!erise% or
the oasion #or e!tensive and timeAonsumin& ar&uments( )he auditte will have every
o$$ortunity to omment widely at the #ull dra#t re$ort sta&e% so disussion at the
outline re$ort sta&e should be on#ined to reviewin& the main issues and should avoid
*uestions o# details( )he aim is to identi#y and% i# neessary% ta0e aount o# any
#undamental di##erenes o# view on main #ats and onlusions and ma'or obstales
<2
li0ely to arise at the #ormal learin& sta&e( More detailed &uidane is &iven in +uide 2
a$$endi! 21(
859 Re7"' '" 'De Audi'ee - Fi1' D$!'
@(15 One the outline has been a&reed% the internal audit should deide who amon&st the
audit team should dra#t whih setions o# the re$ort( )his will de$end u$on suh
#ators as the availability and e!$eriene o# sta##( In $ratie% however% internal audit
will o#ten &et the best results by alloatin& res$onsibility #or dra#tin& eah setion to
the sta## member most losely involved in the relevant element o# the main
investi&ation 9and who has% there#ore% the best 0nowled&e o# the evidene:(
@(1< )he dra#ts o# the various setions will need to be drawn to&ether to $rodue a oherent%
balaned re$ort( )his is the res$onsibility o# team mana&ement as it is they who are
aountable #or submittin& a &ood *uality #irst dra#t re$ort to senior mana&ement(
)eam mana&ement must 0ee$ the #ollowin& $oints in mind"
TDe le(i'i#$&y "! 'De e7"'( )he re$ort should not stray outside internal audit2s
le&al remit( )here should be no su&&estion that the internal audit *uestionin& the
merits o# $oliy ob'etives>
TDe $deGu$&y "! 'De !i%di%(1, &"%&lu1i"%1 $%d e&"##e%d$'i"%1 i% $dde11i%(
'De $udi' "5Ee&'i=e1% that is% whether the internal audit has done a satis#atory
audit and whether this is ade*uately re$resented in the dra#t re$ort( Mana&ement
should ensure that the re$ort $rovides om$lete and onlusive overa&e o# all the
audit issues( )he dra#t should move #rom eah audit issue to lear and e!$liit
onlusions and reommendations>
TDe 5$l$%&e "! 'De =$i"u1 1e&'i"%1 "! 'De e7"'( )he re$ort should onentrate
on the im$ortant as$ets o# mana&ement and auditee2s $er#ormane and avoid
detail on relatively minor issues>
TDe Gu$li'y "! 7e1e%'$'i"%( )he dra#t should be written well% in aordane with
the re$ortin& standards and $rini$les( A$$ro$riate tables% harts et( ?hould be
used to aid the reader2s om$rehension o# the #indin&s% onlusions and
reommendations( It is o#ten use#ul to have someone with no 0nowled&e o# the
audit read the dra#t re$ort at an early sta&e> this will hi&hli&ht areas where
$resentation is wea0(
TD$' 'De d$!'B
Can be #ully su$$orted by the available evidene>
Inludes all si&ni#iant #indin&s and onlusions whih an be drawn #rom the
evidene> and
Is a #air re$resentation o# the wei&ht and balane o# the evidene(
Koth sides o# the issues should be $resented in moderate and un $re'udiial terms( )he
dra#t re$ort should be o$enAminded and re#let an unbiased investi&ation where issues
are e!amined in $ro$er onte!t( In addition the dra#t re$ort should be .rounded/ in the
sense o# $resentin& $raiseAworthy $er#ormane% e##etive mana&ement and &ood GFM
as well as #irmly dislosin& wea0nesses in systems and ontrol and e!am$le o# bad
GFM( +enerally dra#t re$orts should be onstrutive in loo0in& #orward to neessary
im$rovements rather than train& ba0wards at mista0es and wea0nesses( +uidane to
the struture o# re$orts is &iven in +uide 2 a$$endi! 2@(
@(16 )he audit team should review all wor0in& $a$ers be#ore #inalizin& the dra#t re$ort(
)his may have been done durin& the main investi&ation but it is &ood $ratie to ta0e
one #inal run throu&h all wor0in& $a$ers at this sta&e to obtain a rounded view o# the
<3
evidene( )he team may also #ind it use#ul to rossAre#erene the re$ort A its #indin&s%
onlusions and reommendations% su$$ortin& evidene% tables and harts et( A ba0
to the relevant main investi&ation wor0in& $a$ers to he0 that it is $ossible to 'usti#y
everythin& in it( Che0 list is $rovided in +uide 2 a$$endi! 23(
Re7"' '" 'De Audi'ee Audi' Re=ie>
@(1D It is #or the head o# the internal audit to si&n the re$ort and send it to the auditee #or
omment( Ke#ore doin& so she7he needs to satis#y her7himsel# as to"
)he le&itimay o# the re$ort>
)he ade*uay o# the #indin&s% onlusions and reommendations in addressin& the
audit ob'etives>
Kalane>
Juality o# $resentation(
)he internal audit head will not normally review the wor0in& $a$ers in detail( 3e7she
has dele&ated this res$onsibility to the senior auditor( 3owever% where #indin&s%
onlusions or reommendations are $artiularly sensitive% the head may #ind it
neessary to all #or the relevant wor0in& $a$ers(
Di1&u11i"% >i'D 'De Audi'ee e%'i'y 8Cle$$%&e "! Re7"'19
@(28 All dra#t re$orts should be disussed at the a$$ro$riate level with the auditee( )he
results o# the investi&ation% in $artiular the ritial #indin&s should be sub'et to
onsultation with the auditee( ?uh a onsultation at the dra#tin& sta&e is the 0ey $oint
to ensure that"
All material and relevant #ats have been inluded>
)he #ats are not in dis$ute>
)he $resentation and onlusions drawn #rom them are #air>
)he re$ort is balaned in overa&e% ontent and time>
Hhere the re$ort states internal audit views or onlusions with whih the audited
entity are unable to a&ree% this is made lear(
@(21 A#ter internal audit head have a$$roved the dra#t re$ort% in order to lear the re$ort%
the #ollowin& alternative $roedures should be #ollowed"
;ormally% where disussions o# the outline have revealed no $artiular $roblems%
the dra#t re$ort a$$roved by the head will be sent to head o# the $ubli body and
MOFED(
In other ases% where matters are $artiularly om$le! or earlier disussions have
le#t im$ortant matters un resolved% where there is unertainty on ma'or issues or
where si&ni#iant han&es have been introdued at the #inal dra#tin& sta&e% the
internal auditor should $re$are the #inal re$ort inludin& the reservation o# the
auditee and sent the re$ort to the head o# $ubli body and MOFED(
@(22 It is im$ortant that the auditee #ully a$$reiates what it is bein& as0ed to a&ree( )he
internal audit with the audit team should% there#ore% handle all disussions on the re$ort
with the auditee( )he ob'etives are in short% to"
A&ree the ontent o# the dra#t re$ort as #ar as this is $ossible% and% where #ull
a&reement an not be reahed% identi#y the auditee2s reservations>
<1
Asertain what ation the audited entity intends to ta0e on the re$orts onlusions
and reommendations(
@(23 At suh re$ort learane sta&e all material di##erenes observed should be identi#ied(
Hhere the audited entity does e!$ress reservation% on the #ats and onlusions
drawn% these should be onsidered and disussed in a #air way( Any subse*uent
redra#tin& o# the re$ort should ontinue to re#let the aims o# havin& an a&reed re$ort
whih learly sets out the #ats% evidenes and onlusions( Hhere di##erenes o#
o$inion an not satis#atory be resolved the re$ort should brin& this out( And both the
auditees reservations and $ro$osed ourse o# ation should be noted in the re$ort
to&ether with omment #rom the Internal Audit(
@(21 )he urrent $roedure #ollowed a#ter disussion with the auditee 9learane on the
re$orts: is #or the Internal Audit to re*uest a #ormal res$onse #rom auditee when
sendin& them the re$ort( On reei$t o# the res$onse the Internal Audit head will as0
the audit team #or their omments( )he Internal Audit should onsider whether the
res$onse is"
Com$lete% that is% whether it addresses all the ma'or onlusions and
reommendations made in the re$ort>
Relevant A whether the audited entity has res$onded to the atual issues raised in
the re$ort>
?u##iient A whether the audited entity2s $ro$osed ourse o# ation will solve the
$roblems identi#ied in the re$ort in their entirety and whether it will lead to the
s$eedy and #ull im$lementation o# the reommendations>
Fair A whether the audited entity2s reservations or disa&reements with the re$ort are
'usti#ied(
Hhere the res$onse si&ni#iantly #ails one or more o# these tests the Internal Audit
head will onsider writin& ba0 to the auditee( Any subse*uent res$onse should be
sub'eted to the same e!amination(
@(2@ E)he Internal Audit head should also onsider the nature o# any ma'or reservations or
disa&reements the auditee may have( )hese an be divided into"
Disa&reements on the om$leteness% relevane or su##iieny o# the auditee2s
res$onse>
Disa&reement on #ats or tehnial inter$retation o# the evidene(
)he distintion a##ets the way in whih the Internal Audit handles the disa&reement(
On the #ormer% i# re$orted learly and #airly% we an e!$et the MOFED to be able to
wei&h the merits o# the Internal Audit and auditee2s $ositions( )hey an% there#ore% be
inluded in the Annual Re$ort to the ounil o# ministers In ontrast> disa&reements
on #ats or tehnial inter$retation will normally be beyond the MOFED om$etene
to 'ud&e( )hey should% as #ar as $ossible% be resolved be#ore $roeedin& to dra#tin& o#
the #inal re$ort to the e!eutive(
8d9 Re7"' '" 'De ECe&u'i=e1
@(25 )he re$ort to the e!eutive di##ers #rom that to the audited entity only in"
Format 9see $ara&ra$h @(11 above:>
Inludin& the substane o# the audited entity2s #ormal res$onse% and the audit
o##ie2s omments on the res$onse(
<@
In all other res$ets the &eneral struture and ontent o# the re$ort should #ollow the
outline re$ort(
@(2< )he e!eutive% unli0e the audited entity% will have no s$eialist 0nowled&e o# the
sub'et matter( MOFED must bear this in mind in $roduin& the #irst dra#t( )he re$ort
should be written to allow the e!eutive a ready understandin& o# the main issues% the
internal audit a$$roah% #indin&s% onlusions and reommendations( As noted above%
the re$ort must avoid $lain& the e!eutive in a $osition where it is re*uired to ma0e
tehnial 'ud&ments whih are outside its om$etene(
D"&u#e%'$'i"%
@(26 )he main elements o# doumentation in the re$ortin& sta&e are the various dra#ts o#
internal audit re$ort( )here will be #ew% i# any% additional wor0in& $a$ers &enerated and%
onse*uently% only limited need to a$$ly( ?ee +uide 2 A$$endi! 5(
@(2D It is essential% however% to maintain the standard o# doumentation throu&h to the #inal
su$$orted Re$ort( Audit teams should"
Pee$ a se$arate wor0in& $a$er #older ontainin& all main dra#ts o# the re$orts
to&ether with all orres$ondene with the audited entity>
Maintain a lear trail #rom the #irst dra#t o# both re$orts% throu&h the various
revisions% to the #inal versions( Pee$ o$ies o# all dra#ts o# eah setion o# the
re$orts and date all $a&es o# all revisions o# the dra#ts>
Cross re#er all main dra#ts o# the re$orts ba0 to the evidene( Internal audit dra#ts
should be re#erened to the internal audit wor0in& $a$ers and any dra#ts sent to the
auditee re#erened to the auditee2s own #iles(
<5
C)APTER .B POST AUDIT FOLLO*-UP
5(1 )his ha$ter desribes the ob'etives and $roedure #or losure o# the investi&ation%
review o# the audited entities res$onse to the Internal Audit re$ort and measurin& the
im$at o# the Audit re$ort(
Cl"1ue "! 'De I%=e1'i($'i"%
5(2 At the end o# the investi&ation% a#ter submission o# the Internal Audit re$ort the head o#
internal audit should $rodue a resume to the $ubli body mana&ement on the
ahievement the manner in whih the audit has been onduted% $roblems% i# any%
#aed and im$ortant lessons learned #rom the investi&ation( )he ob'etives o# the
$roedure are"
@D@( )o &ive mana&ement the o$$ortunity to .si&n o##/ the study% thereby #ormally
losin& it>
@D5( )o ensure that the Internal Audit as a whole is able to learn lessons #rom the
ondut o# the audit whih will assist its develo$ment o# $er#ormane audit(
5(3 )he #inal resume should onsider"
@D<( Hhether the study2s ori&inal ob'etives 9as $er the #easibility sta&e re$ort:
were ahieved% $rovidin& e!$lanations where this was not the ase>
@D6( Hhat the li0ely im$at o# the Internal Audit re$ort will be>
@DD( )he audited de$artment2s reation to the study and the re$ort% and what
lessons an be learnt #rom it>
588( Hhether the study was delivered on time and to ost% &ivin& e!$lanations #or
any varianes>
581( )he suess or otherwise o# the methodolo&y% hi&hli&htin& lessons to be learnt>
582( )he value and lessons #rom use o# any novel audit tehni*ues(
A o$y o# the re$ort% to&ether with audit $ro&rams and evaluative riteria% should &o to
the $er#ormane audit unit( In addition% the Internal Audit should $rodue a short
ommentary #or the administrative division on the $er#ormane o# any e!ternal
onsultants em$loyed on the study( ?ee +uide 2 a$$endi! 1D(
5(1 Internal audit will review the re$ort% allin& #or any e!$lanations as neessary( Hhen
they are satis#ied that the study has been #ully assessed they will si&n it o##% thereby
allowin& the Internal Audit to lose the study #ormally( Ke#ore doin& so% the Internal
Audit must ensure that the doumentation is in an ade*uate state% suh that $ersons
un#amiliar with the study are able to use the #iles at a later date(
Re=ie> "! 'De Audi'eeF1 Re17"%1e
5(@ At a suitable interval a#ter submission o# the Internal Audit re$ort% normally about two
years% the audit de$artment should review the audited entity2s res$onse to the Re$ort2s
onlusions and reommendations( )he ob'etives o# this e!erise are"
583( )o ensure that the auditee has ated ade*uately and is see0in& to im$rove
$ubli aountability and7or value #or money>
581( )o evaluate the bene#its that has resulted #rom the audit re$ort(
)he team should re$ort their #indin&s to the internal audit head% with a$$ro$riate
reommendations #or #urther ation by the $ubli body(
5(5 Review should onsist o# an e!amination o# the auditee2s ations on eah onlusion
and reommendation and% where $ossible and a$$ro$riate% an evaluation o# the savin&s
that have arued( )he audit team may #ind it use#ul to list eah main $oint in the
re$ort and as0 the auditee #or a #ormal statement o# their res$onse and ations( Even
<<
where a #ormal statement is not #orthomin&% the team should always a&ree the #ats
with auditee2s% es$eially where $roduin& #inanial estimates o# savin&s(
5(< )he review should also inlude an evaluation o# the ade*uay o# the audited entity2s
res$onse to the internal audit onlusions and reommendations( Hhere the review
su&&ests that the res$onse has not been ade*uate% internal audit team should see0 an
e!$lanation #rom the audited entity( I# this is not satis#atory% the internal audit should
onsider $ossible #urther ation by auditee"
A #ormal letter #rom the Internal audit to the head o# the auditee% a&ain see0in&
e!$lanations and as0in& #or a$$ro$riate ation to be ta0en>
A brie#in& to MOFED e!$lainin& the #ats o# the ase>
A #urther audit investi&ation and re$ort at a later date(
)he ourse to #ollow will de$end u$on the si&ni#iane o# the relevant onlusions and
reommendations and u$on the audited entity2s reasons #or their la0 o# res$onse(
3owever% i# the $er#ormane audit wor0 is to have a bene#iial im$at% audited entities
must at $ro$erly and s$eedily(
Me$1ui%( 'De I#7$&'1 "! 'De Audi'
5(6 ?ine one o# the ob'etives o# the $er#ormane audit is $romotin& im$rovements in
$er#ormane and value #or many ahievements% to 0now the im$rovements and
ahievements% the internal audit needs to evaluate and measure the im$ats o# the
audit( )o meet this need% the internal audit should establish arran&ements #or"
586( Monitorin& $lanned im$ats throu&h the ourse o# the audit and in relation to
other out$uts>
58D( Reordin& and evaluatin& ommitments to ation made by the audited entities>
518( Monitorin& and reordin& ahievements a&ainst ommitments> and
511( -rovide a re$ort #or senior mana&ement% on ommitments and ahievements
resultin& #rom internal audit out$uts durin& the $reedin& 3 years( Im$at will%
mainly derived #rom $er#ormane audit as a result o# ation ta0en by the audited
entities durin& the ourse o# the audit% on the internal audit re$orts or #ollowin& the
e!eutives reommendations(
5(D Durin& the strate&i $lan $re$aration% the internal audit is re*uired to inlude a
statement indiatin& the need and time table #or the assessment o# $otential im$ats o#
the audits( Even thou&h it is di##iult% at this sta&e% to $redit learly all the eventual
im$ats% some attem$t to identi#y li0ely im$ats or bene#its is worthwhile as they are
im$ortant #ators in seletin& studies( )his will be #urther onsidered in the re$orts o#
the #easibility study% as the result o# seletin& the audit issues% by identi#yin& more
learly the li0ely im$ats o# the main investi&ation( )hen% in underta0in& the main
investi&ation% tas0s should be identi#ied and methods ado$ted whih hel$ to ensure
these bene#its are ahieved(
5(18 )he #ollowin& $roedures should be #ollowed in measurin& and re$ortin& the li0ely
im$ats resultin& #rom the audit"
A: Monitorin& and tra0in&
Monitorin& the outome o# $lanned im$ats is a matter o# he0in& whether the
antii$ated im$ats are met and ta0in& #ollow u$ ation on the irumstane
resulted #rom the study( In this re&ard% it is hel$#ul to o$en an im$ats wor0in&
$a$er #older #or eah study at an early sta&e% #or e!am$le at the start o# the main
investi&ation( )his wor0in& $a$er #older hel$s to reord and hold in#ormation on
$lanned im$ats and% in due ourse% the audited bodies ommitments and
ahievements(
<6
K: Evaluatin& im$ats
In evaluatin& ommitments and the subse*uent ahievements% there should be
evidene that the wor0 o# the internal audit or the e!eutive in#luened the
$ro$osed ation to a si&ni#iant e!tent> that ation has atually been ta0en and that
bene#its an be reasonably attributed to the ation( It is not $ossible to be s$ei#i
and $resri$tive over the de#inition o# si&ni#iant im$at( )his is beause most
$er#ormane audit im$ats will relate to individual internal audit or e!eutives
reommendations and res$onses o# the audited entities( Kene#its% derived #rom the
ation ta0en as the result o# the study may be measurable or not( 3ene auditors
should identi#y these bene#its as measurable and non measurable to #ailitate their
evaluation( I# measurable% it should enable them to re$ort the e!tent o# the im$at
o# the audit in the learest terms( )hese mi&ht inlude redution in e!$enditure%
inreases in inome% im$roved e##iieny in servie delivery and &reater out$uts
#rom the same level o# e!$enditure( 3owever% in some ases it will not be $ossible
to estimate #inanial bene#its aurately( In suh ases best estimates o# the li0ely
savin&s within a ran&e o# $otential savin&s is advisable( On the other hand% nonA
measurable im$ats are those arisin& #rom ations whih im$rove &overnment
o$erations or $rovide better servie to the $ubli but #or whih there is no
*uanti#iable and disernible #inanial bene#it( E!am$les o# these are reduin&
waitin& times #or o$erations% sim$li#yin& $roedures #or ta! olletion or
im$rovin& advie and &uidane to laimant et( Ky identi#yin& these measurable
and nonAmeasurable im$ats% auditors should assess and evaluate the results o# the
audited entities2 ommitments and ahievements( )hese need to be reorded and
u$dated re&ularly in the wor0in& $a$er #older o$ened to monitor and tra0 im$ats(
C: Re$ortin&
Im$at assessment and measurement is not #or e!ternal re$ortin& to auditee( It is a
means o# observin& the ahievement o# study ob'etives and the e##etiveness o#
internal audit in meetin& its or&anizational ob'etives( )here#ore% im$ats o# the
audit observed durin& the evaluation should be re$orted to the head o# the $ubli
body( In this re&ard% the $ubli body should be $rovided with annual statements o#
detail o# all im$ats $romised or delivered in the $revious 3 years( De$endin& on
the nature o# the ation $romised% it may be neessary to review the atual $ro&ress
made #or the #ull 3 years $eriod so as to reassess savin&s bein& ahieved(
D: Galidation o# im$at returns
As the im$at o# internal audit may ome under lose it is im$ortant that
assessments are onsistent( Kene#its ahieved as a result o# the wor0 o# internal
audit should always be internally validated( Hherever $ossible they should be
a&reed with the audited entities or MOFED( I# there is a disa&reement learly
artiulated about the bene#its ahieved the head o# the $ubli body should be
advised on what basis the bene#it has been assessed and% i# a$$liable% the audited
bodies reservations learly artiulated(
5(11 )he audit $roess should not ome to an end one and #or all( For all audits
underta0en% there should #ollow a yle startin& #rom the overview to the #ollow u$
sta&e and a&ain mar0in&( Internal audit should ensure that the outome o# an
investi&ation and any neessary #ollow u$ is learly brou&ht out to be inluded in all
mar0in& and monitorin& arran&ements(
<D
SECTION T*O Pe!"#$%&e Audi' S'$%d$d1
DEFINITIONS
In this doument unless the onte!t otherwise indiates"
I%'e%$l Audi' means the audits established in eah $ubli bodies(
Audi'ed E%'i'ie1 or Audi'ee1 means all &overnment entities that are audited by the internal
audits aordin& to their mandates(
Audi'"1 Ge%e$l means )he Federal Auditor +eneral(
Audi'" means $er#ormane auditors o# the internal audits in #ederal $ubli body(
S'$%d$d1B Althou&h the word VVstandardsVV is used throu&hout this doument it is understood
that this word is to be used synonymously with the word .&uidelinesVV whih 0ee$s the
authority #or om$liane within the domain o# eah internal audit(
68
INTRODUCTION
)he standards ontained in this doument% re#erred to as Ethio$ian Audit ?tandards are
intended #or use by auditors ondutin& $er#ormane audits o# &overnment entities% $ro&rams%
ativities% and servies( )he standards $rovide benhmar0s #or ensurin& that auditors ahieve
a $ro#essional level o# *uality% inte&rity% ob'etivity% and inde$endene in $lannin&%
ondutin& and re$ortin& their audits( )he standards to&ether with the $er#ormane audit
manual and su$$ortin& materials $rovide &uidane #or the auditor in determinin& the auditin&
ste$s and $roedures that should be a$$lied in the internal audit(
)he doument om$rises #our ha$ters"
CD$7'e 1B -rovides essential ba0&round( It de#ines the one$t o# the 3Es o# $er#ormane
audit and the basi $rini$les onsidered in develo$in& the standards(
CD$7'e 2B -resents the 3Es 0ey &eneral standards" inde$endene o# internal audit
om$etene o# the audit> the e!erise o# due $ro#essional are in ondutin& and re$ortin& the
audit> and the $resene o# *uality assurane re*uired in arryin& the audit(
CD$7'e 3B -resents the #ieldwor0 standards that hi&hli&ht the need #or $lannin&%
su$ervisin&% doumentin&% study and evaluation o# internal ontrols% e!aminin& auditees2
om$liane with laws and re&ulation and obtainin& relevant% reliable and su##iient audit
evidene durin& the $lannin& and the e!eution sta&es o# the audit(
CD$7'e 3B Deals with the re$ortin& standards whih disuss the re*uirements that should
be #ul#illed by the auditors and the internal audit with res$et to the #orm% timeliness% ontent%
$resentation and distribution #eatures o# the audit re$ort(
CD$7'e +B Deals with #ollowAu$ standards that hi&hli&ht the need to #ollowAu$ on ation
ta0en by the audited body on $revious reommendations(
61
C)APTER 1
KACP+ROB;D
1(1 )he role o# the $ubli auditor traditionally has been limited to e!$ressin& o$inions on
#inanial statements and related issues o# le&ality% re&ularity and #raud( )his involves
assessments o# whether transations were $ro$erly ontrolled% whether are was ta0en
in the olletion and ustody o# revenues% whether e!$enditures were $ro$erly inurred
and &enerally% whether e!eutives intentions were bein& met(
1(2 ?tartin& in the 1D58s with inreasin& $ubli e!$enditures% the need arose #or more rational
and in#ormed deisionAma0in& in the use o# resoures and a &rowin& demand #or $ubli
aountability o# those who mana&e $ubli resoures(
1(3 )raditional #inanial and om$liane% althou&h essential% ould not $rovide the
in#ormation needed on waste% ine##iieny or ine##etiveness( )his neessitated the need
#or a new ty$e o# audit with an e!$anded so$e( )his new ty$e o# audit ame to be
0nown as $er#ormane audit or valueA#orAmoney audit(
1(1 -er#ormane auditin& was #irst introdued in the ?u$reme Audit Institutions 9?AIs: o#
some western ountries in the 1D<8s( )oday% it has beome one o# the ma'or tas0s o#
?AIs in most develo$ed and in some develo$in& ountries( In Ethio$ia% the O##ie o#
the Federal Auditor +eneral 9OFA+: ommened $er#ormane audit in 1DD2( ?ome
Re&ional Audit O##ies 9RAOs: has reently introdued it( Althou&h% traditional
#inanial and om$liane audits will ontinue to $lay an essential role% it is antii$ated%
however% that there will be a &radual and $lanned &rowth o# $er#ormane audit wor0 in
all o##ies in due ourse(
1(@ More reently% about 28 years a&o% &reater awareness and understandin& o# environmental
issues led &overnments to rethin0 their roles and res$onsibilities as environmental
stewards( Over this $eriod% there has also been inreasin& onern that or&anizations
should be held aountable #or their ations that a##et the environment(
1(5 In line with this% audit o##ies be&an to e!amine and assess the $er#ormane o#
&overnment or&anizations% $ro&rams% ativities in relation to om$liane with
a$$liable environmental laws% re&ulations% $oliies% et( )hey also started to inlude
Eenvironment2 as the 1
th
.E/ in a normal $er#ormane audit or made environment2 the
$rimary #ous in the audit 9audit o# air *uality% water *uality% #or e!am$le:% in order to
$rovide the le&islature with inde$endent in#ormation% to im$rove environmental
$rotetion $roesses and enoura&e best $raties #or sustainable develo$ment(
1(< -er#ormane audit is an ob'etive and systemati e!amination o# the #inanial and
o$erational $er#ormane o# a &overnment or&anization% $ro&ramme% ativity or #untion
arried out to $rovide the ounil o# ministers with inde$endent in#ormation% im$rove
$ubli aountability and enoura&es best $ratie( It is also to hel$ audited bodies
im$rove their $er#ormane in ahievin& value #or money 9GFM:(
62
1(6 )he so$e o# modern $er#ormane audit overs"
9a: audit o# the e&"%"#y o# administrative ativities in aordane with sound
administrative $rini$les and $raties% and mana&ement $oliies>
9b: audit o# the e!!i&ie%&y o# utilization o# human% #inanial and other resoures%
inludin& e!amination o# in#ormation systems% $er#ormane measures and
monitorin& arran&ements% and $roedures #ollowed by audited entities #or
remedyin& identi#ied de#iienies>
9: Audit o# the e!!e&'i=e%e11 o# $er#ormane in relation to the ahievement o# the
ob'etives o# the audited entity% and audit o# the atual im$at o# ativities om$ared
with the intended im$at> and
9d: Audit o# the e%=i"%#e%'$l e##ets o# &overnment ativities(
6ASIC PRINCIPLES
1(D )he #ollowin& $rini$les 9assum$tions: underlie the standards and were onsidered in
develo$in& them(
)he standards are onsistent with those o# the International Or&anization o# ?u$reme
Audit Institutions 9I;)O?AI: and international best $raties>
Internal audits have to ondut $er#ormane audits to u$hold and $romote $ubli
aountability by $rovidin& inde$endent in#ormation and assurane to the le&islature
Internal audits should a$$ly their own 'ud&ment to the diverse situations that arise in
ondutin& $er#ormane audits
Auditors are re*uired to maintain an attitude o# $ro#essional s0e$tiism when
dishar&in& their $ro#essional duties
)he ado$tion and a$$liation o# a ode o# ethis #or auditors in the $ubli setor
$romotes trust and on#idene in the auditors and their wor0
Internal auditors should wor0 on im$rovin& audit tehni*ues and methodolo&ies #or
auditin& the $er#ormane o# &overnment or&anizations
+ood relationshi$s and e!han&e o# in#ormation between $ubli bodies internal audits
and MOFED(
Audited entities are re*uired to develo$ s$ei#i and measurable ob'etives and
$er#ormane tar&ets
)he head o# the $ubli body is res$onsible #or eonomi% e##iient and e##etive use o#
resoures> and #or desi&nin& and a$$lyin& e##etive ontrol systems to ensure that
ob'etives are met% resoures are sa#e&uarded% laws and re&ulations are #ollowed and
reliable data are obtained and dislosed
Develo$ment o# ade*uate in#ormation% ontrol% evaluation and re$ortin& systems within
the &overnment are needed to #ailitate the aountability $roess(
63
C)APTER 2
+E;ERAC ?)A;DARD?
2(1 )his ha$ter $resribes &eneral standards #or ondutin& $er#ormane and
environmental audits( )hese &eneral standards are related to standards with ethial
si&ni#iane #or the inde$endene o# the internal audit and their auditors% the re*uired
om$etene o# auditors% and the e!erise o# due $ro#essional are in ondutin& the
audit and in $re$arin& audit re$orts( )he &eneral standards also inlude $oliies and
$roedures that should be ado$ted by the Internal audit #or reruitin& $ersonnel with
suitable *uali#iations% develo$in& and trainin& audit sta##% $re$arin& manuals and other
written &uidane% and instrutions and the standards #or *uality assurane(
INDEPENDENCE
In all matters related to their audit work, the Internal audits and their individual auditors must have
independence from the management of the public body.
2(2 Inde$endene im$lies im$artiality and #reedom #rom or re'etion o# im$ro$er in#luene
in ondutin& the audit wor0 and in reahin& 'ud&ments and onlusions(
2(3 Internal audits must be ob'etive in their audit o# entities( )hey should use sound
'ud&ment in determinin& the so$e% audit ob'etives% seletin& the methodolo&y and
$roedures #or the audit(
2(1 )he auditor and Internal audits must be% and must be seen to be% inde$endent and
ob'etive in arryin& out audits( )hey should be #air in their evaluations and in re$ortin&
on the outome o# audits(
2(@ )he audit o##ies are e!$eted to wor0 losely with the le&islature% inludin& with any
ommittees em$owered by the le&islature to onsider audit o##ie re$orts(
2(5 )he Internal audits may &ive members o# the e!eutive ounil brie#in&s on audit
re$orts% but it is im$ortant that the Internal audit maintain their inde$endene #rom
$olitial in#luene% in order to $reserve an im$artial a$$roah to their audit
res$onsibilities(
2(< Inde$endene re*uires that they not otherwise be sub'et to diretion by the ounil in
the $ro&rammin&% $lannin& and ondut o# audits( )he Internal audit should have the
#reedom to set $riorities and $ro&ramme their wor0 in aordane with their mandates
and ado$t methodolo&ies a$$ro$riate to the audits to be underta0en and to deide
whether studies should be e!tended or urtailed or even aborted( 3owever% this does
not im$ly that the internal audit should not ae$t audit assi&nments re*uested by their
res$etive e!eutive( )he Internal audit may ta0e into onsideration their res$etive
e!eutive re*uest #or audits while $lannin& their re&ular audit tas0s( Kut the Internal
audit should be #ree to deide on the manner in whih they ondut the re*uested audit(
61
2(6 )he Internal audit should be able to #orm their own onlusions and reommendations
based on the audit #indin&s% and re$ort the #indin&s im$artially to their res$etive head
o# the $ubli bodies heads and ministry o# #inane and eonomi develo$ment(
2(D )he Internal audit should have bud&et and sta##in& #reedom to dishar&e their
res$onsibilities in a reasonable manner(
2(18 )he Internal audit should not be obli&ed by the mana&ement to arry out% modi#y or
re#rain #rom arryin& out an audit or su$$ress or modi#y #indin&s% onlusions and
reommendations(
2(11 )he Internal audit should be ready to advise the mana&ement in suh matters as
aountin& standards% $oliies and re&ulations avoidin& any e!$liit or im$lied
ommitment that would im$air the inde$endent e!erise o# their audit mandates(
2(12 )he Internal audit should have ade*uate $ower to aess% at all reasonable times%
$remises% reords% relevant douments and any other in#ormation that is neessary to the
#ul#illment o# their duties and res$onsibilities( )hey should also have the ri&ht to obtain
relevant in#ormation% by way o# en*uiry or other means% #rom $ersons or entities
$ossessin& it((
2(13 )he Internal audit has to dishar&e their mandates #reely and im$artially% ta0in& the
audited entitiesV mana&ement views into onsideration in #ormin& audit onlusions%
'ud&ments and reommendations(
2(11 )he internal audit may oAo$erate with aademi institutions and establish #ormal
relationshi$s with $ro#essional bodies% $rovided the oAo$eration and the relationshi$s
do not inhibit their inde$endene and ob'etivity% in order to ma0e use o# the advie o#
e!$eriened members o# the $ro#ession at lar&e(
2(1@ )he Internal audit has a duty to ensure that the results o# the audits are ommuniated
aurately% without bias and in a manner that allow the a$$ro$riate user to understand
#ully and at a$$ro$riately(
2(15 Individual auditors must $er#orm their audit in an ethial manner without any #inanial
in#luenes that mi&ht om$romise their inde$endene( )hey should also be su##iiently
removed #rom $olitial $ressures to ensure that they an audit and re$ort their #indin&s
and onlusions ob'etively with out #ear o# $olitial re$erussion(
2(1< Auditors should $rotet their inde$endene and avoid any $ossible on#lit o# interest
by re#usin& &i#ts or &ratuities whih ould in#luene or be $ereived as in#luenin& their
inde$endene and inte&rity( Auditors should not use their o##iial $osition #or $rivate
$ur$oses and should avoid relationshi$s whih involve the ris0 o# orru$tion or whih
may raise doubts about their ob'etivity and inde$endene(
6@
2(16 Auditors should not beome members o# mana&ement ommittees o# their entity and> i#
advie is to be &iven% it should be onveyed as audit advie or reommendation and
a0nowled&ed learly as suh(
2(1D Auditors who have and7or had had lose a##iliation with the mana&ement suh as soial%
0inshi$ or other relationshi$s that lessens ob'etivity% should not ta0e that assi&nment to
audit that( ?imilarly% auditors who have o##iial% $ro#essional% $ersonal or #inanial
relationshi$ with the audittee that mi&ht ause an auditor to limit the e!tent o# the
in*uiry% to limit dislosure% or to wea0en or slant audit #indin&s in any way should not
be assi&ned in that area(
2(28 Auditors who #ae $ersonal im$airments indiated above should learly deline to
$er#orm the audit and are res$onsible #or noti#yin& the a$$ro$riate o##iials( )he
Internal audit is also res$onsible #or havin& $oliies and $roedures in $lae to hel$
determine i# auditors have any $ersonal im$airment(
COMPETENCE 812009
he audit team must collectively possess the re!uired competence.
2(21 )he Internal audit must a$$ly methodolo&ies and $raties o# the hi&hest *uality to their
audit in order to $rovide the re*uired $ro#essional servie to the $ubli setor entities(
Aordin&ly% audit tas0s should be arried out by auditors whose eduation and
e!$eriene is ommensurate with om$le!ities o# the audit tas0s(
2(22 Internal Auditors have a duty to ondut themselves in a $ro#essional manner at all
times and to a$$ly hi&h $ro#essional standards in arryin& out their wor0 to enable them
to $er#orm their duties om$etently and with im$artiality(
2(23 Internal Auditors should not underta0e audit assi&nments that they are not om$etent to
arry out unless om$etent advie and assistane are obtained whih enable them to
ondut the audit satis#atorily(
2(21 Eah Internal audit needs to ommand the ran&e o# s0ills and e!$eriene neessary #or
e##etive dishar&e o# the audit mandate( )hus% the internal audit should e*ui$
themselves with the #ull ran&e o# u$AtoAdate audit methodolo&ies inludin& systemsA
based tehni*ues to audit automated in#ormation systems(
2(2@ )he Internal audit should ado$t $oliies and $roedures to reruit $ersonnel with
suitable *uali#iations #or $er#ormane audit suh as aountin&% statistis% law%
en&ineerin&% arhitet% automated data $roessin&% $ubli administration% eonomis or
other related soial sienes(
2(25 ;ewly reruited auditors should attend an indution ourse on $er#ormane auditin&
methodolo&y% auditin& standards as well as &overnment $oliies and $roedures(
2(2< Internal audit $ersonnel should $ossess suitable aademi *uali#iations and be
e*ui$$ed with a$$ro$riate trainin& and e!$eriene( )he audit o##ies should establish%
and re&ularly review% minimum eduational re*uirements #or the a$$ointment o#
auditors(
65
2(26 )he Internal audit should ada$t $oliies and $roedures to develo$ and train em$loyees
to enable them to $er#orm their tas0 e##etively and to de#ine the basis #or the
advanement o# auditors and other sta##(
2(2D )he Internal audit should have wellAestablished trainin& $ro&rammes to ensure that their
sta## maintain $ro#essional $ro#iieny throu&h ontinuin& eduation and trainin&( In his
re&ard% auditors have a ontinuous obli&ation to u$date and im$rove the s0ills re*uired
#or the dishar&e o# their $ro#essional res$onsibilities(
2(38 )he internal audit should ado$t $oliies and $roedures to su$$ort the s0ills and
e!$eriene available within the o##ies and identi#y those s0ills whih are absent>
$rovide a &ood distribution o# s0ills to auditin& tas0s and a su##iient number o# $ersons
#or the audit> and have $ro$er $lannin& and su$ervision to ahieve their &oals at the
re*uired level o# due are and onern(
2(31 )he Internal audit should enoura&e their $ersonnel to beome members o# $ro#essional
bodies relevant to their wor0 and to $artii$ate in the bodiesV ativities(
2(32 )he audit o##ies should ensure that audits are $lanned and su$ervised by auditors who
are om$etent% e*ui$$ed with 0nowled&e o# the o##iesV standards and methodolo&ies%
and have an understandin& o# the s$eialties and $euliarities o# the environment(
2(33 )he audit o##ies may a*uire e!ternal e!$erts as onsultants i# the suess#ul arryin&
out o# an audit so re*uires in order that the audit #indin&s% onlusions and
reommendations are $ere$tive and soundly based and re#let and an ade*uate
understandin& o# the #ous area o# the $er#ormane audit(
DUE CARE 812209
he Internal audits and their auditors must e"ercise due care and concern in
complying with the performance auditing standards. his embraces due care in
planning, e"ecuting and reporting the performance audit assignments.
2(31 )he Internal audit must be ob'etive in their audit o# $ubli bodies( )hey should use
sound 'ud&ment in determinin& the so$e% audit ob'etives% seletin& the methodolo&y
and $roedures #or the audit( )hey should also a$$ly the same sound 'ud&ments in
ondutin& and su$ervisin& the audit% in evaluatin& and re$ortin& the audit results(
2(3@ )ehnial s0ill should be o# a *uality a$$ro$riate to the om$le!ities o# a $artiular
audit assi&nment( Auditors need to be alert #or situations% wea0 mana&ement ontrol
systems% inade*uaies in reord 0ee$in&% errors and unusual results whih ould be
indiative o# #raud% im$ro$er or unlaw#ul e!$enditure% unauthorized o$erations% waste
or ine##iieny or la0 o# $robity( Even in seemin&ly normal irumstanes% auditors
should maintain an attitude o# $ro#essional s0e$tiism and should ma0e a ritial
assessment% with *uestionin& mind o#% audit evidenes% re$resentations o# mana&ement
and be alert #or evidene that ontradits or brin&s into *uestion the reliability o#
douments or re$resentations o# mana&ement(
6<
2(35 )he Internal audit must e!erise due are when em$loyin& e!ternal e!$erts as onsultants
to assure themselves o# the onsultantsV om$eteny and a$titude #or the $artiular tas0s
involved(
2(3< ?hould the Internal audit need to see0 e!ternal e!$ert advie to arry out ertain
$er#ormane audit $ro'ets% the standards #or e!erise o# due are in suh arran&ements
have a bearin& also on the maintenane o# *uality o# $er#ormane( Obtainin& and usin&
e!ternal onsultantsV servie in arryin& out $er#ormane audit $ro'ets does not relieve
the Internal audit o# res$onsibility #or the o$inions #ormed or onlusions reahed on
the $er#ormane audit tas0(
2(36 Hhen the Internal audit use the wor0 o# another auditor9s:% they must a$$ly ade*uate
$roedures to $rovide assurane that the other auditor9s: has e!erised due are and
om$lied with relevant auditin& standards% and may review the wor0 o# the other
auditor9s: to satis#y themselves as to the *uality o# that wor0(
2(3D )he internal audit is re*uired to maintain on#identiality re&ardin& audit matters and
in#ormation arisin& #rom their audit tas0( 3owever% they must be entitled to re$ort
o##enes a&ainst the law to $ro$er $roseutin& authorities(
2(18 Auditors must res$et the on#identiality o# in#ormation a*uired durin& the ourse o#
their audit wor0% and should not dislose or use any suh in#ormation unless there is a
le&al or $ro#essional ri&ht or duty to dislose suh in#ormation(
2(11 Auditors should not use in#ormation reeived in the $er#ormane o# their duties as a
means o# seurin& $ersonal bene#it #or themselves or #or others( ;either should they
divul&e in#ormation whih would $rovide un#air or unreasonable advanta&e to other
individuals or or&anizations% nor should they use suh in#ormation as a means #or
harmin& others(
2(12 Auditors should ondut themselves in a manner whih $romotes oAo$eration and
&ood relations between auditors and within the $ro#ession( )he su$$ort o# the
$ro#ession by its members and their oAo$eration with one another are essential
elements o# $ro#essional harater( )he $ubli on#idene and res$et whih an auditor
en'oys is lar&ely the result o# the umulative aom$lishments o# all auditors% $ast and
$resent( It is there#ore in the interest o# auditors% as well as that o# the &eneral $ubli%
that the auditor deals with #ellow auditors in a #air and balaned way(
66
JUALIT4 RE-IE* 8ASSURANCE9 813009
he Internal audit should have policies and procedures to review the efficiency
and effectiveness of their internal standards and procedures.
2(13 )o ensure onsistently hi&h standards o# wor0% internal audit should $ay $artiular
attention to *uality assurane $ro&rammes in order to maintain and im$rove audit
$er#ormane and results(
2(11 Internal audit should establish systems and $roedures to"
Con#irm whether the $er#ormane auditin& standards were a$$lied in the various
sta&es o# the audit>
Ensure whether ade*uate $er#ormane audit $roedures are #ollowed in ondutin&
the audit>
Con#irm whether inte&ral *uality assurane $roesses have o$erated satis#atorily>
and
?eure im$rovements and avoid re$etition o# wea0nesses(
2(1@ )he Internal audit head has the overall res$onsibility #or ensurin& the *uality o# the
audit( 3owever% in arryin& out the audit en&a&ement% the audit head dele&ate $ortion o#
the wor0 $ertainin& to $lannin&% e!eution or su$ervision to other members o# the audit
team(
2(15 Audit sta## who have line res$onsibility #or ensurin& the *uality o# $er#ormane audits
should su$ervise and review audit ativities and the audit re$ort by usin& the auditin&
standards(
2(1< )he Internal audit should establish their own *uality assurane arran&ements in
relation to $lannin&% ondut and re$ortin& o# an audit( A sam$le o# audits may be
reviewed in de$th by suitably *uali#ied $ersonnel not involved in those audits% in
onsultation with the relevant line mana&ement re&ardin& the outome o# the internal
*uality assurane arran&ements and $eriodi re$ortin& to to$ mana&ement(
2(16 It is a$$ro$riate #or Internal audit to institute their own internal audit #untion with a
wide harter to assist the $ubli body ahieve e##etive mana&ement o# its own
o$erations and sustain the *uality o# its $er#ormane(
2(1D Internal audit ondutin& audits in aordane with these standards should have an
e!ternal *uality review at least one every #ive years e!ternal body( )he e!ternal
*uality review should determine whether the Internal audit have *uality assurane
systems in $lae and are o$eratin& e##etively to $rovide reasonable assurane that
established $oliies and $roedures and a$$liable auditin& standards are bein&
#ollowed(
6D
2(@8 An e!ternal *uality review under this standard should meet the #ollowin&
re*uirements" Reviewers should be *uali#ied and have urrent 0nowled&e o# the ty$e o#
wor0 to be reviewed and the a$$liable auditin& standard
a: Reviewers should be inde$endent o# the audit o##ie bein&
reviewed% its sta## and its auditees whose audits are seleted #or review
b: Reviewers should use sound $ro#essional 'ud&ment in ondutin&
and re$ortin& the results o# the e!ternal *uality review
: )he review should inlude a review o# the audit re$orts% wor0in& $a$ers% and other
neessary douments 9suh as orres$ondene and ontinuin& eduation
doumentation: as well as interviews with the reviewed audit o##ieVs $ro#essional
sta##% and
d: A written re$ort should be $re$ared ommuniatin& the results o# the e!ternal
*uality review(
*RITTEN GUIDANCE
he Internal audit adopt policies and procedures to prepare manuals and other
written guidance and instructions concerning the conduct of the performance audits.
2(@1 )he Internal audit should ommuniate to their sta## by means o# irulars ontainin&
&uidane% and the maintenane o# an u$AtoAdate audit manual settin& out their $olies%
standards and $raties so as to maintain the *uality o# audits(
2(@2 )he Internal audit should attem$t to u$date their $er#ormane audit manuals with latest
methodolo&ies and $raties on a $re determined re&ular $eriod(
2(@3 )he Internal audit should revise and u$date their manual and &uidane in the li&ht o#
new Internal audit standards and as well as the Finanial re&ulations and &uides(
D8
C)APTER 3
FIECDHORP ?)A;DARD? 92888A2388:
3(1 )his ha$ter $resribes standards #or #ieldwor0 9$lannin& and ondutin& the audit: #or
$er#ormane audits(
3(2 )he so$e o# $er#ormane audit should embrae"
I Audit o# the eonomy with whih the entity has utilized resoures in the $ursuit o# its
ob'etives in aordane with sound administrative $rini$les and $raties% and
mana&ement $oliies>
I Audit o# the e##iieny o# utilization o# human% #inanial and other resoures% inludin&
e!amination o# in#ormation systems% $er#ormane measures and monitorin&
arran&ements% and $roedures #ollowed by audited entities #or remedyin& identi#ied
de#iienies>
I Audit o# the entityVs e##etiveness in ahievin& its $redetermined ob'etives% and audit o#
the atual im$at o# ativities om$ared with the intended im$at> and
Audit o# the environmental e##ets o# &overnment ativities(
3(3 )he $ur$ose o# #ieldwor0 standards is to establish the riteria or overall #ramewor0 #or
the $ur$ose#ul% systemati and balaned ste$s or ations that the auditor has to #ollow(
)hese ste$s and ations re$resent the rules o# researh that the auditor% as a see0er o#
audit evidene% im$lement to ahieve a s$ei#i result(
PLANNING
he auditor should plan the audit in a manner which ensures that an audit of high
!uality is carried out in an economic, efficient and effective way and in a timely
manner.
3(1 In $lannin& the audit% auditors should"
a: Obtain &eneral in#ormation about the audited entity% 0ey mana&ement systems and
ontrols to assess ris0 to value #or money and to determine si&ni#iane%
b: De#ine the audit ob'etives and the audit so$e%
: Identi#y the study issues and evaluative riteria%
d: Desi&n the methodolo&y to ahieve the ob'etives%
e: Identi#y s$eial $roblems that mi&ht be enountered durin& the e!eution and
re$ortin& $hases%
#: Consider the #orm% ontent and users o# the audit re$ort%
&: Identi#y sta## re*uirements and other resoures 9inludin& outside onsultants:%
h: Consider the aountability re*uirements o# the audited body%
i: Identi#y #indin&s and reommendations #rom $revious audits that ould a##et the
urrent audit% and he0 whether a$$ro$riate ation has been ta0en on these
#indin&s and reommendations%
': Identi#y the $otential soures o# evidene%
0: -re$are a bud&et and time shedule #or the audit>
D1
l: Obtain the a&reement o# the audit entity re&ardin& so$e% ob'etives and
assessment riteria o# the audit and note any disa&reements% i# neessary>
m: -re$are a written audit $lan with the neessary su$$ortin& douments(
3(@ U%de1'$%di%( 'De E%'i'y -rior to ommenin& detailed $lannin& o# an audit o# an
entity% it is im$ortant to understand the lar&er onte!t in whih the entity o$erates( In
order to do this% the audit team should have u$AtoAdate 0nowled&e o#"
?i&ni#iant le&islative authorities>
Or&anizational arran&ements>
)he environment in whih the entity o$erates>
Aountability relationshi$s>
Ma'or ontrol systems>
Pey $ersonnel>
?$endin& levels and revenues>
)he entityVs lients>
)he ob'etive% mission and e!$eted results>
Ma'or o$erations% inludin& those in the #ield>
Ma'or ris0s #ain& the entity> and
-rior de#iienies and 0nown wea0nesses(
3(5 Maintenane o# $ertinent data on the struture% #untions and o$erations o# audited
entities will assist the auditor in identi#yin& areas o# materiality and ris0 and areas
holdin& $otential #or im$rovements in administration(
3(< Entity 0nowled&e% where a$$liable% should also inlude relevant environmental
in#ormation suh as"
)he entity2s a$$roah to environmental issues% inludin& its $oliy and ob'etives
and the e!istene o# an environmental mana&ement system(
Caws and re&ulations &overnin& the audited entity2s environmental res$onsibilities
or its role in determinin& those o# others( )his as$et would inlude identi#yin&
le&al re*uirements im$osed on the entity 4 or those whih it im$oses on others 4
suh as re$ortin& re*uirements% emission limitations arisin& #rom its ativities% or
res$onsibilities to restore de&radation whih it has aused(
3;2 Audi' "5Ee&'i=e1 822109
Audit ob'etives must be are#ully onsidered and learly stated( )hey identi#y the
audit sub'ets and $er#ormane as$ets to be e!amined 9#or e!am$le the 1Es: as well
as the $otential #indin& and re$ortin& elements that the auditor e!$ets to develo$(
3(D Audit ob'etives are normally e!$ressed in terms o# what *uestions the audit is
e!$eted to answer about the $er#ormane o# an ativity% suh as results ahieved% or
the eonomy and e##iieny o# resoure utilization(
3(18 An audit ob'etive is a $reise statement o# what the audit intends to aom$lish( )hey
must be de#ined in a way that will allow the audit team at the end o# the audit to
D2
onlude a&ainst eah o# the ob'etives( )he audit ob'etives should% there#ore% be
de#ined as $reisely as $ossible in order to avoid unneessary and e!$ensive audit wor0(
3(11 )he audit ob'etives $rovide a lear diretion to the audit $roess and drive the rest o#
the $lannin& $roess( O#ten the main audit ob'etive an bro0en down to a number o#
sub audit ob'etives(
3;12 Audi' S&"7e 822209
?o$e is the #ramewor0% boundary% limit or sub'et o# the audit( ?o$in& the audit
involves narrowin& the audit to a relatively #ew matters o# si&ni#iane that $ertain to
the audit ob'etive and are ritial to ahievin& the intended result o# the audit sub'et(
It desribes the $arts or #untions o# the entity that are the sub'et o# the audit as well as
the time $eriod overed by the audit( )he $ur$ose o# de#inin& the so$e is to set an
o$timal balane between the s$read and de$th o# the audit(
3(13 )he $ubli body is en&a&ed in a number o# ativities in a wide variety o# areas and it is
not $ossible #or the internal audit to audit all $er#ormane ativity at the same time(
)here are three underlyin& $rini$les in establishin& the so$e o# the audit"
Relevance to the mandate# Auditors should determine whether the issues seleted #or
audit are within the mandate o# the Internal audit have a $riority within their mandate
and are o# interest to $arliamentarians(
$atters of significance# Identi#yin& matters o# si&ni#iane #or audit involves
answerin& the #ollowin& ty$es o# *uestions"
I Does the sub'et have an im$ortant im$at on resultsF
I Is it an area o# hi&h ris0F
I Does it involve material amountsF
I Is it an issue o# visibility or o# urrent onernF Is it o# interest to ounil
and the $ubliF
I Hill it result in im$roved $er#ormane% aountability or value #or moneyF
%uditability# Auditability relates to the ability o# the audit team to arry out the audit
in aordane with standards( )he team may deide not to arry out the audit
beause it may not have or annot a*uire the re*uired e!$ertise% suitable riteria
are not available% or the area is under&oin& si&ni#iant han&e% et(
3(11 A77"$&D $%d Me'D"d"l"(y)he a$$roah and methodolo&y om$rise the tehni*ues
that will be used by the auditor in &atherin& evidene and ondutin& his analysis(
3(1@ E!am$les o# &atherin& evidene ould inlude review o# $ubli body doumentation
and #iles% re$orts and studies% ondutin& surveys% #ield visits to $ro'et sites%
interviews with entity sta## and sub'et matter e!$erts% et( Analytial methods ould
inlude statistial sam$lin&% yearAtoAyear om$arisons% trend analysis% and
om$arisons with other entities in the same or similar line o# ativities% et(
3(15 Audi' &i'ei$ Audits must have suitable riteria that #ous the audit and $rovide a
basis #or develo$in& observations( Criteria are reasonable and attainable standards o#
D3
$er#ormane and ontrol a&ainst whih om$liane% ade*uay o# systems and
$raties% and the eonomy% e##iieny and e##etiveness o# o$erations an be
evaluated and assessed( )he assessment o# whether or not riteria are met results in
audit observations( ?uitable riteria are riteria that are a$$ro$riate to the $artiular
harateristis o# the audited or&anization(
3(1< Criteria should be develo$ed #or eah line o# en*uiry( )hey should be"
I Rele=$%'B riteria that ontribute to ma0in& observations and reahin&
onlusions a&ainst the audit ob'etives>
I Reli$5leB riteria that result in onsistent onlusions when used by di##erent
auditors in similar irumstanes>
I Neu'$l" riteria those are #ree #rom bias>
I U%de1'$%d$5leB riteria that are learly stated and not sub'et to di##erent
inter$retations> and
I C"#7le'eB all the riteria that ould a##et the observations and onlusions are
identi#ied and used(
3(16 -rimary soures o# riteria are the ontrols% standards% measures% results% ommitments
and tar&ets ado$ted by the entity itsel# or im$osed by le&islative bodies( )he auditor
should review these riteria to assess their relevane to the audit to ensure they are
reasonable and om$lete( )he soures o# the riteria determine the amount o# e##ort
needed to assure the suitability o# the riteria( Hhere the entityVs own measures are
#ound to be suitable% they an be ado$ted as audit riteria(
3(1D Hhere the entity does not have wellAestablished standards #or measurin& or 'ud&in&
$er#ormane onsistent with the audit ob'etives% ae$table riteria may be obtained
#rom the law% re&ulations% standards develo$ed by $ro#essional bodies% $er#ormane
data o# similar or&anizations% and throu&h other analytial methods(
3(28 Other soures o# audit riteria ould be"
)he environmental laws and re&ulations>
Environmental standards develo$ed by reo&nized $ro#essional or&anizations>
Entity re$orts on $lan and $er#ormane re$orts>
+enerally ae$ted &ood $raties>
)he internet>
International onventions and a&reements on environment>
?tandards develo$ed by the audited or&anization>
-rior wor0 o# the o##ie>
Researh enters>
?trate&i $lan doument $re$ared by the auditee
3(21 Hhen the audit team believes that the riteria set are reasonable% they should disuss
them with the auditee senior o##iials to obtain their omments( I# there is
disa&reement and this annot be resolved% the audit team should onsult senior sta##
and7or the advisory ommittee be#ore $roeedin& with the audit(
D1
3(22 I# there is disa&reement with auditee mana&ement about the audit riteria% then this is
to be dislosed in the ha$ter with an e!$lanation o# why the audit team believes
mana&ement is res$onsible #or the sub'et matter and7or why the team used the
riteria des$ite mana&ement2s ob'etion(
3(23 C"%1idei%( 'De >"? "! "'De1 Auditors should determine i# audits or evaluations
o# the sub'et in *uestion have been done by others% suh as internal auditors and
e!ternal e!$erts( )hey may be use#ul soures o# in#ormation #or $lannin& and
$er#ormin& the audit( Audit teams should rely on the wor0 o# others when the wor0
has been arried out in aordane with the O##ieVs standards( )his an be ostA
e##etive as it an eliminate du$liation o# e##ort(
3(21 )he auditor should obtain reasonable assurane about the e!$ert2s om$etene and be
satis#ied that the e!$ert2s wor0 is a$$ro$riate #or audit $ur$oses(
3(2@ C"%1ul'$'i"% $%d $d=i&e -er#ormane audits are om$le! e!erises re*uirin& a
wide ran&e o# s0ills% e!$ertise and e!$eriene to be om$leted ostAe##etively(
Considerable 'ud&ment is re*uired at all sta&es o# the audit( )he audit team should
onsult with 0nowled&eable sta## and advisory &rou$s within the O##ie% sub'et
matter s$eialists% and others as a$$ro$riate% inludin& entity mana&ement% to obtain
advie and &uidane be#ore #inalizin& the audit $lan(
3(25 )he audit team should onsult with entity mana&ement and% amon& thin&s% introdue the
members o# the audit team to auditee mana&ement% review the so$e% ob'etives%
riteria% audit $lan and audit time table% $rovide a short summary o# the methods and
$roedures to be used to ondut the audit% establish o##iial ommuniation lin0
between the audit team and the auditee
3(2< )he Internal audit may a*uire e!ternal and internal e!$erts throu&hout the audit as
onsultants and adviser i# the suess#ul arryin& out o# an audit so re*uires in order
that the audit #indin&s% onlusions and reommendations are $ere$tive and soundly
based and re#leted(
3(26 )here may be many $layers involved in the area o# environmental $rotetion and
their ativities mi&ht be om$le! and re*uire a wide ran&e o# s0ills% e!$ertise%
e!$eriene and 'ud&ment to do the audit e##etively(
3(2D )he audit team should use the servies o# an advisory ommittee( Members o# the
advisory ommittee ould be both #rom inside and outside the audit o##ie and should
be seleted on the basis o# their s0ills% insi&ht% relevant 0nowled&e 9e(&( ?ub'et matter
s$eialist: and e!$eriene(
3(38 )he audit team should meet with the advisory ommittee at the ritial deision
$oints o# the audit(
3(31 )he audit team should also onsult with internal sta## to bene#it #rom their advie%
e!$eriene and 0nowled&e o# the sub'et matter(
3;32 Su!!i&ie%' e1"u&e1 822309
D@
An ade*uate number o# auditin& sta## and su$ervisors with a$$ro$riate s0ills%
0nowled&e and e!$eriene should be assi&ned to the audit( Consultants should be used%
as neessary when inAhouse s0ills are not available or insu##iient( Ade*uate other
resoures should be made available% suh as travel #unds% #or the team to arry out its
wor0(
3;33 *i''e% $udi' 7l$% A written audit $lan should be $re$ared #or eah audit( )he
ontents o# the $lan should inlude"
I )he audit ob'etives>
I )he audit so$e% ma'or onsiderations and the rationale #or the so$in& deisions%
reasons #or any limitations to the so$e>
I )he audit riteria and their soures>
I Desri$tion o# the $lanned audit a$$roah and methodolo&y>
I Identi#iation o# audit sta## and e!ternal onsultants% inludin& their *uali#iations
and s$eial 0nowled&e or s0ills>
I )he estimated ost o# the audit 9sta## hours and other osts:> and
I )he timin&% the 0ey milestones% and the main ontrol $oints(
SUPER-ISION AND RE-IE* 823309
he work of the audit staff at each level and audit stage should be properly
supervised during the audit, and documented work should be reviewed by a senior
member of the audit staff.
3;33 ?u$ervision involves diretin& audit sta## and e!ternal onsultants who are involved in
the audit and monitorin& their wor0 to ensure that the audit ob'etives are met and the
*uality o# audit wor0 is maintained( -ro$er su$ervision is neessary re&ardless o# the
om$etene o# individual auditors(
3;3+ ?u$ervision is an essential and ontinuous $roess and should be done throu&hout the
audit $roess by senior auditors% division heads and de$artment heads to ensure that"
3;3. ?u$ervision is an essential $roess that re*uires that the audit team leader and other
su$ervisors should ensure that"
)he audit is arried out in aordane with the $er#ormane auditin& standards and
$raties o# the Internal audit>
Audit team members have a lear and onsistent understandin& o# the audit $lan and
#ully understand the audit ob'etives9s:>
)he audit $lan and ation ste$s s$ei#ied in that $lan are #ollowed unless a variation
is authorized>
)he neessary audit wor0 is only arried out and bud&ets and timetables are met>
A$$ro$riate advie and onAtheA'ob trainin& based on the level o# e!$eriene o# the
team members is $rovided>
Hor0in& $a$ers ontain evidene ade*uately su$$ortin& all onlusions and
reommendations>
)he audit team ahieves the stated audit ob'etives> and
D5
)he audit re$ort inludes the audit onlusions and reommendations(
3;30 )he s$ei#i needs o# environmental auditin& may re*uire additional $roedures to be
arried out( For the assurane re*uired it may also be advisable to ma0e use o# a
s$eialist in the audit o##ie to arry out a review o# the $lannin& and #ieldwor0 #rom an
environmental $ers$etive(
3;32 ?enior member o# the audit sta## should review all audit wor0 be#ore the audit re$orts
are #inalized and it should be arried out as eah $art o# the audit $ro&resses(
3;3, ?u$ervisors must ensure that the audit is arried out in aordane with environmental
auditin& standards and $raties o# the audit o##ies(
3;30 All audit wor0 should be reviewed by a senior member o# the audit sta## be#ore the
audit re$orts are #inalized( It should be arried out as eah $art o# the audit $ro&resses(
Review should ensure that"
All evaluations and onlusions are soundly based and are su$$orted by su##iient%
relevant and reliable evidene as the #oundation #or the #inal audit re$ort(
All errors% de#iienies and unusual matters have been $ro$erly identi#ied%
doumented and either satis#atorily resolved or brou&ht to the attention o# a more
senior members o# the audit sta##>
Chan&es and im$rovements neessary to the ondut o# #uture audits are identi#ied%
reorded and ta0en into aount in later audit $lans and in sta## develo$ment
ativities(
COMPLIANCE *IT) LA*S AND REGULATIONS
Internal %uditors should assess auditee&s compliance with applicable laws, and
regulations and other compliance re!uirements when necessary to satisfy audit
ob'ectives.
3;31 )he Auditor should desi&n the audit to $rovide reasonable assurane o# detetin& ille&al
ats% irre&ularities and nonAom$liane that ould si&ni#iantly a##et the audit
ob'etive( )he auditor should also be alert to situations or transations that ould be
indiative o# ille&al ats that may have an indiret e##et on the audit results(
3;32 Auditors should determine i# laws and re&ulations &overnin& the entity are si&ni#iant to
audit ob'etives% and% i# they are% assess the ris0 that si&ni#iant ille&al ats ould our(
Kased on that assessment% the auditor should desi&n and $er#orm $roedures to $rovide
reasonable assurane o# detetin& si&ni#iant ille&al ats(
3;33 )he auditorVs assessment o# ris0 inludes onsiderations o# whether the entity has
ontrols that are e##etive in $reventin&Aor detetin& ille&al ats(
3;33 Althou&h it is im$ossible to $resribe $reise standards #or determinin& whih laws and
re&ulations are im$ortant to the audit ob'etives% as &overnment $ro&rams are sub'et to
so many laws and re&ulations% and audit ob'etives vary widely% auditors are advised to
#ollow the #ollowin& a$$roah to ma0e the determination"
D<
)ailor eah audit ob'etive to *uestions about s$ei#i #eatures o# the $ro&ramme to
be audited%
Identi#y laws and re&ulations that have a sensible relation to s$ei#i $arts o# the
$ro&ramme in the audit ob'etive *uestions% and
Asses whether violation o# those laws and re&ulations ould onsiderably a##et the
auditorsV answers to the *uestions inluded in the audit ob'etive( I# they ould%
they are li0ely to be im$ortant to the audit ob'etives(
3;3+ Auditors ondutin& audits in aordane with this standard should hoose and a$$ly
Audit ste$s and $roedures that% in their $ro#essional 'ud&ment% are a$$ro$riate to the
Cirumstanes( )hese audit ste$s and $roedures should be desi&ned to obtain
su##iient% Relevant and reliable evidene that will $rovide a reasonable basis #or their
'ud&ments And onlusions(
3;3. In desi&nin& tests o# om$liane with im$ortant laws and re&ulations% auditors should
assess the ris0 that ille&al ats ould our( )he auditor2s assessment o# ris0 should
onsider inter alia% whether the entityVs mana&ement has e##etive ontrol #or
deterrin& and detetin& ille&al ats( I# auditors onlude that the ontrols are e##etive
they an Redue the e!tent o# their tests o# om$liane(
3;30 Auditors should be alert to situations or transations that ould be indiative o# ille&al
ats and desi&n the audit aordin&ly( Hhen in#ormation omes to their attention
indiatin& that ille&al ats may have ourred% auditors should onsider whether the
$ossible ille&al ats ould si&ni#iantly a##et the audit results( )his may entail the
auditors to e!tend the audit ste$s and $roedures% as neessary% to determine i# the
ille&al ats have or are li0ely to have ourred and to determine their e##et on the
audit results(
3;32 Auditors should e!erise due $ro#essional are in #ollowin& indiations o# $ossible
ille&al ats so as not to inter#ere with $otential investi&ations% le&al $roeedin&s% or
both( I# auditors ome aross suh indiations o# serious ille&al ats% they must re$ort
the ondition to their audit o##ies so as to re$ort the irumstanes to the
investi&atory authorities(
3;3, An audit made in aordane with this standard $rovides reasonable assurane that its
ob'etives have been ahieved( It does not% however% &uarantee the disovery o# every
ille&al at or ontin&ent liabilities resultin& #rom them( ;or does the subse*uent
disovery o# ille&al at ommitted durin& the audit $eriod neessarily mean that
auditorsV $er#ormane was inade*uate $rovided the audit was onduted in aordane
with this ?tandard(
3;+0 For ertain audit assi&nments% auditors may de$end on the wor0 o# le&al onsultants
to determine those laws and re&ulations that are im$ortant to the audit ob'etives%
desi&nin& tests o# om$liane with laws and re&ulations and evaluatin& the results o#
those tests( Auditors may also rely on the wor0 o# le&al e!$erts when audit ob'etives
$resu$$ose testin& om$liane with $rovisions o# ontrats or &rant a&reements(
D6
3;+1 Keause the laws and re&ulations that may a$$ly to a s$ei#i audit are o#ten
numerous% the auditors should e!erise $ro#essional 'ud&ment in determinin& those
laws and re&ulations that mi&ht have a si&ni#iant im$at on the audit ob'etives(
3;+2 I# indiations are #ound that unlaw#ul ats have or may have been ommitted% the
auditor must determine to what e!tent suh ats a##et his7her onlusions and the
#urther $ro&ress o# the audit(
STUD4 AND E-ALUATION OF MANAGEMENT CONTROLS 821209
%uditors should obtain an understanding and assess and evaluate management controls
that are relevant to the audit. (hen controls are significant to audit ob'ectives, auditors
should obtain sufficient evidence to support their 'udgment about such controls.
3;+3 Mana&ement is res$onsible #or establishin& e##etive mana&ement ontrols( In the
broadest sense these ontrols inlude $oliies and $roedures #or"
-lannin&% or&anizin&% diretin& and ontrollin& $ro&ramme o$erations>
ensurin& that a $ro&ramme meets its ob'etives>
Ensurin& that valid and reliable data are obtained% maintained and #airly dislosed
in re$orts>
Ensurin& that resoure use is onsistent with laws and re&ulations>
Ensurin& that resoures are sa#e&uarded a&ainst waste% loss and misuse>
Measurin&% re$ortin&% and monitorin& $er#ormane(
3;+3 )he e!tent o# the study and evaluation o# internal ontrol de$ends on the ob'etives o#
the audit and on the de&ree o# reliane intended(
3;++ Auditors should assess and evaluate the auditeeVs internal ontrol system desi&ned #or
eonomi% e##iient and e##etive o$eration o# the audited entity% #or ensurin& adherene
to mana&ement $oliies% and #or $roduin& timely and reliable #inanial and
mana&ement in#ormation(
3;+. Auditors should #ous on understandin& the #ollowin& internal ontrols in determinin&
their si&ni#iane to the audit ob'etives( )hese inlude $oliies and $roedures that
mana&ement has im$lemented to reasonably ensure that"
A $ro&ram meets its ob'etive>
Galid and reliable data are obtained% maintained% and #airly dislosed in re$orts>
Resoures are sa#e&uarded a&ainst waste% loss and misuse>
Resoure use is onsistent with laws and re&ulations(
3;+0 )he auditors should also determine"
9a: Hhih o# the ontrols within the system are 0ey ontrols% i(e( Controls that should% i#
o$eratin& e##etively"
Ensure om$liane with laws and re&ulations%
Ensure that there are no ma'or #ailures in the eonomy% e##iieny or
e##etiveness o# the ativities bein& audited(
DD
9b: )he overall *uality o# the system o# ontrols relevant to the audit and thus the de&ree o#
reliane that the auditor an $lae u$on it% assumin& that subse*uent tests o# ontrol
$rovide evidene that it has o$erated e##etively on a dayAtoAday basis(
3;+2 Auditors should determine whether internal ontrols are #untionin& $ro$erly to ensure
)he inte&rity% reliability and om$leteness o# the data(
3;+, Internal Auditors should assess the wor0 o# internal auditors to ensure that
mana&ement ontrols are #untionin& $ro$erly and to $revent du$liation o# e##ort(
3;.0 In order to address environmental issues in a strutured manner% mana&ement should
Ideally desi&n and doument the 0ey elements o# its environmental mana&ement
system(
)his may embrae% amon&st others% the #ollowin& as$ets"
Identi#yin& a$$liable le&islative and re&ulatory re*uirements(
Establishin& and maintainin& $oliies and $roedures to $rovide reasonable
assurane that the entity om$lies with those re*uirements(
Evaluatin& and monitorin& the entity2s om$liane with e!ternal re*uirements%
environmental $oliies and $roedures(
?$ei#yin& re$orts that satis#y le&al% re&ulatory or other re*uirements(
3;.1 )he auditor should study and evaluate the internal ontrol measures instituted by
mana&ement #or environmental matters and determine the e!tent o# reliane that an be
$laed on them( )he e!tent o# the study de$ends on the ob'etives o# the audit and the
de&ree o# reliane intended(
3;.2 Auditors should assess the wor0 o# internal auditors on whether mana&ement ontrols
with res$et to environmental mana&ement systems are #untionin& $ro$erly and% i# this
wor0 meets their own standards% use it in order to $revent du$liation o# e##ort(
E-IDENCE
Relevant, reliable and sufficient evidence should be obtained to support the
auditors& findings and conclusions regarding the organi)ation, programme, activity
or function under audit.
3;.3 )he auditorVs #indin&s% onlusions and reommendations must be based on evidene(
)he evidene must be su##iient% reliable and relevant(
Evidene is su##iient i# there is enou&h o# it to su$$ort the auditorVs #indin&s(
Evidene is relevant i# it has a lo&ial% sensible relationshi$ to the #indin&(
Evidene is reliable i# it is onsistent with #at% i(e( It is valid(
3;.3 ?ine auditors seldom have the o$$ortunity o# onsiderin& all in#ormation about the
audited entity% it is ruial that the data olletion and sam$lin& tehni*ues are
are#ully hosen( In $artiular% when om$uter based system data are an im$ortant
$art o# the audit% and the data reliability is ruial to aom$lishin& the audit
ob'etive% auditors should satis#y themselves that data are reliable and relevant(
188
3;.+ Auditors should have a sound understandin& o# tehni*ues and $roedures suh as
ins$etion% observation% en*uiry and on#irmation and be $ro#iient in interviewin& s0ills
to ollet audit evidene(
3;.. )he audit o##ies should ensure that the tehni*ues and $roedures em$loyed are
su##iient to reasonably assess the $er#ormane o# the auditee( Auditors should
evaluate the alternative audit a$$roahes and 'ud&e whih o# these will ahieve the
desired results most eonomially to ensure that su##iient% relevant and reliable
evidene is obtained to ahieve the audit ob'etives at the least $ossible ost(
3owever% auditors should &ive onsideration in seletin& audit a$$roahes and
$roedures to the *uality o# evidene(
3;.0 Evidene may ta0e a variety o# #orms( It may be"
PDy1i&$l Obtained throu&h observations% inludin& $hoto&ra$hs and video reordin&
to su$$ort the observations by diret ins$etion( Hhenever $ossible% it
would be better to obtain $hoto&ra$hs or videota$es to su$$ort suh
observations>
Te1'i#"%i$l 6ased on interviews and disussions( )hose should be substantiated by
other evidene% whenever $ossible>
D"&u#e%'$y Ky reviewin& douments and based on o$ies o# atual doumentation>
A%$ly'i&$l Con#irmation #rom third $arties% inludin& measurements or standards
o# $er#ormane used as a basis #or % 7 develo$in& riteria> and statistis%
om$arisons% analysis% rationale( Et( Develo$ed by the audit team(
3;.2 A$$ro$riate in#ormation should be olleted% analyzed% inter$reted and reorded to
be used as audit evidene in an e!amination and evaluation $roess to determine
whether )he audit riteria are met(
3;., Audit evidene should be o# suh *uality and *uantity that om$etent auditors
wor0in& inde$endently o# eah other will reah similar audit #indin&s7onlusions
#rom evaluatin& the same audit evidene a&ainst the same audit riteria(
3;00 ?u##iient audit evidene should be olleted to be able to determine whether the
auditeeVs environmental mana&ement system on#orms to the environmental
mana&ement system audit riteria(
3;01 Hhihever method is hosen% im$ortane must be attahed to the *uality o# the
audit evidene in terms o# its ade*uay% validity and reliability(
3;02 Indiations o# wea0ness in the environmental mana&ement system and7or nonA
on#ormity to the environmental mana&ement system should be reorded(
3;03 Indiret audit evidene based on on#irmations #rom outside soures is more reliable
than evidene obtained #rom the audited entity itsel#(
3;03 )he auditorVs own he0s are more reliable than audit evidene based on e!ternal
on#irmations and in*uiries(
181
3;0+ D"&u#e%'$'i"% Auditors should maintain ade*uate wor0in& $a$ers showin&
the basis and e!tent o# the $lannin&% wor0 $er#ormed% evidene olleted% #indin&s
and onlusions reahed and $rovide the basi on whih the audit re$ort an be
$re$ared(
)hey should inlude"
-lannin& and administrative material% suh as notes o# $ro&ress meetin&s et>
Corres$ondene with the auditees and notes o# disussions with the auditee
mana&ement>
Co$ies o# evidene% reords% analysis and other su$$ortin& materials #or the #indin&s
and onlusions>
Materials used #or re$ort $re$aration inludin& dra#t re$orts>
3;0. All wor0in& $a$ers are on#idential douments belon&in& to the audit o##ies(
3;00 Hor0in& $a$ers should be su##iiently om$lete and detailed to enable an e!$eriened
auditor havin& no $revious onnetion with the audit to subse*uently asertain #rom
them what wor0 was $er#ormed to su$$ort the onlusions(
3;02 HellAor&anized and om$lete wor0in& $a$ers are o# ritial im$ortane when
reviewin& #indin&s with mana&ement% brie#in& the head o# the $ubli body answerin&
subse*uent *ueries #rom the outside% and $lannin& #uture assi&nments(
3;0, Ade*uate doumentation is im$ortant #or several reasons% inludin&"
Con#irm and su$$ort the auditors re$orts
Aid the auditors in ondutin& and su$ervisin& the audit
Allow others to review the *uality o# audits
Inrease the e##iieny and e##etiveness o# the audit
?erve as a soure o# in#ormation #or $re$arin& re$orts or answerin& any
en*uiries #rom the audited entity or #rom any other $arty
?erve as evidene o# the auditorVs om$liane with auditin& standards
Failitate $lannin& and su$ervision
3el$ the auditorVs $ro#essional develo$ment
3el$ to ensure that dele&ated wor0 has been satis#atorily $er#ormed
-rovide evidene o# wor0 done #or #uture re#erene(
3;20 Internal audit should ado$t reasonable $roedures #or sa#e ustody o# wor0in& $a$ers
and dra#t and #inal re$orts $ertainin& to the audit and should be retain them #or a
su##iiently lon& $eriod to meet the needs o# its $ratie and to satis#y any $ertinent
le&al re*uirements o# reords retention(
3;21 Audi' "51e=$'i"%1 )he om$arison o# the evidene a&ainst riteria will result in
the identi#iation o# observations( )he observations are the basis #or #ormin& overall
onlusions a&ainst audit ob'etives(
182
3;22 C"%&lu1i"%1 Audits must have neessary and su##iient observations to su$$ort
onlusions made a&ainst eah ob'etive( )he auditor should assess the si&ni#iane o#
the observations in relation to the audit ob'etives( At the e!treme ends o# the
$er#ormane s$etrumA#ully satis#atory $er#ormane or hi&hly unsatis#atory
$er#ormane onludin& a&ainst the overall ob'etive may not $ose a $roblem( In the
ma'ority o# ases% however% the auditor will have to use 'ud&ment in reahin&
onlusions(
3;23 Re&"##e%d$'i"%1 Hhere de#iienies in $er#ormane have been identi#ied the
auditor needs to develo$Areommendations to &uide orretive ation( ;ormally the
reommendations should be stated in broad terms o# what needs to be done% with the
s$ei#is o# how it an be done bein& le#t to entity mana&ement( Hhen develo$in&
reommendations% the auditor should ta0e mana&ement views into aount% onsider
the ost and #easibility o# im$lementin& the $ro$osed ation% and understand the e##ets
on results% both $ositive and ne&ative% i# the reommendations are ado$ted( As
a$$ro$riate% a le&al o$inion should be sou&ht in ases involvin& sensitive or
on#idential in#ormation(
183
181
C)APTER 3
RE-OR)I;+ ?)A;DARD? 92188:
3;1 )his ha$ter $resribes standards o# re$ortin& #or $er#ormane audits( )hey over the
need #or written audit re$orts and their timeliness and ontent(
%t the end of each audit, auditors should prepare a written audit report that clearly
communicates the results of the audit.
3;2 )he re$utation and redibility o# the audit de$end to a &reat e!tent on the *uality o# the
re$orts it $rodues( )he re$orts are what ounil o# ministers see o# the wor0 o# the
$ubli Kody( Conse*uently% they have to meet the hi&hest standards #or ontent and
$resentation(
3;3 Hritten re$orts ommuniate the results o# audits to ounil o# ministers and others>
Redue the hane o# misunderstandin& about results re$orted> and #ailitate #ollowAu$
to determine whether a$$ro$riate orretive ations have been ta0en( )he need to
maintain $ubli aountability #or &overnment $ro&rammes demands that written audit
re$orts be -rodued(
FORM
3;3 )he re$ort should be $reeded by a suitable 'i'le to hel$ the reader to distin&uish it #rom
statements and in#ormation issued by others(
3;+ )he re$ort should be 1i(%ed by the head o# the $ubli body onern or Minister o#
Finane and Eonomi Develo$ment(
3;. )he re$ort should bear the d$'e to in#orm the reader that onsideration has been &iven to
the e##et o# events about whih the auditor beomes aware u$ to that date( A#ter the
re$orts have been issued% auditors have no obli&ation to $er#orm $roedures or ma0e
en*uires or investi&ation re&ardin& the issues overed by the audit re$ort(
3;0 3owever% when% a#ter the re$orts have been issued to the auditees and other users% but
be#ore they have been laid be#ore the ounil% auditors beome aware o# subse*uent
events whih% had they ourred and been 0nown o# at the date o# their re$ort% mi&ht
have overed them to issue a di##erent re$ort% they should disuss the matter with the
auditee% and should onsider the im$liations #or their re$ort% ta0in& additional ation
as A$$ro$riate(
CONTENT
*ach performance audit should be complete, accurate, ob'ective, convincing and as clear
and concise as the sub'ect permits.
3;2 )he ontent o# the re$ort should be easy to understand and #ree #rom va&ueness or
ambi&uity% inlude only in#ormation whih is relevant and su$$orted by su##iient and
18@
reliable evidene and be inde$endent% ob'etive% #air% om$lete and aurate%
onstrutive and onise(
)he re$ort should inlude"
3;, Audi' "5Ee&'i=e1 )he auditor should e!$lain why the audit was onduted and what
the re$ort is to aom$lish(
3;10 S&"7e )he auditor should desribe the de$th and overa&e o# the audit wor0 arried
out to meet the audit ob'etives and the e!tent o# any limitations(
3;11 Ti#i%( )he re$ort should indiate the $eriod o# time #or whih assurane is bein&
&iven and to assure readers that the re$ort is dealin& with issues o# urrent interest(
3;12 De1&i7'i"% "! 'De 7"($##e " $&'i=i'yB )he re$ort should $rovide onte!t and
ba0&round material to allow the reader a su##iient $ers$etive on the audited
$ro&ramme or ativity to understand the issues(
3;13 Ci'ei$B )he auditor should state the yardsti0s used% i(e( )he basis o# measurin& the
audited entity2s $er#ormane% and the soure o# the riteria as well as any disa&reement
with mana&ement in the suitability o# the riteria hosen(
3;13 Me'D"d"l"(y )he auditor should learly e!$lain the evidene &atherin& and analysis
tehni*ues used(
3;1+ Le($l 5$1i1B )he audit re$orts should identi#y the a$$ro$riate le&islation or other
authority under whih the audit has been arried out(
3;1. P"!e11i"%$l 1'$%d$d1B )he re$ort should indiate the auditin& standards or $raties
#ollowed in ondutin& the audit% thus $rovidin& the reader with an assurane that the
audit has been arried out in aordane with &enerally ae$ted $roedures(
3;10 Audi' "51e=$'i"%1B )he re$ort should indiate the e!tent to whih $er#ormane
satis#ied the riteria( Auditors should re$ort si&ni#iant #indin&s develo$ed with res$et
to eah audit issue( In re$ortin& the #indin&s auditors should inlude su##iient% relevant
and reliable evidene to $romote ade*uate understandin& o# the matters re$orted( )he
audit #indin&s should ontain the #our elements" &i'ei$, &"%di'i"%, &$u1e $%d e!!e&'(
)he observations should $oint out the si&ni#iane o# the issue by desribin& its im$at
on *uality o# $er#ormane and the e##et on results( )he underlyin& ause o# the
$roblem should also be desribed(
3;12 C"%&lu1i"%1 )he re$ort should $oint out the onlusion reahed on $er#ormane
a&ainst eah ob'etive( Conlusions are lo&ial in#erenes about the audited entity based
on the auditorsV #indin&s( Conlusions should be written s$ei#ially and not le#t to be
in#erred by readers(
3;1, Re&"##e%d$'i"%1B Auditors should ma0e reommendations #or ations to im$rove
$ro&rams and o$erations and to orret $roblem areas identi#ied durin& the audit when
the $otential #or im$rovements in $ro&rams% o$erations% and $er#ormane is
substantiated by the re$orted #indin&s and onlusions( Reommendations should
185
lo&ially #low #rom the evidene and need to state learly the ations to be ta0en( )he
reommendations should be onstrutive and should be direted at resolvin& the ause
o# identi#ied $roblems( )hey should also be s$ei#i% ation oriented% $ratial and
#easible% addressed to $arties that have the authority to at(
3;20 M$'ei$l %"%-&"#7li$%&e Auditors should re$ort all material nonAom$liane with
laws and re&ulations and ille&al ats that were #ound durin& the audit( )hese #indin&s
should be su$$orted by ade*uate evidene(
3;21 M$%$(e#e%' &"%'"l1 )he internal ontrols that were assessed should be identi#ied to
the e!tent neessary to learly $resent the ob'etives% so$e% and methodolo&y o# the
audit( Hhen auditors disover si&ni#iant wea0nesses in mana&ement ontrol as the
ause o# de#iient $er#ormane% the #indin&s should be desribed in the re$ort as the
WauseW( In audits where the sole ob'etive is to audit the internal ontrols% the
wea0nesses #ound durin& the audit that would be si&ni#iant to the users should be
identi#ied and inluded in the re$ort to head o# the $ubli body and MOFED and all
ontrol wea0ness should be inluded in the re$ort as de#iienies
3;22 M$%$(e#e%' =ie>1 82.009
Auditors should re$ort the views o# res$onsible o##iials o# the auditee on the audit
#indin&s% onlusions and reommendations as well as orretions $lanned( Auditors
should re*uest that the res$onsible o##iialsV views on si&ni#iant #indin&s% onlusions
and reommendations be submitted in writin&(
3;23 )he auditeesV view should be evaluated ob'etively and reo&nized% as a$$ro$riate% in
the re$ort( AuditeeVs $romise or $lan #or orretive ation should be noted but should
not be Ae$ted as 'usti#iation #or dro$$in& a si&ni#iant #indin& or related
reommendation(
3;23 Hhen the auditee2s omments state that the audit #indin&s% onlusions or
reommendations are inaurate or misleadin& and those omments are not% in the
auditorsV o$inion% valid% the auditors should state their reasons #or disa&reein& with the
omments in a #air and ob'etive manner( On the other hand auditors should ad'ust their
re$orts as neessary i# they #ind the auditees2 omments are valid(
3;2+ I# the auditee #ails to &ive omments to the Internal audit and MOFED at the ri&ht time
or does not volunteer any omment on the audit results% the MOFED should indiate the
auditeeVs #ailure or relutane in the re$ort(
3;2. A&&"#7li1D#e%'1 Auditors should re$ort noteworthy aom$lishments% $artiularly
when mana&ement im$rovements in one area may be a$$liable elsewhere( Re$ortin&
aom$lishments alon& with the de#iienies $rovides a more #air $resentation o# the
situation by $rovidin& a$$ro$riate balane to the re$ort( In addition% inlusion o# suh
aom$lishments may lead to im$roved $er#ormane by other &overnment
or&anizations that read the re$ort(
3;20 Need !" !u'De >"? I#% durin& the audit% auditors identi#y si&ni#iant issues% other
than #raud and ille&al ats% that warrant #urther wor0% but the issues are not diretly
18<
related to the audit ob'etives or the auditors do not have the time or resoures to
e!$and the audit to $ursue them% they should re#er the issues to the head o# the $ubli
body Hho are res$onsible #or $lannin& #uture audit wor0( Hhen a$$ro$riate% auditors
should also dislose the issues in the re$ort and the reasons the issues need #urther
study(
3;22 N"%-di1&l"1ue "! i%!"#$'i"% I# ertain in#ormation is $rohibited #rom &eneral is
losure by #ederal% state laws or re&ulations% auditors should re$ort the nature o# the
in#ormation omitted and the re*uirement that ma0es the omission neessary( Additional
irumstanes assoiated with $ubli sa#ety and seurity onerns ould also 'usti#y the
e!lusion o# ertain in#ormation in the re$ort( For e!am$le% detailed in#ormation
related to om$uter seurity #or a $artiular $ro&ram may be e!luded #rom $ublily
available re$orts beause o# the $otential dama&e that ould be aused by the misuse o#
this in#ormation( In suh irumstanes% auditors may issue a limited o##iial use re$ort
ontainin& suh in#ormation and distribute the re$ort only to those $arties res$onsible
#or atin& on the auditorsV reommendations(
3;2, Auditors need to wei&h the need to reveal all si&ni#iant #ats 0nown to them whih% i#
not revealed% ould either distort the results or oneal im$ro$er or unlaw#ul $ratie
a&ainst any re*uirements or other irumstanes that may neessitate the omission o#
ertain in#ormation( 3owever% i# the internal audit has a*uired in#ormation in the ourse o# an
audit% whih in the national interest annot be #reely dislosed in the audit re$ort% it should
onsider ma0in& a se$arate% un$ublished re$ort inludin& on#idential or sensitive material(
REPORT JUALIT4 823209
he report should be timely, ob'ective, complete, accurate, clear and concise.
3;30 Ti#eli%e11 re*uires that #or the re$ort to be o# ma!imum use% the audit re$ort must be
$rodued in a timely manner( A are#ully $re$ared re$ort may be o# little value to
deisionAma0ers i# it arrives too late( )here#ore% auditors should $lan a$$ro$riate
issuane o# the audit re$ort and ondut the audit with this &oal in mind( Auditors
should also onsider $roduin& interim re$orts% durin& the audit% o# si&ni#iant matters
needin& immediate attention to a$$ro$riate o##iials( ?uh re$ortin& may be oral or
written but is not a substitute #or the #inal re$ort(
3;31 O5Ee&'i=i'y re*uires the re$ort to be balaned in ontent and tone( A re$ortVs
redibility is si&ni#iantly enhaned when it $resents evidene in an unbiased manner
so that re$ort users an be $ersuaded by the #ats( Auditors should $resent audit
results im$artially and re#rain #rom e!a&&eratin& or over em$hasizin& shortomin&s
in $er#ormane o# the auditee( )he tone o# re$orts should enoura&e deision ma0ers
to at on the auditorsV #indin&s and reommendations( )his tone should be balaned by
re*uirin& re$orts to $resent sound and lo&ial evidene to su$$ort onlusions% while
re#rainin& #rom usin& ad'etives or adverbs that haraterize evidene in a way that
im$lies ritiism or onlusion by indiret re#erene(
3;32 C"#7le'e%e11 re*uires that the re$ort should ontain all the neessary evidene to
satis#y the audit ob'etive and $romote an ade*uate and orret understandin& o# the
matters re$orted( It also means inludin& a$$ro$riate ba0&round in#ormation(
186
Kesides% om$lete means that the re$ort should $rovide ade*uate in#ormation about the
e!tent and si&ni#iane o# audit #indin&s% inludin& the #re*ueny o# ourrene o# the
#indin&s with res$et to the number o# ases or transations e!amined and the
relationshi$ o# #indin&s to the auditeeVs o$erations( 3ene% su##iient detailed
su$$ortin& data should be inluded to ma0e onvinin& $resentation(
3;33 A&&u$&y re*uires that the evidene $resented be true and that #indin&s be orretly
$ortrayed( Aordin&ly% the re$ort should ontain only in#ormation% #indin&s and
onlusion that are su$$orted by relevant% reliable and su##iient evidene in the
auditor2s wor0in& $a$ers( It also means desribin& the audit so$e and methodolo&y
and $resentin& #indin&s and onlusions in a manner onsistent with the audit so$e( I#
the auditors ome aross data that are relevant and si&ni#iant to the audit #indin&s and
onlusions but are unable to e!amine them% they should indiate in the re$ort the
dataVs limitations and their deision not to ma0e unwarranted onlusions or
reommendations based on the data(
3;33 Cl$i'y re*uires that the re$ort should be easy to read and understand( as #ar as
$ossible re$orts should be written in a sim$le lan&ua&e( I# there is a need to use
tehnial terms% abbreviations and aronyms% they should be learly de#ined( Auditors
may onsider usin& a summary within the re$ort to a$ture the re$ort userVs attention
and hi&hli&ht the overall messa&e( I# a summary is used% it &enerally should #ous on
the s$ei#i answers to the *uestions in the audit ob'etives% summarize the audits most
si&ni#iant #indin&s and the re$ortVs $rini$al onlusions% and $re$are users to
antii$ate the ma'or reommendations( )he re$ort should also ontain suitable titles
and a$tions to ma0e the messa&e easier to understand( Gisual aids suh as $itures%
harts% &ra$hs and ma$s should be used whenever $ossible to lari#y and summarize
om$le! material(
3;3+ C"%&i1e%e11 re*uires that the re$ort be no lon&er than neessary to onvey and su$$ort
messa&e( Auditors should avoid writin& too muh details or unneessary re$etition(
Althou&h room e!ists #or onsiderable 'ud&ment in determinin& the ontent o# re$orts%
those that are #atAbased% but still onise% are li0ely to ahieve &reater results(
REPORT DISTRI6UTION 823309
%udit reports should be submitted to the head of public body, and to $inistry of
Finance and *conomic +evelopment.
3;3. )he re$ort should be submitted to the auditee% o##iials desi&nated by law or re&ulation
to reeive suh re$orts% those res$onsible #or atin& on the #indin&s and
reommendations% those who have le&al oversi&ht authority% those who have $rovided
assistane to the audited entity% inludin& e!ternal #undin& or&anizations% o# neessary(
3;30 Bnless restrited by law or re&ulations% o$ies should be made available #or $ubli
ins$etion(
3;32 I# the sub'et o# the audit involves material that is lassi#ied #or seurity $ur$ose or is
not releasable to $artiular $arties or the $ubli #or other valid reasons% the internal audit
should limit the re$ort distribution(
18D
C)APTER +
FOCCOHAB- 92@88:
@(1 )his ha$ter $resribes the standard #or #ollowAu$ o# reommendations made in $revious
audit re$orts and7or the reommendations made by ounil o# ministers(
AUDITOR S)OULD FOLLO*-UP ON RECOMMENDATIONS
MADE IN PRE-IOUS AUDIT REPORTS
@(2 )he main $ur$ose o# #ollowAu$ is to"
Asertain whether% or to what e!tent% reommendations or observations made by
or by MOFED or have been im$lemented by the onerned audited body(
Determine the im$ats whih an be attributed to $er#ormane audit e!aminations
Demonstrate added value #rom $er#ormane audit wor0
@(3 Res$onsibility #or $lannin& and arryin& out the #ollowAu$ rests with the a$$ro$riate
internal audit head(
@(1 E##etive #ollowAu$ arran&ements need to be in $lae to ensure that the audited body has
$ro$erly onsidered any matters identi#ied durin& the urrent or $ervious audits and
where a$$ro$riate% has im$lemented a&reed ations(
@(@ Elements o# #ollowAu$ inlude"
A timely review o# the ation ta0en by the mana&ement o# the audited body on the
reommendations made by MOFED7Counil o# ministers(
An evaluation o# the ade*uay o# the ation in ahievin& $er#ormane
im$rovements
An assessment o# any $roblems that may have arisen in relation to im$lementation
As assessment o# the im$ats o# the e!amination
Consideration o# the need or so$e #or #urther audit wor0 in the same or a related
area(
@(5 In#ormation on the entity2s $ro&ress in im$lementin& reommendations by
MOFED7Counil o# ministers(
118
GLOSSAR4
Audi' E=ide%&e In#ormation that #orms the #oundation whih su$$orts the auditorVs or audit
o##ieVs #indin&s% onlusions or re$ort(
Rele=$%' most u$AtoAdate available and have a lo&ial relationshi$ to what
is bein& e!amined(
Reli$5le most aurate% obtainable% valid and om$lete(
Su!!i&ie%' would lead a reasonable $erson to the same onlusion as you(
Audi' I11ue1 )he #ous o# the main investi&ations( )hey are the basi *uestions the
investi&ation will onsider(
Audi' M$%d$'e )he auditin& res$onsibilities% $owers% disretions and duties on#erred on
an audit o##ie under the onstitution or other law#ul authority o# a ountry(
Audi' O5Ee&'i=e A $reise statement o# what the audit intends to aom$lish and7or the
*uestion the audit will answer(
Audi' S&"7e )he #ramewor0 or limits and sub'ets o# the audit(
Audi'i%( S'$%d$d1 )hey are the riteria or yardsti0s a&ainst whih the *uality o# the audit
result is evaluated( )hey $rovide minimum &uidane #or the auditor that
hel$s determine the e!tent o# audit ste$s and $roedures that should be
a$$lied to #ul#ill the audit ob'etive(
Due C$e )he a$$ro$riate element o# are and s0ill whih a trained auditor would be
e!$eted to a$$ly havin& re&ard to the om$le!ity o# the audit tas0%
inludin& are#ul attention to $lannin&% &atherin& and evaluatin& evidene
and #ormin& onlusions and ma0in& reommendations(
E&"%"#y Minimizin& the ost o# resoures used #or an ativity havin& re&ard to the
a$$ro$riate *uality and timin&(
E!!e&'i=e%e11 )he e!tent to whih ob'etives7intended im$ats are ahieved(
E!!i&ie%&y )he relationshi$ between the out$ut% in terms o# &oods% servies% or other
results% and the resoures used to $rodue them(
Ci'ei$ )he standards used to determine whether a $ro&ramme meets or e!eeds
e!$etations( Criteria $rovide a onte!t #or understandin& the results o# the
audit(
C"%di'i"% Is a situation that e!ists whih has been determined and doumented
durin& the audit(
E!!e&' E##et an be in two onte!ts% whih de$end on the audit ob'etives( Hhen
the auditorsV ob'etives inlude identi#yin& the atual or $otential
onse*uenes o# a ondition that varies 9either $ositively or ne&atively:
#rom the riteria identi#ied in the audit% We##etW is a measure o# those
onse*uenes( Auditors o#ten use e##et in this sense to demonstrate the
need #or orretive ation in res$onse to identi#ied $roblems( Hhen the
auditorsV ob'etive inludes estimatin& the e!tent to whih a $ro&ramme
has aused han&es in $hysial% soial or eonomi onditions% We##etW is a
measure o# the im$at ahieved by the $ro&ramme( 3ere% e##et is the
e!tent to whih $ositive or ne&ative han&es in atual $hysial% soial% or
eonomi onditions an be identi#ied and attributed to $ro&ramme
o$erations(
C$u1e Ci0e e##et ause has two onte!ts% whih de$end on the audit ob'etives(
111
Hhen the auditorsV ob'etives inlude e!$lainin& why the $oor 9or &ood:
$er#ormane determined in the audit ha$$ened% the reasons #or that
$er#ormane are re#erred to as WauseW( Identi#yin& the ause o# $roblems
an assist auditors in ma0in& onstrutive reommendations #or
orretions( Keause $roblems an result #rom a number o# $lausible
#ators% the reommendations an be more $ersuasive i# auditors an
learly demonstrate and e!$lain with evidene and reasonin& the lin0
between the $roblems and the #ator or #ators they identi#ied as the ause(
Hhen the auditorsV ob'etives inlude estimatin& the $ro&rammeVs e##et on
han&es in $hysial% soial% or eonomi onditions% they see0 evidene o#
the e!tent to whih the $ro&ramme itsel# is the WauseW o# those han&es(
A C"de "! E'Di&1
C
A Code o# Ethis is a om$rehensive statement o# the values and $rini$les
whih should &uide the daily wor0 o# auditors( )he inde$endene% $owers
and res$onsibilities o# the $ubli setor auditor $lae hi&h ethial demands
on the Internal audit and the sta## they em$loy or en&a&e #or audit wor0(
ECe&u'i=e )he branh o# &overnment whih administer the law(
Field S'$%d$d1 )he #ramewor0 #or the auditor to systematially #ul#ill the audit ob'etive%
inludin& $lannin& and su$ervision o# the audit% &atherin& o# relevant%
reliable and su##iient evidene and an a$$ro$riate study and evaluations
o# internal ontrol(
Fi%di%(1,
C"%&lu1i"%1 $%d
Re&"##e%d$'i"%1
Findin&s are the s$ei#i evidene &athered by the auditor to satis#y the
audit ob'etives 9audit issues:> onlusions are statements dedued by the
auditor #rom those #indin&s> reommendations are ourses o# ation
su&&ested by the auditor relatin& to the audit ob'etives(
Ge%e$l S'$%d$d1
I%de7e%de%&e
I%'e%$l C"%'"l
Sy1'e#1
)he *uali#iations and om$etene% the neessary inde$endene and
ob'etivity% and the e!erise o# due are% whih shall be re*uired o# the
auditor to arry out the tas0s related to the #ield and re$ortin& standards in
a om$etent% e##iient and e##etive manner(
)he #reedom o# the Internal audit to at in aordane with their audit
mandate without e!ternal diretion or inter#erene o# any 0ind(
)he whole system o# #inanial and other ontrols% inludin& the
or&anizational struture% methods% $roedures and internal audit%
established by mana&ement within its or$orate &oals% to assist in
ondutin& the business o# the audited entity in a re&ular% eonomi%
e##iient and e##etive manner> ensurin& adherene to mana&ement
$oliies> Com$liane with rules and re&ulations> sa#e&uardin& assets and
resoures> seurin& the auray and om$leteness o# aountin& reords>
and $roduin& timely and reliable #inanial and mana&ement in#ormation(
112
I%'e%$'i"%$l
O($%iA$'i"% "!
Su7e#e Audi'
I%1'i'u'i"%1
8INTOSAI9
An international and inde$endent body whih aims at $romotin& the
e!han&e o# ideas and e!$eriene between ?u$reme Audit Institutions in
the s$here o# $ubli #inanial ontrol(
Le(i1l$'ue )he lawAma0in& body o# a ountry% #or e!am$le $arliament(
M$'ei$li'y@Si(%i!i&
$%&e
In &eneral terms% a matter may be 'ud&ed material7si&ni#iant i# 0nowled&e
o# it would be li0ely to in#luene the user o# the #inanial statement or the
$er#ormane audit re$ort( Materiality is o#ten onsidered in terms o#
value% but the inherent nature or harateristis o# an item or &rou$ o#
items may also render a matter materialA#or e!am$le% where the law or
some other re&ulation re*uires it to be dislosed se$arately re&ardless o#
the amount involved( In addition to materiality by value and by nature% a
matter may be material beause o# the onte!t in whih it ours( For
e!am$le% onsiderin& an item in relation to the overall view &iven by the
aounts> the total o# whih it #orms a $art> assoiated terms> the
orres$ondin& amount in $revious years( Audit evidene $lays an
im$ortant $art in the auditorVs deision onernin& the setion o# issues and
areas #or audit and the nature% timin& and e!tent o# audit tests and
$roedures(
Pl$%%i%(
De#inin& the ob'etives% settin& $oliies and determinin& the nature% so$e%
e!tent and timin& o# the $roedures and tests need to ahieve the
ob'etives(
P"1'ul$'e1 Kasi assum$tions% onsistent $remises% lo&ial $rini$le as and
re*uirements whih re$resent the &eneral #ramewor0 #or develo$in&
auditin& standards(
P"($# It is a broad term that enom$asses any #unded e##ort whih is ollateral to
the normal on&oin& ativities o# an or&anization% an e!$ansion $ro&ram% a
new em$loyee bene#it $ro&ram% a new ontrat% a &overnmental health or
trainin& $ro&ram% a new ED- a$$liation or the li0e(
Pu5i&
A&&"u%'$5ili'y
)he obli&ations o# $ersons or entities% inludin& $ubli enter$rises and
or$orations% entrusted with $ubli resoures to be answerable #or the
#isal% mana&erial and $ro&ram res$onsibilities that have been on#erred on
them% and to re$ort to those that have on#erred these res$onsibilities on
them(
Re7"'i%(
S'$%d$d1
)he #ramewor0 #or the auditor to re$ort the results o# the audit% inludin&
&uidane on the #orm and ontent o# the auditorVs re$ort(
Su7e=i1i"% An essential re*uirement in auditin& whih entails $ro$er leadershi$%
diretion and ontrol at all sta&es to ensure a om$etent% e##etive lin0
between the ativities% $roedures and tests that are arried out and the
aims to be ahieved(
113
REFERENCES
1( Auditin& ?tandards% International Or&anization o# ?u$reme Audit Institutions% Auditin&
?tandards Committee% Qune 1DD2(
2( Audit and Aountin& +uide% +uide on -er#ormane Audit in the -ubi ?etor% )he ?outh
A#rian Institute o# Chartered Aountants% Quly 1DDD(
3( Code o# Ethis and Auditin& ?tandards% I;)O?AI% ?eoul( 2881(
1( Euro$ean Im$lementin& +uidelines #or the I;)O?AI Auditin& ?tandards% ;o 11% 1DD6(
@( +overnment Auditin& ?tandards% +eneral Aountin& O##ie% Quly 1DDD(
5( -er#ormane Audit Manual% O##ie o# the Federal Auditor +eneral% Addis Ababa%
Ot( 1DD5(
111
<( GalueA#orAMoney Audit Manual% O##ie o# the Auditor +eneral o# Canada% Cast Gersion
Ot( 2881(
6( Galue #or Money Hor0sho$ Kinder% C)I7IDI% ;AO% Au&ust 1DD3(
D( +overnment Auditin& ?tandards E!$osure Dra#t% +eneral Aountin& O##ie% 2882(
18( Galue #or Money 3andboo0% ;ational Audit O##ie% ?$rin& 1DD<(
11( +overnment Auditin& ?tandards% +eneral Com$troller o# the Re$ubli o# -eru% -rinted
#rom Internet(
11@
SECTION T)REE O$l I%!"#$'i"% O5'$i%i%(
a: +uide I
ORAL INFORMATION O6TAINING AND USE
+E;ERAC
b: In $er#ormane audits we &enerally obtain si&ni#iant amounts o# oral
in#ormation% e(&( #rom interviews and disussions with the head o# the audited entity(
Interviews are sometimes the only means o# obtainin& basi in#ormation% and in many
ases they $rovide initial WleadsW into the issues bein& addressed by our investi&ation(
)hey may also su$$lement% e!$lain% inter$ret or ontradit in#ormation obtained by other
means(
USE OF ORAL INFORMATION
: )here is no reason why oral in#ormation annot be used in an audit o##ie re$orts
$rovided that the in#ormation is obtained #rom what we believe to be a 0nowled&eable
soure and it is $ro$erly attributed in the re$ort( Ideally% suh in#ormation should be
orroborated either by written on#irmation or by other evidenes( ?uh orroboration is
$artiularly im$ortant where the material in *uestion is sensitive or ruial to the Audit
issues o# the re$ort( I# this is not $ossible this should be made lear in wor0in& $a$ers
and $ossibly in the re$ort itsel#(
d: In#ormation obtained by interview 9even i# on#irmed in writin& by the interviewee:
re$resents no more than the understandin&% view or word o# the interviewee( )he
use#ulness and reliability o# suh in#ormation thus de$ends u$on its nature and soure%
and on whether there are other $ratiable means by whih we an more onlusively
establish or veri#y what we have been told( )he auditin& $rini$les and standards on the
relevane% reliability and su##iieny o# evidene should a$$ly 9see a$$endi! 28 in the
manual :(
e: Hhen a$$raisin& the value o# in#ormation reeived durin& interview we should ta0e
aount o# the intervieweeVs a$$arent 0nowled&e o# the sub'et% his $osition in the
hierarhy and whether the in#ormation is onsistent with any other obtained #rom
elsewhere( )he #at that an individual is a senior o##ier does not ensure the reliability o#
the in#ormation $rovided( )he individual may be new or la0 the detailed #irstAhand
0nowled&e whih a subordinate may have(
PLANNING AND PREPARATION
#: Interviews should be $ro$erly $lanned( )he interviewer should 0now the $ur$ose o#
the interview and the in#ormation needed( 3e7she needs to be #amiliar with the
ba0&round to the sub'et to be disussed so that the interview an be onduted
intelli&ently( I# he7she is not well brie#ed all redibility may be lost in the eyes o# the
interviewee( Moreover suh ba0&round 0nowled&e may allow the interviewer to
reo&nize any inonsistenies in what the interviewee is sayin& and thus $ursue the matter
#urther(
&: Advane notie should be &iven to the interviewee o# the sub'et to be disussed(
)his arran&ement will ho$e#ully ensure that the interviewer interviews the ri&ht $erson
and will allow the interviewee time #or #amiliarizin& himsel#7hersel# with the sub'et(
115
CONDUCT OF INTER-IE*S
h: )he interviewer should ontrol the disussion to 0ee$ it direted towards
obtainin& the re*uired in#ormation and to avoid $rotrated debate( )here are
three im$ortant rules to try to adhere to"
a: obtain i# $ossible all the in#ormation re*uired in one interview>
b: at the end o# the interview brie#ly summarize the main $oints with the
interviewee with a view to on#irmin& understandin& and lari#yin& any
misunderstandin&>
: do not e!tend the interview beyond a reasonable $eriod o# time% whih should
losely a$$ro!imate to the time initially a&reed(
i: )he interviewer should e!erise $ro#essional s0e$tiism( 3e7she an assume
&ood #aith but not blind #aith( )here may be situations where he7she annot
trust the interviewee(
*RITTEN RECORD OF INTER-IE*
': In#ormation obtained throu&h interview should be $ut in writin& as soon as
$ossible( In most ases it will be a$$ro$riate to ta0e notes durin& the
interview( In some ases however noteAta0in& may ause the interviewee to be
relutant to tal0 #reely there#ore use disretion(
0: )he notes o# interviews should be se$arate douments in the wor0in& $a$er
#olders and ontain details o# the disussion inludin& the time and $lae%
&rades% $ositions and names o# all involved and the si&natures o# all involved
audit o##ie sta## $resent(
CONFIRMATION 64 INTER-IE*EE
l: Hhere $ossible notes o# meetin&s should be a&reed by the interviewee(
Alternatively% some #orm o# written on#irmation o# si&ni#iant #ats obtained
orally should be re*uested #rom interviewees( Hritten on#irmation is
$artiularly im$ortant i# other orroboratin& evidene is unavailable(
m: I# an interviewee re#uses to on#irm the si&ni#iant oral in#ormation either in
writin& or orally we should note our wor0in& $a$ers aordin&ly and state
where available the intervieweeVs reasons( In suh ases we need to onsider
the e##et o# this unwillin&ness on the use o# the data in our re$orts( Also the
$erson may not be inde$endent and will li0ely have a or$orate $osition to
$resent(
n: In some ases it may be neessary #or an audit team to ondut a series o#
interviews% drawin& on evidene #rom a number o# di##erent soures( Hhere
this is the ase the interviews need to be losely ontrolled( Juestionnaires
$rovide an e##etive means o# ahievin& this ontrol(
11<
2; SET-UP INTER-IE*S AND JUESTIONS
1( Bnless $ro$erly or&anized and onduted% interviews will not &ive us the re*uired
audit evidene( )here#ore% we should or&anize and ondut interview by onsiderin&
#ators that a##et their e##etiveness( A number o# onditions that a##et the
interviewee to res$ond $ositively to our *uestions should be onsidered and resolved(
For e!am$le% the interviewee"
may be relatively unin#ormed about the audit o##ie% the $ur$ose o# $er#ormane
audit and the $artiular assi&nment we have>
may be $ersonally res$onsible #or some as$et o# the area we are e!aminin&> or not
inde$endent beause o# the or$orate $osition he7she holds>
may not see us $ositively% as #ew $eo$le see auditors in a wholly $ositive li&ht>
may have their own a&endas and onerns whih they brin& to the interview>
may not have a detailed understandin& o# the lan&ua&e or one$t o# $er#ormane
audit>
may only be $re$ared to allow as a limited amount o# time(
2( All these reate $roblems( )hey an ma0e the interviewee de#ensive and not easy to
ommuniate with( ?uh #ators lead to misunderstandin&s about the nature and
$ur$ose o# our *uestions( )he interviewee may also see us as havin& some
undislosed motive and view us with sus$iion( )he setAu$ o# the interview and the
way that we $ose our *uestions is there#ore o# the utmost im$ortane(
3( 3ow we setAu$ an interviewAour introdution o# the audit o##ie% our wor0 and
ourselves will in#luene how the interviewee $ereives us and onse*uently the
in#ormation that she7he is $re$ared to im$art( I# we are unlear and a$$ear seretive
the interviewee will be le#t in on#usion and may view us with mistrust( On the other
hand i# we are o$en and e!$liit we an e!$et a better ree$tion(
1( It is normally better to start #rom the assum$tion that the interviewee has no
0nowled&e about the audit o##ie% the assi&nment or ourselves 9unless the ontrary is
true:( In this re&ard% we should $rovide in#ormation on"
the role o# the audit o##ie>
the $ur$ose o# the $er#ormane audit>
the so$e and issues o# the assi&nment and our onerns in the area>
why we wish to disuss with the $artiular interviewee>
what we want to disuss about>
who will be omin& to interview her7him>
how we intend to use the in#ormation we obtain>
what the audit o##ie does with the results o# its investi&ations(
@( He should onvey this in#ormation in the lear and understandable manner( He
should e!$ress ourselves in $lain lan&ua&e% avoidin& 'ar&on>
116
the use o# tehnial e!$ressions" #or e!am$le% the words .eonomy% e##iieny and
e##etiveness/ have $artiular meanin&s to us whih the interviewee an not be
e!$eted to share>
Abbreviations or aronyms(
It is o#ten use#ul to develo$ a standard #orm o# wordin& to inlude in all written a$$roahes to
interviewees( I# the initial ontat is by tele$hone we an #ollow it u$ with a short
written e!$lanation(
5( He should try to ensure that the in#ormation onveyed in advane o# the interview as
this is more li0ely to $ut the interviewee at ease( I# it is le#t to the start o# the interview
you may #ae someone who already #eels de#ensive and is relutant to disuss issues
o$enly with you( It is also &ood $ratie% at the start o# the interview% to rein#ore the
interviewee2s understandin& by &oin& over the in#ormation a&ain $ossibly $uttin& in
di##erent ways than the #ormer( Further% be#ore startin& the *uestions% &ive the
interviewees an o$$ortunity to lari#y any as$et that they are still not lear about(
<( At times% auditors should not $rovide the interview terms o# re#erene in advane i#
they believe that advane warnin& ould allow the interviewee time to #irm u$ a lie% or
&ive them time to develo$ a ommon story so that auditors do not detet
inonsistenies(
6( In assi&nin& the interviewer% normally% a 0nowled&eable member o# the internal audit
will ondut the interview( 3owever% in some ases we may need to all #or assistane
#rom sta## with little real 0nowled&e o# the to$i( I# this is the ase we must $rovide
the interviewer with all in#ormation needed( )his inludes"
what the interviewer needs to do to set the interview u$>
details o# the interviewee name% &rade% loation% o##iial $osition and the reason
why we wish her7him to be interviewed>
the ob'etive o# the interview and what in#ormation we want out o# it>
the assi&nmentAthe so$e% issues et( and how the interview #its into our audit
methodolo&y>
the reasons #or eah o# our *uestions and $ossible #ollowAu$ *uestions>
any #ollow u$ ation that is to be ta0en 9e(&( obtainin& re$orts re#erred to durin& the
interview:(
how the interviewer is to write u$ the interview(
D( Finally our *uestionin& tehni*ue will $lay a ma'or $art in our e##etiveness as an
interviewer( )he di##erent ty$es o# *uestions that ould be used in an interview are"
i( Closed *uestions" used to obtain s$ei#i answers usually very short and
#re*uently only .yes/ or .no/( 3owever% losed *uestions an allow the
interviewee to be unin#ormative>
ii( )he diret *uestion" usually be&ins with H3O% H3ERE% H3T H3E;
OR 3OH and is desi&ned to eliit s$ei#i in#ormation>
iii( )he #ollow u$ or $robin& *uestions" this an be used to $robe wea0nesses
or $roblem areas or 'ust to obtain more details or e!$lore the sub'et in &reater
de$th(
11D
e(&( 3ow o#ten are the re$orts analyzedF Hhat ation is ta0en as a result o# the analysisF
iv( )he o$en *uestion" is very im$ortant and it invites the
interviewee to tal0 #reely and to o##er in#ormation o$enly without a$$earin& to be
interro&ated( )he o$en *uestion also allows the interviewee to e!$ress $ersonal
o$inion or ommuniate $roblem( Gery o#ten it tells the interviewee what is
atually ha$$enin& rather than what should ha$$en( It also o##ers the o$$ortunity
#or the interviewer to #ollow u$ on si&ni#iant $oints(
E(&( Could you tell me about the maintenane o# the motor vehilesF
3owever% are must be ta0en to ontrol any unneessary di&ression and maintain ontrol o# the
interview(
v( Multi$le *uestions" this an be used when several related
*uestions are as0ed at the same time( )his a$$roah is ae$table in #ew situations
but &reat are is re*uired to ensure that"
all $arts o# the *uestion are answered>
the *uestions are strutured lo&ially> and
the *uestions do not on#use the interviewee(
It is usually sa#er to avoid multi$le *uestions alto&ether(
vi( Enoura&in& *uestions" these are use#ul #or develo$in& ra$$ort
and demonstratin& em$athy with the interviewee( e(&( Tou must #ind it di##iult to
meet every body2s ideal tem$erature and su$$ose you have to $ut u$ with a lot o#
om$liant( 3ow do you deal with these di##iultiesF
vii( )he lin0in& *uestion" this demonstrates you are listenin&
are#ully% are interested and want to develo$ the sub'et #urther(
18( All the above ty$es o# *uestions are not relevant #or interviews( Mostly o$en
*uestions that re*uire the interviews to &ive his views in broad terms are advisable( In
&eneral *uestions should"
be non 'ud&mental and neutral in style>
not lead the interviewee towards an answer>
be a$$ro$riate to the &rade and #untion o# the interviewee>
not be as0ed in multi$le #orms( As0 them one at a time allowin& the interviewee to
&ive a #ull answer be#ore as0in& the ne!t>
be $hrased to avoid .yes7no/ answers>
be written learly and in $lain lan&ua&e( A&ain% avoid the use o# 'ar&ons tehnial
wordin& and abbreviations(
11( In onlusion% to &et the most out o# the interview% we should"
$rioritize the *uestions> this is $artiularly im$ortant when meetin& senior o##iials
who are li0ely to &ive us only a limited amount o# time(
lay out our interview sheets% so that there is $lenty o# s$ae to note down the
answers>
#or im$ortant #ormal interviews% ta0e at least two audit o##ie sta## one to be
res$onsible #or as0in& *uestions% the other to reord the answers>
0ee$ the number o# audit o##ie sta## at eah interview to the minimum> the more
sta## you ta0e% the more intimidatin& it will be #or the interviewee>
$rodue a reord o# the disussion as soon as the interview is om$leted(
128
3; SUR-E4
INTRODUCTION
1( ?urveys are one o# the audit tehni*ues used in
olletin& audit evidenes #or $er#ormane audit( )hey an &ive new insi&ht in areas
under e!amination and $rovide the auditor with a shar$er view o# or&anizational
$er#ormane( 3owever% surveys will only be suess#ul i# we use the a$$ro$riate ty$e
o# survey% desi&n the *uestions well and analyze the results are#ully( )his re*uires a
#irm understandin& o# the $roedures involved in arryin& out a survey and the *uality
o# evidene that an be olleted( )he $ur$ose o# this &uide is to $rovide a ran&e o#
ideas and advie on how to $er#orm a survey and how to use the evidene olleted(
USE OF SUR-E4S
2( ?urveys are a very versatile tehni*ue #or olletin&
in#ormation beause they an $rovide evidene #or many di##erent $ur$oses( )hey an
be used"
a: durin& the $er#ormane audit $lannin& sta&es to
identi#y 0ey 9audit: issues and views on the main #ators a##etin& $er#ormane(
)he $lannin& sta&e inludes both the overview% mar0in& and #easibility> where 0ey
issues are to be delineated( For e!am$le% at the overview sta&e *uestions an be
used to investi&ate the $ubliVs attitude to the health servie in the health are
institutions( From the result issues to be investi&ated in de$th an be identi#ied(
b: as $art o# the #ull investi&ation"
)o $rovide substantive evidene on as$ets o# the audited entityVs $er#ormane
in *ualitative and *uantitative terms( Evidene an be obtained #rom within the
audited body 9#or e!am$le% in the study o# immunization $ro&ram health
$ro#essionals $artii$atin& in the $ro&ram were surveyed #or their attitude to the
$ro&ram: or #rom outside the audited entityVs 9#or e!am$le% #ators a##etin&
mothers to $artii$ate in immunization $ro&ram were identi#ied #rom eli&ible
women:( )he evidene an be #ats and #i&ures or it mi&ht be the views and
o$inion o# the rei$ient o# the audited entityVs servies(
)o $rovide om$arisons with bodies $rovidin& similar servies in Ethio$ia or
Forei&n Countries( )his an be $artiularly use#ul durin& investi&atin& standard
mana&erial o$erations where the e!eutive would e!$et the internal audit to
e!$lore as to what ha$$ens the $ubli body% $rivate setor or overseas(
T4PES OF SUR-E4
3( )he most widely used ty$es o# surveys are"
sel# om$letion *uestionnaires 9$ostal *uestionnaires:>
unstrutured interviews 9&rou$ disussion:> and
strutured interviews 9tele$hone surveys and #ae to #ae surveys:(
121
DESIGNING AND CARR4ING OUT A SUR-E4
1( )he survey $roess is divided in to #our sta&es"
?ta&e I -reliminary researh>
?ta&e II ?elet who to survey>
?ta&e III Desi&n the survey doument>
?ta&e IG Collet and analyze the result(
Stage I ,reliminary Research
@( A suess#ul survey as0s the ri&ht $eo$le% the ri&ht
*uestions in the ri&ht way( )o be able to do this you need to have a &ood
understandin& o# the survey sub'et and o# the $eo$le or or&anizations you are &oin& to
survey( It is there#ore% relevant at this sta&e to"
deide what in#ormation is to be olleted> and
deide who to ollet the in#ormation #rom(
Stage II Select whom to Survey
5( In this sta&e the auditor should"
identi#y the survey $o$ulation>
selet the method o# sam$lin&> and
selet the sam$le size(
<( More o#ten the individuals in the $o$ulation an be
learly identi#ied( 3owever% in some ases it is di##iult to determine the tar&et
$o$ulation #or survey( )his is beause the $o$ulation you want to survey annot be
obtained in a sin&le list( In suh irumstanes you should om$ile a sam$le #rame
whih identi#ies every individual in the whole $o$ulation(
6( )he reliability o# $o$ulation estimates #rom sam$lin&
de$ends on whether the sam$le re$resents the $o$ulation su##iiently well(
9-roedures in sam$lin& are &iven in this &uide $a&e 21:( A number o# di##erent ty$es
o# sam$le an be ta0en(
a: ;onAstatistial sam$lin&" whih is a$$lied to
sam$lin& when sam$le seletion is totally 'ud&mental( Hhen a small seletion o#
ases has been deliberately hosen #rom the $o$ulation% usually it will not $rovide
*uantitative statements about the $o$ulation as a whole( 3owever% small
'ud&mental sam$les may be use#ul audit tools where"
they an be used to illustrate some $artiular set o# #eatures $reAdetermined #rom
other audit tests>
the sam$les are su##iiently im$ortant in their own ri&ht in the onte!t o# the
area under e!amination% and in terms o# aountability% to be the sub'et o#
le&islative oversi&ht ommittee *uestionin&> or where some stron& lo&ial
ar&ument means the results are li0ely to be valid #or wider $o$ulation>
the results are li0ely to be learAut% #or e!am$le they all show a similar $attern(
122
b: Juota ?am$lin&" is mainly used when there is &ood 0nowled&e o#
the $o$ulation> but no $reise s$ei#iation% or no &ood listin& o# onsistent
bodies7individuals( )he sam$le size is derived on the basis o# $o$ulation estimates
and broad statistial rules% and then overall 0nowled&e o# $o$ulation om$osition
is used to de#ine the desired om$osition o# the sam$le( For e!am$le% a survey o#
individuals may be re#leted in *uotas #or $eo$le o# di##erent a&es% se!% et(
re#letin& their 0nown $ro$ortion o# the $o$ulation(
: Cluster ?am$lin&" o#ten used as it is &enerally *ui0er% easier and
hea$er than both strati#ied and sim$le random sam$lin&( It involves subdividin&
the $o$ulation into lusters o# individuals% ideally eah luster is as varied as the
whole $o$ulation( For e!am$le% i# individuals2 reords are held at re&ional o##ies%
the re&ional o##ies an be re&arded as luster and a sim$le random sam$le o#
re&ional o##ies an be surveyed(
d: ?ystemati ?am$lin&" used when there is &ood in#ormation on the
$o$ulation% but where that in#ormation is held in a #ormAloal manual listin&% #or
e!am$leAwere the a$$liation o# #ull random seletion methods would be ostly
and timeAonsumin&( )he sam$le is seleted by a$$lyin& a standard interval #rom
a randomly s$ei#ied startin& $oint in the #irst interval to the $o$ulation listin&(
e: ?im$le Random ?am$lin&" this is the basi method o# random
sam$lin&( It ensures that eah member o# the $o$ulation has an e*ual hane o#
seletion( )he time to use this method is when you have a om$lete listin& o# the
$o$ulation but no #urther in#ormation on whih you want to desi&n the sam$le and
when it is no more ostly to administer than other methods(
#: ?trati#ied ?am$lin&" used when you have #urther relevant
in#ormation about the $o$ulation( It ensures that di##erent subA&rou$s o# the
$o$ulation are re$resented( )he strata are hosen on one or more harateristis
$ertinent to the study( 3avin& ordered the $o$ulation into strata it an then be
seleted usin& small random sam$le #rom within eah strata(
&: -robability -ro$ortional to ?ize" bein& similar to sam$le methods
used in #inanial Audit% it is used to ensure that sam$les are drawn in $ro$ortion to
their size( For e!am$le% to sam$le &rant a$$liation you may want to ensure a
hi&her $ro$ortion o# ases with lar&e values are inluded(
h: Multi sta&e sam$lin&" as with multiAloation #inanial audit% is
drawn in two or more sta&es( )he sam$le will de$end in $art on the way that the
in#ormation is stored( For e!am$le% i# the in#ormation is not held entrally but at a
number o# re&ional o##ies> the sam$le desi&n may immediately involve twoAsta&e
sam$lin& A the #irst sta&e a sam$le o# o##ies% the seond sta&e a sam$le o# ases
within eah o##ie sam$le(
D( ;o sam$le an $rovide e!at measures o# harateristis
o# the $o$ulation as a whole" estimates derived #rom sam$lin& will always be sub'et
to a de&ree o# unertainty( )he sam$le size needed de$ends on"
the $o$ulation distribution>
123
the $reision whih an be tolerated when evaluatin& results>
the level o# on#idene needed that the sam$le result is re$resentative o# the
$o$ulation(
Stage III +esign the Survey +ocument
18( In this sta&e% you have to desribe what you need to
onsider when ta0in& deisions on the lan&ua&e to use% the *uestion #ormat to ado$t%
and the layout and ontent o# the #inal survey doument( )o ondut an e##etive
survey and obtain the relevant evidene you should"
onsider how to word the *uestion well>
hoose the most a$$ro$riate #ormat and res$onse arran&ement #or eah *uestions>
onsider inludin& he0 *uestions>
deide u$on the struture and ontent o# the survey doument>
ontrol the *uality o# the survey desi&n> and
he0 the survey whether it is desi&ned to enoura&e ma!imum res$onse(
11( )o hel$ $otential res$ondents to understand your
*uestionnaires you must write learly% in terms they are #amiliar with% and without
biasin& their res$onses( )o ahieve larity% it is advisable to use sim$le words
strai&ht#orward% sentenes and 0ee$ the *uestions short( Ke aware and remove $hrases
that have more than one meanin&( Ke s$ei#i in your wordin&% avoid abstrat words
or words that onvey &eneral or broad meanin&s( Ma0in& $resum$tions about the
res$ondent or as0in& hy$othetial *uestions will also introdue bias into your
*uestions( )he only way to he0 whether your *uestions are lear and without bias is
to $reAtest them(
12( Tou need also to hoose the a$$ro$riate #ormat and
res$onse arran&ements #or eah *uestion( In $ratie there are two widely used ty$es
o# *uestion #ormats% o$en and losed( Eah #ormat serves a s$ei#i $ur$ose and will
ollet in#ormation in a di##erent way( )o deide whih is the most a$$ro$riate #ormat%
you need to onsider what ty$e o# in#ormation you want% 9is it to &enerate ideas or is it
to ollet #ats and #i&ures: and how you want to use it 9do you want *ualitative data or
*uantitative data:(
O$en *uestions $ermit the res$ondents to answer in their own words without
$rom$tin& #rom the *uestionnaire( )hey are used to &enerate *ualitative in#ormation>
to ollet ideas% in de$th views and o$inions( )hey #ore res$ondents to rely totally on
their own 0nowled&e and reall( As a result you have no way o# 0nowin& what #ators
the res$ondent onsidered% or what was im$ortant but was not remembered(
13( Closed *uestions restrit the res$ondentVs re$lies to a
limited set o# res$onse ate&ories% usually set out in he0list( )hey are used to ollet
in#ormation in a standard #orm #rom all res$ondents( )hey are sim$ler to answer than
o$en *uestions and minimize the li0elihood o# ambi&uity and #urther the $roblem o#
how muh in#ormation the res$ondent should $rovide( )he #ive di##erent ways o#
#ormattin& losed *uestions are"

#ill in the blan0s A

s$ei#y the units in whih the res$ondent is to answer
121
e(&( ost o# servie% ;o( o# sta##
yes7no *uestions A
used to establish whether a ondition is $resent or not
and to #ilter res$ondents throu&h the survey so they
answer only *uestions whih a$$ly to them 9Bsin&
W&o toW $hrase:>

multi$le hoie *uestions A

the res$ondent as0ed to $i0 out one or more answers
#rom a list>

ratin& A
as0 the res$ondents to rate their answers aordin& to
$reAset ran&e o# o$tions>

ran0in& A
as0 the res$ondents to ran0 items aordin& to a
$artiular order% say $riority% im$ortane% osts et
11( In the losed *uestion #ormat% you should also onsider
how you would be as0in& the res$ondents to reord their answers( Ky as0in& the
res$ondent to irle a number% it #ailitates odin& the answer ate&ory as it ma0es
om$ilation and analysis sim$le( 3owever% i# res$ondents are as0ed to ti0 bo!es%
their re$lies may have to be oded be#ore they an be om$iled and analyzed( -reA
odin& hel$s to s$eed u$ data om$ilation% $re$aration and analysis(
1@( In both ty$es o# *uestions% he0 *uestions are $ertinent
to veri#y #ats( )hey are ertain ty$es o# in#ormation that you an re*uest #rom a
res$ondent in one *uestion and he0in& with another usin& the res$onse to a seond
*uestion( For e!am$le% ta0e the two *uestions% .3ow lon& have you been &ettin& this
servieF/ and .Hhen did you start to &et the servieF/ )hese are he0 *uestions(
)hey an be a use#ul mehanism #or veri#yin& #ats that you want to inlude in re$ort(
15( )he struture o# the #inal survey doument is an
im$ortant $art o# the survey desi&n $roess and is o#ten one to whih little attention is
$aid( 3owever% to &et the most out o# the survey% you should always $re#ae the
survey by &ivin& the res$ondent in#ormation about"
audit o##ie>
the $ur$ose o# the survey>
how and why they were seleted>
how the results will be used>
assurane about anonymity 9where a$$ro$riate:>
time needed to om$lete the survey>
deadline #or $ostal surveys> and
audit o##ie ontat name and tele$hone number(
It should also be advisable to $rovide &uidane on how to om$lete the survey% so that%
there is onsisteny o# a$$roah( -rovide any relevant in#ormation in the overin&
letter and wherever $ossible try to $ersonalize the overin& letter or introdution to the
survey #or e!am$le address the rei$ient by name and si&n eah letter individually(
1<( )he #irst im$ression on the doument in#luenes the
res$ondent whether to re$ly or not( Conse*uently% ma0e the survey attrative to loo0
at% easy to read% #ollow and answer( Order the *uestions in a lo&ial se*uene $erha$s
bro0en down into &rou$s under headin&s to demonstrate to the res$ondent that you
12@
have a &ood understandin& o# the sub'et under e!amination( A$$earane is also
e*ually im$ortant #or the analyst> #or e!am$le% ma0e the answers easy to #ind on the
#orm(
16( As the time the survey ta0es is too lon&% the bene#its will
be lost( A balane has to be stru0 between what you need #or the study and what
res$onses an or will $rovide( First thin0 about the rei$ients> it is im$ortant to
maintain their interest( I# the survey ta0es too muh time their interest will be lost or
they may re#use to ta0e $art( ?eond% thin0 about the $ratiality o# handlin& all the
res$onses(
1D( )o he0 that your survey will as0 the ri&ht $eo$le the
ri&ht *uestion in the ri&ht way and that the res$ondents are willin& and able to &ive
you the in#ormation% you need to $retest your wor0( -retestin& is arried out durin&
the initial develo$ment o# the survey instrument% and involves #indin& out #rom the
res$ondent i# you have as0ed"

the ri&ht $eo$le"A

3as the res$ondent the e!$eriene and in#ormation
to answer the *uestionsF

the ri&ht *uestion"A

Hill the *uestion obtain the in#ormation neededF

in the ri&ht way"A

Does the res$ondent understand the *uestionF

#or the in#ormation needed"A

Can the res$ondent remember the in#ormation
as0ed #or in su##iient detailF
28( -retestin& an be done in a number o# sta&es some o#
whih may not involve the res$ondent( First as0 your ollea&ues to read throu&h the
*uestions and identi#y wea0nesses( Inlude $eo$le who are un#amiliar with the sub'et
and an there#ore &ive you ob'etive o$inion( ;e!t send a dra#t to the audited body #or
their omments( Finally as0 a small number o# res$ondents to om$lete the dra#t
survey( A#ter wards disuss with them any $roblems they had% then amend your wor0
aordin&ly(
21( On om$letion o# the survey desi&n and testin& $hase%
the *uestionnaires an be issued( Remember to he0 that the *uestionnaires are
o$ied orretly% any odes to identi#y the individual *uestionnaires are orretly
alloated and reorded( Ma0e sure also whether the *uestionnaire is sent to the ri&ht
$eo$le and the date o# issue is reorded(
22( At the end% one o# the main worries when arryin& out
any survey is whether you will reeive su##iient re$lies to be able to ome to any
onlusion( Tou an do other thin&s that in#luene the number o# res$onses% suh as"
$rovidin& a stam$ed addressed envelo$e in whih the res$ondent an return the
survey>
allowin& the res$ondent su##iient time to om$lete the survey>
125
ta0in& into aount the normal wor0 loads o# the res$ondent> and
#ollowin& u$ nonAres$onses% usually usin& remindin& letter(
Stage I- Collect and %naly)e the Results
23( In this sta&e% the *uestionnaires will be olleted%
analyzed and the result re$orted( It inludes"
$re$arin& the survey res$onse #or analysis>
#ollowAu$ on non res$onses>
analyzin& the survey res$onses> and
re$ortin& the results(
21( Ke#ore ommenin& the analysis the #irst tas0 should be
$re$aration o# the res$onses to suit your analysis( It involves e!aminin& the res$onses
#or error and trans#ormin& the data into a suitable #ormat #or analysis( Kesides% be#ore
startin& to $re$are your data you will need to hoose your method o# analysis( )his
ould be either usin& manual analysis or om$uter system(
2@( )he #irst sta&e in data $re$aration is the reordin& o#
eah *uestionnaire and the date o# reei$t( )his will enable you to see who has re$lied
and who needs remindin&( It also hel$s you when it is a$$ro$riate to issue remindin&
note( ;e!t to this% #or all om$leted *uestionnaire that reeived% you should he0 that
the res$ondents have orretly #ollowed your instrutions on how to om$lete the
survey #orm( )hen to suit your analysis% you need to onvert all the results into a #orm
ready #or summarization and analysis usin& ode numbers(
25( In most surveys it is di##iult to &et 188X res$onse rate(
Kut% 0nowin& that you may not &et 188X res$onse rate does not mean you should not
$ursue nonA res$ondents( Tou should do all you an to #ollow nonAres$onses( )his
an be done usin& tele$hone or letter( One reminder to nonAres$ondents may be
su##iient to obtain the res$onse or two or three may be neessary( Tou should also
onsider whether it is worthwhile sendin& out a seond o$y o# the surveyAthe #irst
may not have been reeived or it may have beome lost(
2<( Reeivin& the re*uired level o# res$onse to your survey%
you should ontinue to analyze the results( Tou an ate&orize the res$ondents% #or
e!am$le% by a&e% se!% inome% et( as your in#ormation need #rom the survey( I# you
are analyzin& manually% you an tally to &et the total number o# results( De$endin& on
the om$le!ity o# the survey you an use analytial tehni*ues suh as sim$le or
multi$le re&ression analysis(
26( )he end $rodut o# the survey is the re$ort( )he re$ort
ontent varies as the $ur$ose o# the survey onduted( Hhere the survey $rovides
in#ormation or evidene #or strate&i $lan or a #easibility study% it will normally be
su##iient to state a survey was arried out and &ive the main #indin&s and onlusions(
Details o# methodolo&y should be available on wor0in& $a$ers( On the other hand%
where the survey $rovides evidene #or the main investi&ation% you should both
desribe the survey methodolo&y and $resent the #indin&s and onlusions in the
re$ort( In this ase the methodolo&y should inluded"
$ur$ose o# the survey>
12<
Hhy was the survey neededF Hhat did it enable you to doF
ty$e o# the survey>
Has it a $ostal% a tele$hone or an o$inion surveyF
Did it involve any &rou$ disussions or in de$th interviewsF
who onduted the survey>
Has it the audit o##ie% onsultants or 'ointlyF
who was surveyed>
COC li0e to 0now who has $rovided us with evidene(
the number o# res$ondents surveyed and how they are seleted>
the res$onse rate>
E!eutives are interested in the res$onse rate% so it is advisable to state in the re$ort( Tou
should also state the validity o# the survey result #or small res$onse rate(
the survey result(
Consider $ublishin& the result o# the survey( )he e!eutive may be interested in the
raw data" the *uestions as0ed and the res$onse &iven( )hey ould be inor$orated in
an a$$endi! or $ublished se$arately(
2D( In $resentin& the #indin&s and onlusions% as survey
results o#ten $rovide $lenty o# so$e #or interestin& &ra$hial $resentation> the results
in $rini$le are no di##erent #rom other evidenes and analysis% and the usual &uidane
on re$ortin& and $resentation a$$ly(
Further &uidane may be $rovided in detail se$arately as the need arises(
3; SAMPLING
1( ?am$lin& involves the $roess o# seletin& a sam$le
#rom a &rou$ o# items% in order to draw onlusions and ma0e &eneralizations about
the $o$ulation( )he two ate&ories o# sam$lin& used are statistial and nonAstatistial(
2( A nonAstatistial sam$le is either seleted randomly with
no attem$t to set sam$le size usin& statistial riteria% or the sam$le is seleted usin&
sub'etive methods in order to obtain a deliberately biased sam$le( Kut the results are
only illustrative not onlusive( Reo&nizin& their limitations they may nevertheless
be o# value in obtainin& evidenes $rovided that their limitation is $ro$erly e!$lained
in wor0in& $a$ers(
3( ?tatistial sam$lin& uses statistial riteria to determine
and selet a sam$le #rom the $o$ulation( It has many $ratial advanta&es"
9a: ?tatistial sam$lin& o#ten $ermits better $lannin& sine it is $ossible
to estimate in advane the number o# items to be e!amined to ahieve the desired
level o# reliability(
9b: It is $ossible to *uanti#y the ris0 that arises beause we sam$le rather
than test or survey the entire $o$ulation( )he $reision o# the results an be
measured and stated at a $artiular on#idene level(
126
9: )he results o# a statistial sam$le are ob'etive% de#ensible and
re$liable( Keause statistial sam$lin& is based on the theory o# $robability the
results an be de#ended a&ainst those who would ontest the #indin&s(
9d: ?i&ni#iant savin& in time and money an be made by usin&
statistial sam$les to draw onlusions about a lar&e $o$ulation(
1( )he basi $roedures whih will a$$ly to all sam$les
are"
9a: determine the ty$e o# sam$le to be used 9sam$le% strati#ied% luster% two sta&es
et(:>
9b: establish that a reord e!ists o# all $ossible items in the $o$ulation to be
sam$led% that is% the sam$lin& #rame>
9: determine the sam$le size>
9d: selet the sam$le #rom the #rame in an unbiased 9e(&( random: way>
9e: analyze the results o# tests made on the sam$le seleted>
9#: use the result to su$$ort or illustrate the ar&ument o# the re$ort(
Auditors ould use these $roedures in their audit $roess to draw onlusions #or the
whole $o$ulation( Further &uides may be $rovided in details se$arately at the need
arises(
12D
+; PRESENTING FACTS AND FIGURES IN REPORTS
INTRODUCTION
1( HellA$resented data an su$$ort the analysis and ar&uments in a
re$ort stron&ly and e##etively( Care#ul seletion and lear illustration aid
understandin& and hel$ to &et the main messa&es aross( +ood layout and desi&n &ive
an added value whih te!t alone annot $rovide(
2( On the other hand% too muh or $oorly $resented data an
detrat #rom a re$ortVs messa&e( Over om$liation and elaboration &et in the way o#
the readerVs understandin& and loud the main issues( Inonsistent or ina$$ro$riate
$resentation an #ail to a$italize on the &ood wor0 arried out durin& an investi&ation
and the wei&ht o# evidene obtained(
3( )his &uide $rovides basi advie on the seletion and
$resentation o# data in re$orts and $ointers on &ood desi&n( It does not set out to e*ui$
everyone with everythin& one needs to 0now on suh matters> rather it $rovides a
#ramewor0 within whih audit teams an de$loy data with inreased e##et(
IE4 CONSIDERATIONS
1( Hhen dealin& with the $resentation o# data"
)hin0 Ahead" onsider #rom the outset o# the study the sort o# data that needs to be
olleted and how this evidene mi&ht best be $resented( DonVt ollet lots o#
material and only then wonder how to deal with it in re$ort(
Added Galue" only inlude tables% harts or dia&rams i# they add to the messa&e A
and thus the value A o# the re$ort( -resentation o# data should not be onsidered as
an end in itsel#(
?elet" selet the #orm o# $resentation most a$$ro$riate to the messa&e bein&
onveyed( Consider whih will have most im$at( Ke seletive in the amount o#
in#ormation you inlude A too muh may on#use the reader( Kut remember that
the need #or seletivity does not $ermit the $iture to be unbalaned or biased(
Pee$ it ?im$le" the sim$ler the $resentation% the more li0ely the reader is to
understand your messa&e(
?ummarize" donVt rely on #ats and #i&ures alone( )hey donVt always s$ea0 #or
themselves( Inlude a brie# written summary o# the main $oint bein& illustrated to
assist the reader(
138
FORMS OF DATA PRESENTATION
@( Data should be inluded in a re$ort to hi&hli&ht or under$in the
main $oints bein& made( Ma!imizin& im$at means hoosin& the most a$$ro$riate
#orm o# $resentation( )here are three main ways o# $resentin& data% eah with
stren&ths and wea0nesses"
In the main te!t" this method is suitable #or very small amounts o# data and hel$s
to maintain the #low o# a re$ort( 3owever% when more than a #ew #i&ures are
*uoted or the analyses beome more om$liated the messa&e soon beomes
on#used and a table or hart should be onsidered(
In a table" this is the most a$$ro$riate #orm o# $resentation when dealin& with
lar&er amounts o# data or when #i&ures need to be dis$layed with $reision( A
table has to be are#ully onstruted to brin& out its messa&e learly( )oo muh
in#ormation or $oor desi&n will loud the messa&e(
In hart" this method is most valuable #or dis$layin& trends or relationshi$s( )he
visual im$at o# an attratively desi&ned hart hel$s to $ut aross an im$ortant
messa&e learly and *ui0ly( 3owever% a hart is not the best #orm o# $resentation
when atual #i&ures need to be &iven or when small movements in the data need to
be hi&hli&hted( On these oasions a table is more a$$ro$riate(
)he di##erent ways o# $resentin& data are disussed in more detail in the #ollowin&
$a&es( Editorial $oints on the desi&n o# tables and harts are set out at the end(
T E / T
5( Data an be $resented solely within the narrative when the
$oints bein& made an be em$hasized by ommentin& on a #ew results( More
ommonly% data within the te!t will be used to om$lement an ad'oinin& table or hart
and to hi&hli&ht the most im$ortant $oints( An e!am$le o# data $resented in narrative
#orm is $rovided below"
)he ;AO Cor$orate -lan #or the ne!t #ive years e!$ets total sta##in& levels
to remain #airly onstant with $lanned sta## years totalin& D1@ in 1D6D7D8
and D3D in 1DD37D1( )he $lan e!$ets the resoures used #or GFM Audit to
rise #rom 211 to 2@5 sta## years over the #iveAyear $eriod(
;ote that only a hand#ul o# 0ey #i&ures has been inluded in the te!t( Althou&h the
data have not been rounded in this e!am$le% roundin& should always be onsidered as
too many di&its may on#use the reader( )he hoie will de$end on whether there is a
&reater need #or auray than #or sim$liity(
<( Hhen more #i&ures than this have to be $rovided or a more
om$lete $iture is re*uired then a table or hart will have to be inluded(
T A 6 L E S
6( Data should be $resented in tabular #orm when lar&e amounts
o# in#ormation or a number o# #i&ures need to be shown with reasonable auray(
Im$ortant $oints to remember when onstrutin& a table within a re$ort are"
Arran&e the data in olumns and rows in a lo&ial order( )here will o#ten be a
natural order suh as date% al$habetial% hierarhial% or &eo&ra$hial order( Hhere
there is no obvious natural order( arran&e in order o# size% with the lar&est numbers
at the to$( )he #i&ures that are most li0ely to be om$ared should be in olumns
131
rather than rows sine it is easier to determine trends and analyses 9re*uirin&
additions and subtrations: by wor0in& u$ and down the $a&e rather than aross(
In )able 1 the natural order #ollowed is the date order and the table is arran&ed so that
trends over the years are shown down the $a&e(
)able 1 ;AO -lanned sta## years by ativity -lan 1D6<766 to 1DD17D2
-lanned ?ta## Tears
Diret Out$ut ?u$$ort Ativities
Tear
Fin Audit
GFM
Audit Indiret Central
)otal
1D6<766 21@ 1<5 388 16< D86
1D6676D 218 1DD 31@ 16< D11
1D6D7D8 233 211 322 165 D@@
1DD87D1 238 231 31D 1<5 D@5
1DD17D2 235 212 311 156 D@8
Avera&e 23@ 212 311 161 D16
?oure" ?ummary o# the ;AO Cor$orate -lan
)e!tual omment"
W?ta## resoures are $lanned to derease #or erti#iation audit and entral ativities
and to inrease #or GFM audit durin& the ne!t #ive years(W
Round the data wherever $reision is not re*uired( )his ma0es the in#ormation
easier to absorb and $resents a learer $iture( Fi&ures an normally be redued to
about two e##etive di&its and still $rovide su##iient auray( 9An e##etive di&it
is a di&it that varies #rom one number to another( For e!am$le% the numbers <%615%
<%251 and <%111 redued to two e##etive di&its would be shown as <%6@8% <%258
and <%118:(
Common sense is needed when usin& this tehni*ue as it will sometimes be
a$$ro$riate to use more than two e##etive di&its> and there may be oasions when the
#ull #i&ures are needed(
In )able 1 the number o# e##etive di&its is &reater than two only in the seond olumn(
In this ase as the #irst di&it only varied #rom one to two it was not a$$ro$riate to
round the #i&ures(
Inlude olumn and row totals and avera&es where a$$ro$riate( )hese o#ten hel$
to hi&hli&ht variations in the data in identi#y 0ey $oints(
)he e!am$le shows how row totals and olumn avera&es are $ositioned(
Inlude a brie# written analysis o# the main messa&e ontained in the table(
An e!am$le o# a summary te!t is shown in )able l(
C ) A R T S
D( Charts are use#ul #or demonstratin& relationshi$s between data
or hi&hli&htin& trends over time( Garious ty$es o# hart an be used but this boo0let
onentrates on the three most ommon #orms"
-ie harts
Kar harts
132
Cine &ra$hs(
Remember"
Pee$ the dia&ram lear and sim$le so it is easy to understand(
Bse two or three harts i# there are several #eatures to hi&hli&ht( )his may be more
e##etive than a sin&le dia&ram(
Always aom$any the hart with a brie# written summary to draw the readerVs
attention to its main messa&e(
-ie Charts
18( A $ie hart should be used #or showin& the brea0down o# a
whole &rou$ into its om$onent $arts( It $resents a lear visual summary o# the
relative sizes o# the om$onent $arts as demonstrated by the e!am$le shown at Fi&ure
1(
Fi&ure 1
NAO planned staff years for 1989/90
Staff resources by activity
VFM audit
22
Fin! Audit
2"
#entral activities
20
$ndirect services
%"
?oure" ?ummary o# ;AO Cor$orate -lan
)e!tual omment" ?ta## resoures #or ;AO ativities are divided almost e*ually
between Diret Audit 9GFM and #inanial audit:% and ?u$$ort ?ervies 9entral
ativities and indiret servies:(
11( ?ome $oints to remember"
Inlude either the *uantity or the $erenta&e o# the total that eah se&ment
re$resents( )his should be $laed in or beside eah se&ment(
-lae the se&ments o# the $ie hart in a lo&ial order% ideally by size or order o#
im$ortane(
Do not inlude too many se&ments or it will lose im$at( I# the brea0down
re*uired is into more than si! setions then a bar hart will $robably be more
a$$ro$riate(
Bse two or three $ie harts to&ether to show han&es over time or illustrate
di##erenes between &rou$s(
Bar Charts
12( Kar harts an be used #or a variety o# $ur$oses"
133
to om$are &rou$s
to show the brea0down o# a &rou$
to show han&es over time #or one or several variables(
13( )he hart an be drawn either vertially or horizontally( )he
#orms o# bar hart most ommonly used are"
sim$le bar harts 9#i&ure 2:
om$onent bar harts 9Fi&ure 3:
&rou$ 9or multi$le: bar harts 9Fi&ure 1:
(Textual comments have been omitted.)
Fi&ure 2
NAO staffin& by &rade
'lan for 1989/90
Senior managers
Directorate
Managers
Senior auditors
Assistant Auditors
Support staff
External staff
0
100
200
%00
1 2 % " ( ) *
Staff +rade
S
t
a
f
f

,
e
a
r
s
?oure" ?ummary o# the ;AO Cor$orate -lan
Fi&ure 3
Application of surplus funds
19*2 to 198*
0
20
"0
)0
80
100
*2 *% *" *( *) ** *8 *9 80 81 82 8% 8" 8( 8) 8*
,ears
-

.
i
l
l
i
o
n
s
Surplus funds /otal 01penditure
?oure" ;AO Re$ort on the Overseas Develo$ment A&eny
131
Fi&ure 1
2ocal and re&ional bids 3 allocations
198)48* to 1988489
0
(0
100
1(0
200
198)48* 198*488 1988489
-

.
i
l
l
i
o
n
s
2ocal bids 5e&ional bids Allocations
?oure" ;AO Re$ort on derelit land &rant
11( ?ome $oints to remember about usin& and onstrutin& bar
harts"
Bse a sim$le bar hart 9Fi&ure 2: to om$are related &rou$s% to show the
brea0down o# a &rou$ or to show han&es in the &rou$ total over time( Bse a bar
hart in $re#erene to a $ie hart when there are more than si! items to dis$lay(
Bse a om$onent bar hart 9Fi&ure 3: to show han&es in the om$osition o# a
&rou$ over time 9or a&ainst other shown &rou$s:(
Bse a &rou$ bar hart 9Fi&ure 1: to om$are related &rou$s over time or to om$are
individual om$onents o# a &rou$ over time when the total is not im$ortant(
Do not e!eed three om$onents% or &rou$s% in the om$onent and &rou$ bar
harts( Otherwise the hart will not be lear(
)hin0 are#ully about the ri&ht order o# the om$onent $arts or &rou$s( Bsually
they will #ollow a natural order or will be $laed in size order(
Ma0e the om$onent bar hart easier to #ollow by $lain& the least han&eable
om$onent on the bottom layer o# the bars and the most variable om$onent on the
to$ layer(
13@
Line Graphs
1@( )he line &ra$h is the most a$$ro$riate method o# illustratin&
han&es over time #or one or more variables(
Fi&ure @
0
(0
100
1(0
200
2(0
%00
%(0
198*/88 1988/89 1989/90 1990/91 1991/92 Avera&e
Fin Audit
VFM Audit
$ndirect
#entral
ource! ummar" o# the N$O Corporate %lan
Textual comment! ta& resources #or '() audit are planned to
increase durin* the next +ve "ears
15( ?ome $oints to remember when onstrutin& a line &ra$h"
Do not rowd the hart by inludin& too many lines(
Redue the number o# lines to be inluded i# the variables lie lose to eah other or
#re*uently ross over eah other( Otherwise the hart will *ui0ly beome
inom$rehensible(
DESIGN FACTORS
1<( )his setion ontains a summary o# advie &overnin& the
desi&n o# dis$lays o# data( Althou&h some o# the advie may a$$ear trivial it an have
a si&ni#iant im$at on the visual larity o# the dis$lays(
Advie #or tables"
1( Inlude a lear onise title(
2( Dis$lay the time $eriod and &eo&ra$hial area overed by the table(
3( A0nowled&e the soure o# the data(
1( Bse #ootnotes to e!$lain any unavoidable inonsistenies% anomalies or
han&es in de#inition(
@( ?$ae olumns out evenly( )his will hel$ to balane the table( Row and
olumn headin&s should not in#luene s$ain&(
135
5( Bse ruled lines s$arin&ly A they $revent the eye movin& easily between data
$oints( ;ever use lines between olumns o# data within the main body o# a
table(
<( Avoid the e!essive use o# a$ital letters(
6( Maintain onsisteny in the use o# di##erent #onts(
D( ;umber all tables se*uentially(
18( Maintain the same order #or dis$layin& headin&s i# the same ate&ories are to
be overed in two or more tables( )his will ma0e om$arisons easier(
Advie #or $ie harts% bar harts and line &ra$hs"
1( Inlude a lear onise title(
2( Dis$lay the time $eriod and &eo&ra$hial area overed by the
harts(
3( A0nowled&e the soure o# the data(
1( Bse #ootnotes to e!$lain any unavoidable inonsistenies%
anomalies or han&es in de#inition(
@( For bar harts and line &ra$hs label the a!es diretly(
5( Cabel the om$onents o# a hart diretly rather than via a 0ey
wherever $ossible(
<( Avoid the e!essive use o# a$ital letters(
6( Maintain onsisteny in the use o# di##erent #onts(
D( ;umber all harts se*uentially(
18( Bse the same order and start $oint i# two or more $ie harts are
to be om$ared(
11( -osition hart u$ri&ht on the $a&e #or ease o# viewin&(
12( Coate harts as lose as $ossible to their related te!t or learly
indiate where they an be #ound(
13( Do not overrowd dis$lays( )he sim$ler they are the easier
they will be to understand(
11( Inlude a written summary o# the main $oint o# the hart(
13<
SECTION FOUR A77e%di&e1
APPENDI/ 1B ECONOM4, EFFICIENC4 AND EFFECTI-ENESS
)his $art o# the &uide &ives e!am$les o# eonomy% e##iieny and e##etiveness( It is
#or illustration only and does not $rovide an e!haustive $iture o# the area or even the
sub'ets used(
E!am$le 1" Eradiation o# disease(
O5Ee&'i=e1
)he ob'etive o# the $ro&ram is the om$lete eradiation o# the $reventable disease R
amon&st youn& $eo$le throu&hout the whole ountry within a 28Ayear time $eriod>
A&'i=i'ie1B
A $ro&ram o# inoulations #or the 8A15 year old a&e &rou$ throu&hout the ountry
aom$anied by eduation to show $arents the e##ets o# the illness and to enoura&e
them to brin& #orward their hildren #or inoulation>
I%7u'1
Gaines% dotors% hy$odermis% vehiles #or trans$ort% $etrol% #orei&n urreny 9#or
vaines% $etrol% vehiles et(:% trainin& o# sta##% eduation literature>
Ou'7u'1
?ta## trained% $arents ontated% villa&e &rou$s addressed% inoulations &iven% villa&es
inoulation visits>
I#7$&'1
Diret $ro&ram im$ats" #all in level o# illness #rom s$ei#ied disease both amon&st
those inoulated and more widely in the $o$ulation>
Hider ob'etive im$ats" ontat with dotors and health visitors durin& inoulation
$ro&ram may lead to rural $o$ulation &ainin& a &enerally better level o# health are(
E&"%"#y
Calulation o# eonomy should inor$orate both the $rie $aid to su$$liers and all
other osts that are diretly attributable to in$uts(
E##etive ost is the total ost inurred by the or&anization in a*uirin& in$uts and
brin&in& them to the $oint o# $rodution usa&e( Fators to be onsidered are"
&ross $urhase
disount
e!tra .$urhase $rie/ ost% e(&( ta!%
su$$lier trans$ort osts
own trans$ort% maintenane ost to ma0e use o# in$uts%
the .ost/ o# subAstandard items
Pu&D$1e Pi&e
136
)he $rie $aid to su$$liers #or in$uts is entral #or eonomy" an eonomi or&anization
will obtain the desired *uantity and *uality o# in$uts #or the lowest total $rie a#ter
allowin& #or all available disounts( )he or&anization may also onsider any later sra$
value o# in$uts to minimize the total net ost o# in$uts 9)1: in"
)1 Y 99$Ad:n: A s
where
n is the number o# items $urhased>
$ is the basi su$$ly $rie $aid $er unit o# in$ut>
d is the disount $er item &iven on WnW items>
s is the total sra$ value o# WnW units(
O=eDe$d1
-urhasin&% trans$ortin&% storin& and maintainin& in$uts also &enerate osts whih an
eonomi or&anization should onsider within its deisionAma0in&( )hus% #or e!am$le% an
or&anization may $ay less to its su$$liers% throu&h bul0 disounts i# it $urhases all its
in$uts in one lar&e order( )his may also allow savin&s on trans$ortation( Kut the hi&h
sto0 levels may neessitate lar&er% and more e!$ensive% stora&e #ailities over a lon&er
$eriod than a number o# smaller orders( Inludin& overheads% an eonomi or&anization
will aim to minimize )2 in"
)2 Y 99$Ad:Za:n A s
where"
WaW is the $er unit overhead ost o# $urhasin&% trans$ortin&% holdin& and maintainin& n
units o# in$ut(
Ju$li'y
)he eonomi $er#ormane o# an or&anization will also be a##eted by the #inanial
onse*uenes o# the *uality o# the in$uts it $urhases( Juality an a##et total in$ut osts
throu&h"
the true su$$ly $rie o# usable in$uts" unless an or&anization obtains redit #rom
its su$$lier #or subAstandard in$uts the $urhase ontrat with the lowest #ae
value may not be the most eonomi( I# a lar&e number o# om$onents #ail *uality
tests% the e##etive su$$ly $rie o# W*ualityW in$uts may $rove to be relatively hi&h(
In this situation% i&norin& overhead osts% an eonomi or&anization would aim to
minimize the e##etive total su$$ly $rie o# usable in$uts 9)3:"

)3 Y ;9-AD: Z M9-AD: A ?
where"
; is the *uantity o# usable 9or W*ualityW: in$ut a*uired>
M is the *uantity o# subAstandard in$ut>
- is the basi su$$ly $rie $aid $er unit o# ;ZM in$ut>
D is the disount &iven $er unit on ;ZM items>
[9-AD: bein& the net% or atual% $rie $aid $er unit\>
? is the total sra$ value realizable on ;ZM items(

diret addition o# osts" $oor *uality in$uts may be hea$er to buy but add to total
osts throu&h the need to arry out remedial wor0 on subAstandard items or the
addition o# #urther in$uts to om$ensate #or $oor *uality( Identi#yin& whih
13D
om$onents are subAstandard will always reate additional osts( Inor$oratin&
these diret osts% eonomy an be de#ined as minimizin& )1 in"
)1 Y ;9-AD: Z M99-AD:ZR: Z I A ?
where"
R is the e!tra remedial or in$ut osts% $er subAstandard item% &enerated by M
items o# subAstandard in$ut>
I is the total additional ost that the need to identi#y subAstandard items
&enerates(
the level o# overheads" i# an or&anization is unable to identi#y and weed out subA
standard in$uts at the $oint o# $urhase it will inur hi&her e!$enditure on its
overheads 9e(&( trans$ortation or stora&e:% inreasin& the total ost o# $urhasin&
W*ualityW in$uts( In this situation it may $rove more eonomi to $ay a hi&her unit
$rie to a su$$lier i# this &uarantees a lower level o# subAstandard items and%
onse*uently% a lower total ost #or *uality items( A&ain% to be eonomi an
or&anization should minimize )@"
)@ Y 99-AD:ZA:; Z M99-AD:ZR: Z K Z I A ?
where"
A is the overhead ost% $er unit% o# $urhasin&% trans$ortin&% holdin& and maintainin& ; units
o# *uality in$ut>
K is the addition to total overhead osts o# $urhasin&% trans$ortin&% holdin& and maintainin& M
units o# subAstandard in$ut(
)his last e*uation% )@% an be reAwritten to ta0e aount o#"
the total amount o# W*ualityW in$ut an or&anization will see0 to $urhase% ;% will
normally be the same as the amount it would buy i# there were no *uality
$roblems 9n in )1 and )2:>
the base $rie an or&anization $ays #or its in$uts% i&norin& disounts% will be the
same re&ardless o# the *uantity it $urhases 9i(e( $ in )1 and )2 Y - in )3 to )@:(
It is the disount that varies with the size o# order(
+iven these assum$tions% )@ beomes"
)@ Y [n99$Ad:ZaAs\ A nD! Z M99$A9dZD!::ZR: Z K Z I A ?!
or
)@ Y [)1\ A [nD!\ Z [M99$A9dZD!::ZR: Z K Z I A ?!\
where"
D! is the additional disount% $er nZM item% &iven #or buyin& nZM rather than
'ust n items [9dZD!: Y total disount% $er item $urhased% &iven on nZM items\>
?! is the addition to the sra$ revenues #rom the $urhasin& M units o# subA
standard in$ut in addition to n *uality items [9sZ?!: is the om$lete sra$ value
realized on nZM items\>
all other #ators are as de#ined above(
From the above% an eonomi or&anization is one that balanes all the #ators that
in#luene the osts o# its in$uts A the su$$ly $rie% disounts% overheads and the e##ets o#
*uality( )hese an a##et total osts in di##erent diretions and it is #or mana&ement to
#ind that soure o# su$$ly% method o# $urhase% trans$ortation% handlin& and maintenane
that $rodues the most eonomi solution #or the or&anization(
118
From the above e*uation )1 and )2 inurred by the or&anization are not onsiderin&
*uality $roblem o# eonomy but )3% )1 and )@ are with *uality $roblems( )2 inludes all
the overhead ost and )@ A , K are overhead ost by subAstandard $rodut(
Eonomy *uestions are li0e"
Hhether $rie $aid #or dotors% hy$odermis was 'usti#ied and orres$onded to
normal or reo&nized $ries>
Hhether% &iven s$ei#ied needs and *uality% every e##ort was made to use unAbranded
dru&s% whih are normally very muh hea$er% rather than branded dru&s #or the
inoulations>
Hhether bul0 $urhase disounts were ahieved #or $urhase o# vehiles>
E!!i&ie%&y
An o$eration ould be said to have inreased its e##iieny in the sense that either #ewer
in$ut were used to $rodue a &iven amount o# out$ut% or a &iven level o# in$uts resulted in
inreased out$ut( Ine##iieny would be revealed by identi#yin& the $er#ormane o# wor0
with no use#ul $ur$ose or the aumulation o# an e!ess o# 9or unneessary: material and
su$$lies(
E##iieny an be e!$ressed as bein& to either"
Minimize I
1
% I
2
%(((%I
m
in #n9I
1
%I
2
%(((I
m
>O
1
%O
2
%(((O
$
: sub'et to O
1
Y*
1
%
O
2
Y*
2
% (((((%O
$
Y*
$
>
or
Ma!imize O
1
% O
2
%(((((%O
$
#n9I
1
%I
2
%(((I
m
>O
1
%O
2
%(((O
$
: in sub'et to I
1
NJ
1
%
I
2
NJ
2
%(((((%I
m
NJ
m
(
where"
#n is the W$rodution #untionW relatin& out$uts to in$uts>
I
1
%(((%I
m
are the *uantity o# in$uts 1 to m>
O
1
%(((%O
$
are the *uantity o# out$uts 1 to $(
An e##iient or&anization is then one that has the best $ossible $rodution #untion% #n(
E##iieny overs the $er#ormane o# all the ativities o# an or&anization( I# we are
e!aminin& the e##iieny o# a hos$ital% #or e!am$le% we ould loo0 at everythin& #rom the
$er#ormane o# leanin& sta##% throu&h the o$eration o# the $harmay% to the utilization o#
o$eratin& theaters( He ould also have loo0ed at the use made o# bri0s% labor% ement%
trans$ort et( in #irst buildin& the hos$ital(

In eah ase we are evaluatin& how well the or&anization turns in$uts 9bri0s% leanin&
sta##% dru&s% o$eratin& theaters% dotors et(: into out$uts 9 the hos$ital% lean orridors%
#illed $resri$tions% o$erations:( In some ases the out$uts o# one ativity are the in$uts
o# another( For e!am$le% an o$eratin& theater may be an out$ut o# the hos$ital buildin&
$ro&ram but the 0ey in$ut #or theater utilization( )hus we an trae a whole ran&e o#
e##iieny issues throu&h an or&anization #rom its $rime in$uts to its #inal out$uts(
E##iieny *uestions are li0e"
111
Hhether a$$ro$riate vehiles were used #or the ty$e o# terrain overed 9e(&( i# all
travel is on &ood *uality roads there will be less 'usti#iation #or use o# e!$ensive
1HD vehiles:
Hhether the use o# sta## mathes the needs o# the wor0 9e(&( it would be ine##iient to
use o# dotors #or inoulations% as o$$osed to nurses or health visitors ould also be
overly e!$ensive:>
Hhether the visits to villa&es have been $lanned to ma!imize the level o# ontat with
the tar&et $o$ulation #or the level o# in$uts>
9e(&( $lannin& to ontat ma'or $o$ulation enters% eduation throu&h $reAnatal or
$ostAnatal linis% inoulation throu&h $ostAnatal linis% i# a$$ro$riate:
Hhether it ould have been inte&rated with other e!istin& health $ro&rams to ahieve
the same out$ut but at &reatly redued in$uts>
E!!e&'i=e%e11
)he e##etiveness o# an or&anization is not 'ust a *uestion o# whether it has ahieved its
ob'etives or obtained its intended im$ats A these mi&ht have ourred without any
intervention or e!$enditure by the or&anization( I# that were the ase then &overnment
e!$enditure was entirely waste#ul( E##etiveness is onerned with the e!tra bene#its
whih have arued throu&h the or&anization2s or shemeVs intervention in the #ield(
)o e!amine or assess how e##etive an or&anization is we need to evaluate its im$ats (
)he im$ats o# a sheme or $ro&ram an be viewed under the #ollowin& #our ate&ories"
additionality" the e!tra intended im$ats that have ourred solely as a result o#
the intervention o# the or&anization>
deadwei&ht" those intended im$ats that already e!isted or would have ourred
without any intervention #rom the or&anization( +overnment e!$enditure on
deadwei&ht is om$letely ine##etive as the im$ats would have arued without
it( For e!am$le% i# a &overnment is tryin& to inrease $rodution o# an item% 9e(&(
o##ee: subsidies #or that element o# $rodution that already ta0es $lae is
unneessary( +overnment should only be subsidizin& additional $rodution>
dis$laement" those intended im$ats that are additional but our beause ativity
has been reloated #rom one $lae to another% or beause ativity on the subsidized
sheme has dis$laed ativity on other desired ob'etives% merely to ta0e
advanta&e o# &overnment su$$ort( For e!am$le% i# &overnment wished to see an
inrease in em$loyment and $rovided subsidies #or industry in Addis some #irms
mi&ht move investment $lanned #or other $arts o# the ountry to the a$ital to ta0e
advanta&e o# &overnment #undin&( E*ually% in ountries where the e!han&e rate is
0e$t at an arti#iially hi&h level throu&h &overnment ontrol o# #orei&n urreny%
bla0 mar0et entre$reneurial ativity on a*uirin& #orei&n e!han&e so as to
im$ort Wlu!uryW &oods is dis$laed #rom more 9soially: use#ul ativities>
?ide e##ets" the unintended im$ats o# &overnment intervention( )hey may be
desirable or unwanted( For e!am$le% subsidies #or inreased a&riultural
$rodution may lead #armers to e!$loit land to an e!tent that soil erosion beomes
a serious lon&Aterm $roblem(
In assessin& the e##etiveness o# an or&anization we should be loo0in& to see that it
ma!imizes its additionality( Fundin& o# other im$ats A deadwei&ht% dis$laement and
side e##ets A is waste#ul as it does not add to the diret ahievement o# the shemeVs
ob'etives( 3owever% it should be reo&nized that deadwei&ht% by itsel#% is also bene#iial
$rovidin& the &overnment avoids $ayin& #or it" deadwei&ht im$ats ontribute to the
112
ahievement o# the ob'etive( )hey are distin&uished #rom additionality solely beause
they would have ha$$ened without &overnment intervention( Hith #ew e!e$tions%
&overnment should ma!imize additionality without disoura&in& deadwei&ht(
E##etiveness is ar&uably the most im$ortant element o# $er#ormane( +oods and
servies may be $rovided eonomially or e##iiently but i# they do not ahieve their
intended ob'etive the resoure used will lar&ely be wasted( For this reason the auditor
will o#ten #ind that e##etiveness is the #irst area to be onsidered when loo0in& at the
o$$ortunities to ondut an investi&ation( 3owever% assessin& e##etiveness an be
e!tremely di##iult( Identi#yin& and measurin& im$ats may $ose onsiderable $roblems(
Assessin& whether they are additional% deadwei&ht et( may be im$ossible( Auditors must%
there#ore% only enter into e##etiveness audits i# they are satis#ied that they have the s0ills
and tehni*ues neessary to $rodue de#ensible and aurate results(
E##etiveness audit is o#ten seen as the most im$ortant as$et o# e!aminin& auditees
$er#ormane( It reates ma'or $roblems #or the auditor beause"
it is di##iult to measure and identi#y
the im$ats may only be a$$arent in the lon& term
establishin& ause and e##et may not be $ossible
it leads us into the $olitial area(
E##etiveness *uestions are li0e"
Hhether a &overnmentA#unded $ro&ram is needed amon&st ertain se&ments o# the
$o$ulation 9some $eo$le may have intended to $ay #or the inoulations themselves A
&overnment #undin& is deadwei&ht:>
Hhether the $ro&ram leads to lon&Aterm eradiation o# the disease 9note" the
$ro&ramVs ob'etive is disease eradiation% not the &ivin& o# inoulations:>
Hhether the $ro&ram reates or solves other health are $roblems 9side e##ets A
health visitors may be able to identi#y and treat other diseases at an early sta&e> on the
ne&ative side there may be e!am$les assoiated with use o# nonAsterile needles or
diret side e##ets o# vaines% e(&( whoo$in& ou&h or the use o# dru&s in less
develo$ed ountries that have been banned elsewhere beause o# their 0nown
$roblems:(
2; E/AMPLES OF ECONOM4, EFFICIENC4 AND EFFECTI-ENESS
Ae$ E&"%"#y E!!i&ie%&y E!!e&'i=e%e11
1( Kuildin& to s$ei#iation time% at lowest ahievable ost%
or within a$$roved ost
limits(

2( Btilization o# wards% beds theaters and
e*ui$ment
3( Reduin& the $atient waitin& list
1( )he e##et on dia&nosti and treatment
rates(
@( Im$at on the number and ty$e o# o$erations $er#ormed(

5( Alloation and mi! o# medial and

administrative sta##(
<( Mana&ement and resoure alloation system(
113
6( Im$rovements in the health and *uality o# li#e o# the
$o$ulation(
3( E/AMPLES OF 6ASIC CONCEPTS OF PERFORMANCE AUDIT
Ae$ O6JECTI-ES INPUTS ACTI-ITIES OUTPUTS IMPACTS
Raw material needed
E##et on the Eonomy
Constrution
Inreasin& s$eed o# travel
Fundin& available
Reduin& road aident
E##et on the user time% aidents%
osts
Cand re*uirements
-urhase o# land
E##et on the $eo$le livin& near the
roads and on the environment
Desi&n o# new road
Cabor needed #or onstrution wor0
Reduin& vehile o$eratin& osts

;ew roads
E##et on other roads and rail shemes

E##et on health servies

111
APPENDI/ 2B AIMS, O6JECTI-ES AND POLIC4 INSTRUMENTS
Ai#1 $%d "5Ee&'i=e1 - de!i%i'i"%1
1( )his a$$endi! de#ines aims% ob'etives and $oliy instruments% how they interArelate
and loo0s at areas o# audit interest(
2( Aims an be de#ined as W the $ur$oses #or whih an or&anization or $ro&ram e!istsW(
Ob'etives are said to Wstem #rom Aims and to re$resent s$ei#i $lanned ahievementsW(
Ob'etives are usually set at several levels% #rom hi&hAlevel strate&i ob'etives to
individual ob'etives #or $artiular ativities(
3( Aims and ob'etives there#ore #orm a hierarhy% with Aims at the hi&hest and most
&eneral level% and ob'etives beneath in several tiers% o# inreasin& s$ei#iity as one
&oes down( Aims are diretions% while ob'etives are destinations( Aordin& to these
de#initions an Aim does not $rovide the basis o# an assessment o# ahievement% beause
i# you said youVd &o north% then an enormously wide ran&e o# outomes would be
onsistent with that intention A a ran&e so wide as to ma0e meanin&#ul assessment
im$ossible( )he distintion is worthwhile beause the di##erene is si&ni#iant" audit
assessment o# e##etiveness annot &et &oin& i# we have only aims and no ob'etives(
1( He an e!em$li#y these ideas with the ase o# ommerial om$any( Its aim would be
somethin& li0e Wto ma!imize earnin&s $er shareW( ?ubsidiary to that it mi&ht have
ob'etives #or net $ro#it a#ter interest and ta!ation% mar0et share% &rowth% et( )hen there
mi&ht be a lower level o# more s$ei#i ob'etives% e(&( #or &ross $ro#it% borrowin&s% loan
har&es% ta!ation(
@( +overnment de$artments and other $ubli bodies will not usually have suh learly
enuniable aims and ob'etives as $ro#itAoriented tradin& om$anies( One thin& we have
to be are#ul o# is that de$artments sometimes all their aims Wob'etivesW( It doesnVt
matter what these thin&s are alled as lon& as we 0ee$ a lear view o# the
diretion7destination distintion( He should also distin&uish between $oliy ob'etives%
whih are stated in terms o# im$ats% and $ro&ram ob'etives% whih are stated in terms
o# out$uts(
Ai#1 $%d "5Ee&'i=e1 - $udi' i%'ee1'
5( Firstly we an onsider the e!istene and *uality o# the ob'etives( I# there is
de$artmental ativity whih does not have ob'etives 9or% as is more li0ely% does not have
$ro$erly santioned ob'etives% or ob'etives su##iiently s$ei#i to ma0e use#ul
$er#ormane assessment $ossible: then there is a ris0 to GFM and we would want to
inlude that in Re$ort( I# the de$artment has $ro&ram ob'etives but no $oliy ob'etives
then we an loo0 to see how muh e##ort they have $ut into devisin& $oliy ob'etives%
and i# we donVt thin0 theyVre tryin& hard enou&h% say so(
<( ?eondly we an loo0 at the $roess o# $oliy #ormulation% and onsider whether $oliy
ob'etives were set on the basis o# ade*uate analysis and su##iient and u$AtoAdate
in#ormation(
6( )hirdly we an loo0 at the relations between the ob'etives( )his means he0in& that
there are lo&ially sound relations between ob'etives at di##erent levels o# the hierarhyA
11@
the ruial area will $robably be the relation between $oliy ob'etives and $ro&ram
ob'etives( He should also loo0 #or $ossible on#lits between the $oliy ob'etives o#
the audited body and those o# other $ubli setor bodies i# unresolved they may reate a
ris0 to GFM(
P"li&y i%1'u#e%'1 - de!i%i'i"%
D( )he terms W$oliy instrumentW and W $ro&ramW are both used to denote the means ado$ted
by de$artments to $ursue their ob'etives( -oliy instruments are the ativities o# the
de$artment% whether it be ma0in& &rants% $rovidin& servies% or $rourin& &oods and
servies( )he term WinstrumentW si&nals the #at that what the de$artment does should be
re&arded as a means to an end rather than an end in itsel#(
18( In the $ast thin&s tended to &et done Wbeause theyVve always been done li0e thatW% or
beause o# una0nowled&ed $ressure #rom some onstitueny or interest( )his is not
satis#atory( De$artments should have learly enuniated $oliy ob'etives( One they
have ob'etives% they an as0 themselves how their $oliy instruments relate to them" are
the urrent instruments really the best means o# seurin& the $revailin& ob'etivesF
P"li&y i%1'u#e%'1 - $udi' i%'ee1'
11( )here is a list o# $oints to onsider in the V-oliy InstrumentsV setion o# the E##etiveness
audit Aide Memoire in +uide I( )he #ollowin& $ara&ra$hs $rovide some e!$ansion and
disussion o# the more im$ortant $oints(
12( Cle$ li%? 5e'>ee% 7"li&y i%1'u#e%'1 $%d 7"li&y "5Ee&'i=e1B I# the relation between
instruments and ob'etives has been &ot ri&ht% the ob'etive9s: will be a om$lete
'usti#iation o# a $oliy instrument( ?ometimes the hoie and desi&n o# $oliy
instruments is in#luened by wider $oliy onsiderations" a less ostAe##etive
administrative arran&ement may be hosen beause o# the desire to redue the numbers
o# ivil servants% or a more e!$ensive &ood $roured beause the hea$er alternative is
an im$ort and there are #orei&n urreny onsiderations , servies( )he im$ortant thin&
is that any suh e!tra $ur$oses% whih do not #orm $art o# the $rimary rationale #or the
$oliy instrument% should be Win the o$enW> they should be stated as seondary ob'etives
and some indiation &iven o# how they interat with the main ob'etives 9i(e( whih
ob'etives &et $riority in whih irumstanes:( )he means hosen to $ursue a $oliy
ob'etive may themselves be hosen #or $olitial reasons% and i# this is lear to the
le&islature the A+ would not normally omment on the instruments hosen 9althou&h he
mi&ht still wish to draw attention to the e!tent to whih $oliy was bein& ahieved or to
any #inanial onse*uenes o# whih -arliament would not otherwise be aware:(
13( Al'e%$'i=e i%1'u#e%'1 1D"uld 5e e=$lu$'ed $%d &"1'ed" )o be sure that it has hosen
the best means the de$artment should e!amine all the $ossibilities( )here ou&ht to be a
thorou&h and systemati review o# $reedents% $arallels% and evidene #rom $ilot studies%
s$eially ommissioned researh% surveys% , servies( )he de$artment needs to have a
$ro$er understandin& o# the environment within whih the instrument will o$erate%
es$eially the related ativities o# other $ubli setor bodies( It is ommon to #ind that
thorou&h analysis o# this 0ind has not been done( As well as brin&in& this to attention
when it ours% we an onsider the so$e #or su$$lementin& the in#ormation available to
the de$artment with other in#ormation in the $ubli domain% advie or researh soliited
#rom third $arties suh as aademis% and survey data(
115
11( P"li&y i%1'u#e%'1 1D"uld D$=e e=$lu$'i"% &i'ei$ $%d $11e11#e%' $%d #"%i'"i%(
#e&D$%i1#1 5uil' i% $' 'De "u'1e' $1 7$' "! 'De de1i(% "! 'De i%1'u#e%'" In other
words de$artments should not start to o$erate instruments be#ore they have said what the
o$erational riteria o# suess are to be> hosta&es to #ortune must be &iven(
11<
116
APPENDI/ 3B O-ER-IE*B AIMS, AND O6JECTI-ES
1( Ai#1
)he aims o# the overview are to>
I: obtain a &ood understandin& o# the audited entity% its $oliies and ob'etives% its main ativities and $rini$al
resoures>
II: identi#y the $otential ris0 to ahievin& GFM>
III: su&&est areas or sub'ets #or individual inAde$th investi&ations>
IG: hi&hli&ht areas #or ontinuin& audit attention(
2( O5Ee&'i=e1
)he ob'etive o# the overview is to assemble and evaluate relevant in#ormation in order to
$rovide an understandin& o# the audited entity% its main ativities and $rini$al resoures% it
should identi#y the main GFM ris0s and $ossible investi&ations and also $rovide su##iient
in#ormation to su$$ort the $re$aration o# a divisional $lan( It should not e!tend to the
olletion or e!amination o# detailed audit evidene( )he overall a$$roah should be to
ollet the minimum amount o# in#ormation needed to meet the ob'etive(
3( S&"7e
)he so$e o# the overview overs a number o# main areas eah o# whih an be su$$orted by
a variety o# in#ormation( )hese inlude"
a: Ka0&round
(inancial in#ormation! bud*ets,
estimates, accounts, si*ni+cant
holdin*s o# assets.
Or*ani-ational structure! divisional
(branch and re*ional) local o.ce
net/or0.
b: Ob'etives
polic" ob1ectives and their relative
priorities
Operational ob1ectives o# particular
activities aimed at achievin* polic"
ob1ectives.
: Constraints
an" constraints under /hich the
audited entit" operates.
d: Resoures
The resource used e.*. cash,
manpo/er, land and buildin*s, plant
and e2uipment.
e: Ativities
details o# the activities underta0en b"
the or*ani-ation to achieve its
ob1ectives.
#: -roedures and ontrols
procedures and controls used to
ensure that the or*ani-ation3s
ob1ectives are pursued /ith due re*ard
to '(), this includes!
arran*ements #or the plannin* o#
activities and allocation o#
resources4
details o# mana*ement in#ormation
11D
s"stems desi*ned to monitor and
control activities, the use o#
resources and arran*ements #or
sta& trainin*.
&: Ris0 to GFM
ris0 o# poor '()
h: Ris0s to the Internal Audit
ris0s o# the 5nternal audit bein*
embarrassed.
I: Other in#ormation
areas o# interest to the council or
public.
in#ormation on an" internal and
external revie/s
6 results o# previous 5nternal audit /or0
)he a$$roah to in#ormation olletion should be .to$Adown/ startin& at the hi&h &eneral
level and wor0in& down to as muh detail as is re*uired to meet the overview ob'etive(
1( Pl$%%i%(
)he or&anizations audited by the audit o##ies may be lar&e and om$le!( E##iient and
e##etive overview o# suh or&anization re*uires are#ul $lannin&( An audited entity an be
overed by a sin&le overview% or by a number o# overviews overin& di##erent $arts o# the
or&anization% they may be arried out in one year or s$read over several years> and they an
be underta0en as a sin&le annual e!erise or as a series o# adAho e!erises(
)he number and so$e o# overview de$ends on the audited entityVs or&anizational
om$le!ity and the $rior 0nowled&e o# the audit #ield( I# the entity is very om$le! it will
usually re*uire more than one overview( )imin& de$ends on the sale o# the overviews and
the availability o# resoures(
Or&anizational om$le!ity de$ends on the sale% nature and interArelationshi$ o# the audited
entityVs ob'etives% ativities% struture and resouresA#ators whih in themselves tend to
su&&est the best a$$roah to ta0lin& an overview( Or&anizational om$le!ity an be
assessed by onsiderin& the #ollowin& *uestions(
Ob'etives A 3ow learly are ob'etives de#inedF
A 3ow many ob'etives are thereF
A 3ow om$le! are the ob'etivesF
A 3ow interArelated are the ob'etivesF
Ativities A 3ow many ativities are thereF
A 3ow om$le! are the ativitiesF
A 3ow interArelated are the ativities
A 3ow learly are the ativities lin0ed with the
ob'etivesF
?truture A Hhat is the ty$e o# strutureF
A 3ow dis$ersed are the o$erational unitsF
A 3ow many o$erational units are thereF
1@8
A 3ow interArelated are the o$erational units
A 3ow learly are the o$erational units lin0ed with the
ativitiesF
Resoures A Hhat are the nature and value o# the audited entityVs
resoures 9man$ower% assets and a$ital7ash:F
A 3ow do resoures relate to ob'etivesF
A 3ow do resoures relate to ativitiesF
A 3ow do resoures relate to struturesF
Common servies usually relate to the alloation and ontrol o# resoures" ash7a$ital% #i!ed
assets 9land and buildin&s:% sto0% vehiles% e*ui$ment% om$uters% man$ower% et( It will
o#ten be the ase that ommon ontrols are surveyed se$arately beause o# their si&ni#iane
or the way in whih they ut aross boundaries( Car&e or&anizations may 'usti#y a se$arate
overview #or ommon ontrols alone(
;ormally% overviews should not rossAde$artmental boundaries% but onsideration should be
&iven to interAde$artmental overviews when ommon ob'etives or ativities e!ist(
1@1
APPENDI/ 3B E-ALUATI-E CRITERIA
I%'"du&'i"%
1( Evaluative riteria are the reasonable standards a&ainst whih mana&ement an be assessed(
)hey are used to 'ud&e the de&ree to whih an audited entity on#irms to reo&nized &ood
$ratie( Evaluative riteria are what the auditor believes the de$artment should be doin& or
ahievin& i# it is to seure &ood value #or money( )he riteria will over struture%
or&anization% systems% methods laws% re&ulations% sta##in&% trainin&% resoures et( de$endent
on the area we are loo0in& at( ?uitable riteria are that are a$$ro$riate to the $artiular
harateristis o# the audited entity( )hey #ous wherever $ossible on the results e!$eted to
be ahieved by the o$eration% system% ontrol et( )he assessment o# whether or not riteria
are met results in audit #indin&s 9observation:(
2( In -er#ormane Auditin& we use evaluative riteria"
in the overview and mar0in& to identi#y ris0 to value #or money and the $otential im$at
o# a study( At these sta&es we only re*uire broad% to$ level riteria to om$are what we
believe should be ha$$enin& with what is ha$$enin& in the audited entity>
durin& the #easibility and $lannin& sta&es to de#ine the main study audit methodolo&y(
Eah main study issue should be e!amined a&ainst detailed evaluative riteria whih% in
turn determine the WtestsW we will need to arry out 9and lo&ially the #easibility o# the
main study:>
in the main investi&ation to evaluate the in#ormation olleted and to draw onlusions on
the de$artmentVs $er#ormane and ma0e reommendations( 3ere we will use the detailed
riteria established durin& the #easibility and $lannin& sta&es>
durin& re$ort writin& to $rovide a struture to the re$ort and hi&hli&ht the $riority issues(
Evaluative riteria are there#ore the bedro0 o# e##etive $er#ormane auditin&(
C"%&e7'1
3( Evaluative riteria an be either"
$rini$les% i(e( the absolute onsiderations whih determine whether an ativity is
onduted $ro$erly or whether value #or money is ahieved 9e(&( that the audit entity
should re$ort its $er#ormane to the ounil> or that 'ob reation should be ostAe##etive:>
standards% i(e( the level o# $er#ormane o# the ativity or o# the resultant im$at( ?tandards
o#ten ta0e the #orm o# norms or tar&ets% may over *uantity and *uality% and may be
absolute or relative% 9e(&( that the audited entity should $rodue a re$ort to the ounil on
its $er#ormane at least annually> or that the ost $er 'ob should not e!eed R birr:(
1( He an also set evaluative riteria as *uestions( )his has one ma'or advanta&e( Hhere we
#ind that the answer is not wholly in the $ositive% we 0now that we have si&ni#iant #indin&s
9$rovided that we ensure that the evaluative riteria are si&ni#iant:( Further% the evaluative
riteria themselves $rovide us with the reommendation( ?o% i# we #ind that the answer to
the evaluative riteria(
.3ave ministries set lear% measurable and *uanti#iable o$erational ob'etives
#or eah o# their de$artments and divisions overin& the ne!t 12 monthsF/
I# no% we have a reommendation that"
.All ministries should set lear measurable and *uanti#iable o$erational ob'etives #or
eah o# their de$artments overin& the ne!t 12 months(/
1@2

;ote" )his would be the initial reommendation( He would also $rovide instrutions%
&uidane% e!am$les o# best $ratie% outlines o# reommended trainin& et( to allow this
reommendation to be im$lemented suess#ully(
@( )he minimum re*uirement #or an e##iient study is a set o# evaluative $rini$les( Alone these
may be su##iient #or more limited studies o# struture or $roess as they will allow the
auditor to identi#y areas where there is a ris0 to value #or money and to su&&est
im$rovements(
5( ?tandards &ive the auditor the added dimension o# bein& able to measure the e!tent o# the
auditeeVs $er#ormane o# the $rini$le established #or struture or $roess or its im$at on
value #or money( Ky settin& a numerial benhmar0 o# e!$eted $er#ormane the auditor may
be able to value the #inanial and7or nonA#inanial onse*uenes o# the auditeeVs ations(
E*ually% it may be $ossible to assess the value o# any audit reommendations(
<( )he broad ontent o# evaluative riteria also varies aordin& to the nature o# the
overview7mar0in& to$is or audit issues we are loo0in& at( Audit issues #all into 3 broad
ate&ories"
*uestions o# struture " the overall le&al% or&anizational% resoure and mana&ement
#ramewor0>
*uestion o# $roess" suh mana&ement and tehnial ativities as $lannin&% $rodution%
ontrol et(>
*uestions o# ahievement o# value #or money" the level to whih an ativity is eonomi%
e##iient or e##etive(
A detailed analysis whih an hel$ the auditor to identi#y audit issues is &iven in this
+uide on $a&e 2@ to 25(
6( )he riteria we use will there#ore #all somewhere within the #ollowin& matri!"
,RI.CI,/* S%.+%R+
STRUCTURE e(&( there should be lear e(&( the audited entity
lines o# aountability should $rodue annual
#or all e!$enditure re$orts to Counil
PROCESS e(&( $er#ormane should e(&( monitorin& should
be monitored in a timely be within 3 days o#
and aurate #ashion the event and aurate
to withinZ7A @X
-FM e(&( 'ob reation should e(&( 1@%888 additional
AC)IE-EMENT be ma!imized #or the #unds 'obs should be reated
s$ent in the year
D( Any $artiular audit may need evaluative riteria #or a number o# the ells o# the matri!%
de$endin& u$on the e!at so$e o# the audit( Criteria should &ive om$lete overa&e o# all
the audit issues% i(e( we should onstrut an umbrella o# riteria #rom whih de#inition o# the
audit methodolo&y% in#ormation &atherin& and analysis o# audit #indin&s an $roeed( )hus
#or an audit loo0in& at the mana&ement and $er#ormane o# a sheme% riteria will $robably
be needed #or both $rini$les and standards o# $roess and GFM ahievement( Hithin eah
ell a number o# riteria may be needed(
1@3
Ad=$%'$(e1 "! u1i%( e=$lu$'i=e &i'ei$
18( Evaluative riteria have a number o# advanta&es #or $er#ormane audit"
there will be a &eneral level o# onsensus amon&st the audit team as to the im$ortant
#ators a##etin& eonomy% e##iieny and e##etiveness>
e!aminers have a lear idea #rom the start o# what onstitutes &ood and bad $ratie% and
are more able to assess their #indin&s ri&orously and de#ensibly>
i# the audited entity si&ns u$ to the riteria #rom the start% learane o# the dra#t re$ort
should be eased>
the audited entity will be able to &ive a more in#ormed and strutured res$onse to the our
audit $ro$osals #rom the outset>
riteria reate a stron& #ramewor0 whih assists the $re$aration o# tas0 outlines and
olletion o# evidene>
the riteria may $rovide a &ood struture around whih to dra#t the Re$ort(
E1'$5li1Di%( &i'ei$
11( )he level% detail and nature o# the riteria to use will be a matter #or audit 'ud&ment in eah ase
and will vary aordin& to the sta&e o# the a$$roah we have reahed"
in the overview we only re*uire indiations o# ris0 to value #or money and so an ta0e a
#airly &eneral a$$roah to the riteria>
in the #easibility review and main investi&ation we re*uire $reise and detailed riteria on
the $ro$osed study issues( )his ensures we have a viable methodolo&y and tar&ets our
wor0 on the 0ey evidene(
12( In the main investi&ation% riteria will be determined by the ob'etives and de$th o# the
investi&ation( In a broad based audit it may be a$$ro$riate to de#ine only hi&hAlevel
$rini$les #or eah as$et o# the auditeeVs ontrol #ramewor0( For narrower% more shar$ly
#oused studies% more detailed $rini$les and standards mi&ht be neessary(
13( ?ome riteria are a$$liable to all #ields o# mana&ement( For e!am$le we an establish riteria%
that the audited entity should"
have lear measurable ob'etives and a &eneral $lan #or aom$lishin& them>
have tar&ets by whih to assess whether ob'etives are bein& met>
have well de#ined res$onsibilities #or the use o# resoures>
have sta## and or&anize in an eonomi and e##iient manner to aom$lish ob'etives and
the $lan>
use resoures to deliver $ro&rams e##iiently and with ade*uate ontrol>
have in#ormation whih is timely and aurate and enable the ahievement o# the tar&ets
and the ob'etives to be monitored>
re$ort the results o# its 0ey ativities 9sta##% ounil% share holders% $ubli% ustomers:(
11( )he above riteria are broad statements whih are e*uivalent to #undamental 9study: issues
and an be used #or establishin& the so$e o# investi&ation( Kut they e!lude what an be
use#ul #or ondutin& the investi&ation detailed riteria #or s$ei#i #untion or ativity( For
e!am$le% it an be established #or the trainin& #untion that the or&anization should"
identi#y sta## trainin& needs>
analyze trainin& needs and develo$ trainin& $lans>
desi&n ourses to re#let the needs identi#ied> ontrol the im$lementation o# sta## trainin&
ourses>
monitor and evaluate sta## trainin& needs(
1@1
)hese riteria would $rovide the benhmar0s #or an e!amination o# the trainin& #untion(
Kut it is $ossible to sub divide these still #urther so that #or instane( .the audited entity
should identi#y sta## trainin& needs/(
individual and &rou$ trainin& needs should be identi#ied in terms o# $otential
im$rovement to $resent and #uture 'ob $er#ormane(
line mana&ers should have the $rimary res$onsibility #or identi#yin& trainin& needs(
1@( )he level o# detail will de$end on e!aminers 'ud&ment( )he *uestion to as0 is what is use#ul
#or ondutin& the audit( Criteria an be set at three levels"
at the #irst level% are the broad statements o# $rini$le whih will a$$ly in any situation>
at the seond level% is the methodolo&y #or a #untion or ativity>
at the third level% are detailed standards and $roedures o# a s$ei#i or tehnial nature(
)his is the di##iult Athin0 tan0 A sta&e( It is $ossible to identi#y riteria whih a$$ly to eah
ty$e o# #untion or ativity e(&( man$ower% trainin&% &rants in aid et( )he e!aminer ould
then a$$ly the a$$ro$riate set o# riteria to the investi&ation( Hhile this is a use#ul startin&
$oint% in $ratie the riteria have to be tailored to eah audited entityVs irumstanes( )he
reasons #or this are"
?truture A )he audited entity is or&anized hierarhially or by team et( It is
entralized7deentralized( It is &overned by a board% ommittees% hie#
e!eutive or ombination o# the above( ?ensitivity has to be shown to
the audited entityVs historial develo$ment e(&( universities( ;one o#
the strutures are &ood or bad( It de$ends on whih suits the audited
entityVs #untions7ativities(
Central Controls A An a&eny may have more $ower to at on its own behal# than a
&overnment entity( )hus an a&eny may have #le!ibility e(&( on sta##%
use o# #unds( Kut suh arran&ements will be set out in the #ramewor0
doument with the s$onsorin& or&anizations( +overnment entity in
turn need to ensure that they om$ly with treasury re*uirements in
their own o$erations(
Ce&islature A Ce&islature may re*uire an audited entity to have ertain ontrol or
#ollow standards or $raties with their $ro&rams( E!am$les would be
to obtain audited returns% deal with laims in a ertain way% onsult
with others et(
?ize A A lar&e or&anization or $ro&ram is li0ely to have more so$histiated
ontrols than a small or&anization or $ro&ram(
Ris0 A I# the ativities are overed by seurity onsideration or ommerial in
on#idene then more strin&ent ontrols would be needed(
)ime A I# servie standards re*uire a *ui0 res$onse e(&( $oliies% #ire then the
systems should be &eared to $rovidin& that res$onse(
15( Hhen you believe you have reasonable set o# riteria disuss them with the auditee
de$artment( )heir omments ould in#luene your deision on whih riteria to use #or the
investi&ation(
Hhen settin& riteria"
the riteria should be measurable wherever $ossible>
1@@
set ost e##etive riteria #or the area under investi&ation>
identi#y the s$ei#i ris0 to value #or money whih the riteria need to over>
he0 whether there are any riteria already in e!istene elsewhere whih are relevant to
the audit issues 9see $ara&ra$h 1< below:>
tailor the riteria to the audited entityVs and ativity under e!amination( )a0e aount o#
the irumstanes under whih the audited entity o$erates inludin&>
any le&islative restritions>
the aims and ob'etives o# the auditee2s $ro&rams>
the level o# dele&ated authority #rom the head o# $ubli body or MOFED>
the sale o# o$eration( Hithin bounds% the smaller the sale o# o$eration% the less
demandin& the riteria an reasonably be(
remember that what may be a reasonable riterion #or one auditee may be
unreasonable #or another( A hi&h level o# senior o##ier involvement in asset
dis$osals would be e!$eted in an audited entity where suh transations are rare(
Kut &reater dele&ation o# authority ould be ae$ted in an audited entity har&ed
with asset mana&ement as its $rimary #untion and with develo$ed $roedures and
ontrols>
set realisti riteria% not ideal whih no de$artment ould $ossibly ahieve(
1<( In many ases there may be some &uidane on evaluative riteria( -ossible soure o#
in#ormation inlude"
&enerally ae$ted mana&ement $raties> 9&ood $ratie:
ob'etives o# the entity or $ro'et>
$revious audit o##ies investi&ations o# the same sub'et>
aademi $ronounement o# the $ro#ession>
$ubliations o# other national audit o##ies>
&overnment rules and re&ulations>
standards establish by the audited or7and its su$ervisory authority o# the auditee>
$ro#essional bodies or trade assoiations% here or abroad>2
the Ethio$ian mana&ement institute>
the internet
international bodies>
om$arison o# the audited entity with similar or&anizations both in Ethio$ia and abroad(
)he assistane o# onsultants may also $rove valuable(
16( I# usin& e!istin& riteria the auditor should ensure that it"
is relevant to the issues and the audit entityVs under e!amination>
$rovides ade*uate overa&e o# all the 0ey value #or money onsiderations>
is $ithed at the ri&ht level>
is u$ to date(
1D( Establishin& a standard a&ainst whih to evaluate the auditeeVs $er#ormane will &enerally be
more di##iult than reahin& a&reement that the auditeeVs should #ollow ertain $rini$les o#
&ood mana&ement or best $ratie( O#ten we will #ind that the audited entity has not set itsel#
standards o# $er#ormane and that no &enerally ae$ted ones e!ist( Hhere no standards
e!ist% om$arisons may $rove use#ul( )here are a number o# di##erent om$arisons whih we
an em$loy"
om$arisons over time>
between &eo&ra$hial areas>
between individuals where they are doin& li0e wor0>
1@5
to the avera&e o# the or&anization% $artiularly in relation to standardized ativities>
with similar $ubli or $rivate setor or&anizations>
to im$lied $er#ormane derived #rom ontrastin& the $lanned ahievement and resourin&
o# an ativity(
28( )hou&h in#ormative% om$arisons may not allow us% in all ases% to draw de#initive onlusions
as to whether value #or money is bein& ahieved( 3owever% even in suh situations% they may
$rovide su##iient evidene to *uery WoutlyersW% i(e( those ourrenes whih lie #urthest #rom
the norm o# $er#ormane #or their om$arators( For e!am$le% i# in e!aminin& $ubli setor
ontributions to $rivate setor housin& shemes we #ind that in <@X o# ases the ontribution
ran&ed between Kirr @%888 and Kirr 18%888 we mi&ht *uery both ases where the
ontribution was less than Kirr 1%888 9on the &rounds that the $rivate setor sheme would
have &one ahead without $ubli setor ontributions: and where it was in e!ess o# Kirr
28%888 9on the &rounds that the $ubli setor ontribution was e!essive in om$arison to
the resultin& bene#its:( In both instanes the ases should be reviewed in detail to $rovide
su##iient evidene to su$$ort our initial onlusions(
21( One word o# aution is neessary( In ertain irumstanes the auditor may not be best $laed
to s$ei#y &enerally ae$table riteria( In e##etiveness audit both $rini$les and standards
derive #rom the $oliy ob'etives and will need to be set or a&reed by the $oliy ma0ers( Kut
even in these ases the auditor has two #urther onstrutive avenues to investi&ate"
where the auditee have omitted to set riteria themselves% this may be a relevant #indin&
#or re$ort>
om$arisons an be made to similar shemes both in Ethio$ia and abroad(
C"%&lu1i"%1
22( )o draw onlusions in $er#ormane audits we deide what is &ood and bad $ratie by the
auditee A we intuitively set our own evaluative riteria( I# onsidered systematially% a&reed
within the team% and disussed with the auditee% riteria an #orm the ornerstone o# an
e##iient study( Ky settin& out the riteria u$#ront we an ensure our wor0 #ouses on the 0ey
issues #or value #or money(
1@<
APPENDI/ +B IDENTIF4ING FUNDAMENTAL ISSUES
1( Fundamental issues are the basi GFM *uestions the investi&ation should onsider i# it is to
reah sound onlusions on $er#ormane and use o# resoures in $ro&ram% $ro'et or other
area or ativity to be e!amined( )o $rodue $enetratin& investi&ations and deisive re$orts
within a reasonable timesale the number o# #undamental issues to be $ursued should
normally be to 2A1( )hese should not be allowed to mushroom as the investi&ation $roeeds(
2( As a startin& $oint to identi#y suh issues% the auditor may onsider the #ollowin& list o# 11
basi *uestions( )his list is not intended to be $resri$tive nor it is to be ta0en as a om$lete
summary o# all $ossible #undamental issues(
AuthorityF Does the ativity to be investi&ated ome under relevant le&islation or
re&ulationsF 9)his is not an e!amination o# re&ularity but o# the
overall authority #or the ativity onerned(:
;eedF Is there a need #or $ubli setor e!$enditure or use o# resoures on this
ativityF 3ow #ar is the involvement o# the audited entity 'usti#iedF
AlternativesF 3as there been $ro$er onsideration o# the alternative means o#
meetin& the needF 3as the best alternative been seleted #or
im$lementationF
MethodF 3ave ativities been $lanned% or&anized and im$lemented in an
ae$ted wayF
?tandardF Here the re*uirements7s$ei#iations a$$ro$riate% at the ri&ht level and
are they bein& metF
)imelinessF Did matters $roeed at the a$$ro$riate rate avoidin& delay and
unneessary osts 9both diret and onse*uential% #inanial and nonA
#inanial:F
ControlsF Are there ade*uate ontrols to ensure the ahievement o# satis#atory
GFMF
CostF Here resoures used eonomially and e##iientlyF
ReoveryF Here reei$ts or returns o$timizedF
AhievementF Here the intended ob'etives #ully ahievedF Here there si&ni#iant
adverse e##ets or unintended im$atsF
Im$liationsF Here there any other si&ni#iant GFM im$liations o# the ativity
onernedF
1@6
APPENDI/ .B DOCUMENTATION
Hor0in& $a$er should be maintained to $rovide a reord o# the wor0 arried out% the #indin&s and
onlusions reahed and $rovide the basis on whih the $er#ormane re$ort an be $re$ared( )hey
should be $re$ared in su##iient detail% but at the most eonomial level% to enable an e!$eriened
auditor with no $revious onnetion with the audit to establish what wor0 was $er#ormed to
su$$ort the #indin&s and onlusions(
Hor0in& $a$ers should be $re$ared and #iled in wor0in& $a$er #olders 9H-F: as the audit
$roeeds( Care should be ta0en to inlude only that material whih is diretly relevant and auditors
should &uard a&ainst the tendeny to o$y too many unneessary douments( It will be hel$#ul at
the re#erenin&% review and re$ortin& sta&es% i# the auditor summarizes the evidene olleted to
show the detailed audit ob'etives o# the e!amination to evaluate its relevane% reliability and
su##iieny% and to draw onlusions and ma0e reommendations based on the evidene( Auditors
should there#ore% im$lement the #ollowin& &uidelines"
1( Hor0in& $a$ers should show"
the evidene olleted
the $roedure used to obtain it
the soure o# the evidene
the sta## who arried out the wor0
the date o# the wor0
the issue% su$$osition and detailed audit ob'etive to whih the evidene relates(
2( Hor0in& $a$ers should be lear% onise and le&ible( Material should be restrited to matters
whih are relevant to the audit and should not ontain e!essive detail( )hey should be
suitably re#erened and ross re#erenes and orderly $laed #or ease o# loation and
re#erene(
*"?i%( P$7e F"lde1
3( All wor0in& $a$ers should be #iled on wor0in& $a$ers #olders 9H-Fs:( )he material held in
H-Fs #or individual investi&ation should onsist o#"
a: $lannin& and administrative material 9e(&( o$ies o# #easibility review re$orts% notes o#
$ro&ress meetin&s:(
b: Corres$ondene with the audited entity and notes o# disussions with the auditee
o##iials>
: o$ies o# evidene% reords% analysis and other $a$ers in su$$ort o# the #indin&s and
onlusions>
d: materials and $a$ers aumulated in re$ort $re$aration inludin& dra#ts and summaries
o# main issues(
1( Hhen or&anizin& the doumentation o# a $er#ormane audit investi&ations the #ollowin&
methods are reommended"
1: maintain a lead #ile ontainin& the essential douments 9e(&( overview #easibility review
re$orts% dra#t re$orts et(:
2: minutes and summaries should be $laed on the le#t and enlosures on the ri&ht 9where
summaries are used on H-Fs% minutes% i# needed% should be brie# and should not re$eat
the summary:>
3: all H-Fs and #iles should have an inde! as the to$ doument>
1: H-Fs should ontain summaries o# evidene and eah doument should be re#erened and
inde!ed #or ease o# review and later re$ort dra#tin&>
1@D
@: avoid e!traneous or unneessary enlosures 9i# neessary only the a$$ro$riate $arts o# a
doument should be enlosed:>
5: douments should normally be #iled in hronolo&ial order% alternatively% subAdivision
may be used #or se$arate as$ets>
<: douments should show the #ile number #rom whih they were o$ied% the date 9or i# not
0nown the a$$ro!imate date: o# ori&in% and i# $ossible the &rade o# the ori&inator>
6: i# the enlosure is a dra#t% e##orts should be made to on#irm that a #inal version was
made% 9es$eially i# the doument is a submission to Ministers et(:% and a note made o#
the outome>
D: Hhere an enlosure on H-F re#ers to another doument o# si&ni#iane whih is also
on #ile% its #ile and enlosure number should be re#erred to in the mar&in>
18: im$ortant or relevant sentenes and $ara&ra$hs in the enlosure should be side lined
or otherwise hi&hli&hted>
Re7"'i%( #$'ei$l
@( Durin& the ourse o# re$ort $re$aration it is li0ely that a number o# dra#ts will be $re$ared
within the internal audit( )his has a tendeny to distane the dra#ts #rom the evidene and as
a result it is essential that"
all dra#t re$orts should show the date o# ori&in on eah $a&e>
all dra#ts should be 0e$t and #iled in hronolo&ial order>
dra#t re$orts should be re#erened to su$$ortin& evidene showin& H-F re#erene
and enlosure number>
the #inal dra#t re$ort to be sent to the audited entity should be re#erened ba0 to
the auditeeVs soure #rom whih the evidene was obtained(
)his $rovides a &ood disi$line to ensure that we have ade*uate su$$ort #or the re$ort and
allows us to res$ond *ui0ly to any hallen&es #rom the auditee(
158
APPENDI/ 0B INITIAL ANAL4SIS OF DEPARTMENT OF ASSORTED ISSUES - INPUTS
AND ACTI-ITIES
1( )his $art o# the &uide &ives an e!am$le o# the methodolo&y o# ross uts( Cross uts are an
analytial tehni*ue used in the overview with the ob'etive o#"
obtainin& an initial understandin& o# the #inanes and struture o# an audited entity>
de#inin& a strate&y #or the audit> and
identi#yin& $otential audit to$is(
2( )o ahieve this ob'etive we need to"
identi#y the main #aets o# the auditee inludin& its"
A ob'etives>
A $oliy instruments>
A re&ulatory and $rini$al administrative ativities>
A or&anizational struture>
A in$ut usa&e by ty$e e(&( labour% interest $ayments>
A inome% e!$enditure% assets and liabilities>
A main #inanial mana&ement ontrol systems(
analyze this in#ormation to &ive a #ull listin& o# all $ossible eonomy% e##iieny and
e##etiveness to$is within the auditee( For e!am$le we would want to analyze the data
by $oliy ob'etive and% as a subsidiary to this% by $oliy instrument 9this would &ive a
view o# the $ossible ran&e o# e##etiveness issues:>
alloate the auditeeVs% and where $ossible the wider $ubli setorVs% #inanial data to eah
o# these to$is(
)his will &ive us a ran&e o# $ossible $er#ormane audit to$is #or the auditee and their materiality(
3( )he e!am$le below is about the #itional De$artment o# Assorted Issues( It is assumed that all
the neessary in#ormation has been olleted( )he remainder o# this $art o# the &uide
demonstrates how that in#ormation an be analyzed(
1( A &ood startin& $oint is o#ten the #inanial statements o# the or&anization( )hese an indiate
where resoures are bein& used% and #or what $ur$ose( )he auditeeVs annual aounts &ive
the #ollowin& in#ormation"
T$5le 1B EC7e%di'ue "! 'De De7$'#e%' "! A11"'ed I11ue1, 1,// EC;
I'e# 6i 8i% #illi"%19
3ousin& 2@8
)rans$ort A roads 288
)rans$ort A rail 16@
Anient monuments @5
Museums and other olletions 28
;ational -ar0s D8
De$artmental Administration 2@
)otal e!$enditure o# de$artment 22.
9?oure" #ititious:
)his &ives us only a very hi&h level view o# the de$artment( All we an say at this sta&e is
that housin& and the two ty$es o# trans$ort are the most material areas(
151
@( Coo0in& #urther into the available #inanial in#ormation we #ind that the e!$enditure on
housin& an be bro0en down% by $oliy instruments% as #ollows"
T$5le 2B A51'$&' !"# 'De De7$'#e%' "! A11"'ed I11ue1K 5ud(e' 1D">i%( eC7e%di'ue "%
D"u1i%( 5y 7"li&y i%1'u#e%' 8$l1" 1D">i%( 17e%di%( $u'D"i'y9
P"li&y i%1'u#e%' 6i
8i% Milli"%19
;ew build A $rivate 9ministry: 3<
;ew build A $ubli 9munii$alities: 58
?lum learane 9munii$alities: 33
Renovation A $ubli 9munii$alities: 15
;omad sites 9zones: 5
3ostels #or urban homeless 9munii$alities: 21
Rehabilitation o# housin& #or dis$laed homeless $ersons 9zones: <@
Di$lomati housin& [net tradin& aount loss\ 9Ministry: 2
)otal housin& e!$enditure 2@8
9soure" #ititious:
)able 2 &ives us a better a$$reiation o# the $riority to be attributed to eah housin& area"
the rehabilitation e!$enditure and $ubli setor new build aount #or over @8X o#
housin& e!$enditure between them% and should be reviewed in more detail later in the
overview>
nomad sites and di$lomati housin& a$$ear to be relatively unim$ortant>
we need to be are#ul% however% as the item #or di$lomati housin& is a loss made on a
tradin& ativity whose annual turnover is 111 million birr( In &ross terms it is the lar&est
item% and the e!istene o# a loss su&&ests $oor value #or money( )here is stron& evidene
to su&&est that it is an area worthy o# #urther investi&ation(
5( In table 2 we have analyzed e!$enditure by broad $oliy instrument only( In $ratie this is
o#ten how we will #ind #inanial in#ormation $resented( Bsin& this data we ould also
attem$t an analysis by the $oliy ob'etives to whih eah o# those instruments relate( Ky
interviewin& the auditeeVs to$ mana&ement we obtain in#ormation on their $oliy ob'etives
whih allows us to $re$are #i&ure 1( )here are a number o# interestin& #eatures about this"
the de$artment has 3 broad housin& ob'etives" im$rovin& rural and urban housin& and
$rovidin& ade*uate housin& #or the di$lomati ommunity>
im$rovement7e!tension o# urban housin& is the sin&le bi&&est third tier item>
what a$$eared to be a relatively small item A nomad sites A beomes o# medium size
when the element #rom the rehabilitation $oliy instrument e!$enditure item is inluded(
<( He an also reA$resent table 2 to show the relative im$ortane o# the various s$endin&
authorities"
152
T$5le 3B De7$'#e%'$l "! A11"'ed I11ueK1 eC7e%di'ue "% D"u1i%( 5y 17e%di%( $u'D"i'y
S7e%di%( Au'D"i'y 6i
8i% #illi"%19
Munii$ality 138
Sones 61
Ministry 3D
)otal housin& e!$enditure
9soure" #ititious:
2@8
)able 3 an be viewed as re$resentin& e!$enditure by main #inanial mana&ement system(
Althou&h munii$alities and zones are the s$endin& authorities and have $rime
res$onsibility #or seurin& &ood value #or money% we would e!$et to see the de$artment
monitorin& and reviewin& their $er#ormane and e!ertin& $ro$er ontrol over them to ensure
that they at eonomially% e##iiently and e##etively( He would want to loo0 at this later in
the overview to he0 that suh ontrols e!ist and are o$eratin&(
6( Returnin& to )able 1 we are also interested in the auditeeVs e!$enditure on in$uts( He would
want to see that the de$artment had e##etive systems #or eonomy #or eah main in$ut( )he
#irst ste$ is to determine what the auditee s$ends its money on"
T$5le 3B De7$'#e%' "! A11"'ed I11ue1K eC7e%di'ue 5y i%7u'1
I%7u' 6i
8i% #illi"%19
Kuildin& ontrats 386
Administrative sta## 18
Other diretly em$loyed labour 2@
I -lant and e*ui$ment @1 ]
I Road vehiles
Ci&ht vehiles
16 ]
Ma'or trans$ort 2< ]
Cand $urhase D
Cash om$ensation to #armers 12
Railway rollin& sto0 1<<
I Com$uters 5 ]
I Administrative in$uts 15 ]
Interest $ayments 13<
)otal e!$enditure o# the auditee 625
9?oure" #ititious:
)here are 3 items over Kirr 188 million whih will have a ma'or e##et on whether the
or&anization is eonomial( In eah ase we would e!$et the de$artment to have ade*uate
ontrols( In addition the items mar0ed W]W will be $urhased #rom main su$$liers( )here
should be a $ro$er $rourement system overin& all suh $urhases( )o&ether these items
aount #or Kirr 116 million(
153
D( )ables 1 A 1 and #i&ure 1 &ive us the #ollowin& s$read o# e!$enditure"
I'e# 6i
8i% #illi"%19
Kuildin& ontrats 386
Railway rollin& sto0 1<<
Im$rovement o# urban housin& 15<
Di$lomati housin& [&ross e!$enditure\ 115
Im$rovement o# urban housin& sto0 115
Interest $ayments 13<
Munii$ality 138
-rini$al $urhases 9total o# ] items: 116
Brban new build 9total: D<
Sone 61
Im$rovement o# rural ommunitiesV housin& 61
Rehabilitation o# housin& #or dis$laed homeless $ersons <@
Cultivatin& ommunities housin& 58
;ew build A $ubli 58
-lant and e*ui$ment @1
Road vehiles 9total: 12
Administrative sta## 18
Ministry 3D
;ew build A $rivate 3<
?lum learane 33
Other diretly em$loyed labour 2@
-astoral ommunities housin& 21
3ostels #or urban homeless 21
Administrative in$uts 15
Renovation A $ubli 15
Cash om$ensation to #armers 12
Cand $urhase D
Com$uters 5
;omad sites 5
)his list is too lar&e to be able to ondut a #ull overview on eah item( Full analysis o# ris0
to value #or money% $ubli aountability et( #or eah e!$enditure item would ta0e a
onsiderable time( Further% in the normal ourse o# events% the list would be su$$lemented by
#urther tables overin& e!$enditure by ativity and #ull brea0downs o# the railwayVs% anient
monumentsV et( e!$enditure by $oliy instrument and $oliy ob'etive( He need to set
$riorities #or our #uture overview wor0(
18( ?ettin& $riorities is a matter #or audit 'ud&ment and will vary with available resoures( )he
more sta## we have the &reater the number o# hi&h and medium $riority items we an
investi&ate in de$th in the rest o# the overview( Kelow is one $ossible set o# $riorities"
hi&h $riority" M birr 188 million 96 items:
medium $riority" M 18 million but N 188 million 9D items:
low $riority" M 18 million but N 18 million 9D items:
de minimus" N 18 million 93 items:
11( Ky settin& these $riorities we are sayin& that we are unli0ely to e!amine low $riority items and
will ondut no #urther wor0 on de minimus items% unless evidene omes to li&ht to han&e
this deision( )he #inanial ross uts have &iven us 1< items whih% on the materiality
151
riteria% are worth investi&atin& #urther( Cross uts have also indiated that #or one item%
di$lomati housin&% there is a lear onern about value #or money(
12( He should not limit ross uts solely to the #inanial in#ormation( Or&anizations an underta0e
re&ulatory or administrative ativity whih% thou&h not havin& a si&ni#iant diret bearin& on
their own use o# resoures% an a##et the inome% e!$enditure or value #or money o# others
in the $ubli setor( He need our ma$ o# the or&anisation to over both its own use o#
resoures and the in#luenes it has on the rest o# the $ubli setor(
13( In addition to the #inanial ross uts% we need an or&anizational hart o# the de$artment with a
#ull statement o# the $oliy ob'etives o# eah area( Muh o# this will orres$ond to the
analysis above% as it will be a restatement o# the #inanial data #rom an or&anizational
view$oint( Kut there may be areas where the inome or e!$enditure is minimal but where
the ob'etives are im$ortant #or the wider $ubli setor(
11( An e!am$le above mi&ht be ;ational -ar0s( Its e!$enditure is medium $riority as it a##ets the
de$artment o# Assorted Issues% but its re&ulatory and administrative ativities are li0ely% at
the minimum% to a##et the ativities and e!$enditure o# the De$artment o# A&riulture as
well( He mi&ht #ind that the latter arries osts o# a #urther @8 A 188 million birr beause o#
the ations o# the DAI( I# we were to analyze eah de$artment entirely on its own
e!$enditure alone% eah item would be only medium $riority( )o&ether% under the overAridin&
$oliy ob'etive% the total e!$enditure is hi&h $riority(
1@( A #urther e!am$le mi&ht be in an area that a$$ears in none o# the tables above A road aident
$revention( In our #itional e!am$le the DAI has res$onsibility #or road aident $revention
and a $oliy ob'etive to minimize the ost to the eonomy o# aidents( Kut it ma0es no
diret e!$enditure on this ob'etive( All suh e!$enditure is borne by other de$artments% by
munii$alities or zones( )he others to&ether s$end 28 million birr a year on suh thin&s as
road im$rovements% tra##i li&hts% round about et(( Kut two other #ators are im$ortant"
the diret ost to the de$artment o# health o# treatin& aident vitims is a$$ro!imately
D8 million birr a year>
the e##et on the eonomy as a whole runs into many 188s o# millions o# birr a year(
In this ase the DAI has an administrative7re&ulatory ativity with a ma'or $oliy ob'etive
havin& si&ni#iant $ubli setor and national ost im$liations( It would be wron&%
there#ore% to i&nore it( I# we limit ross uts to diret de$artmental #inanial data alone we
would not $i0 this u$(
15( )he suess o# ross uts de$ends on &ood in#ormation about the ob'etives% ativities% #inanes
and mana&ement systems o# the or&anization( It is de$endent% there#ore% on havin& a &ood
wor0in& relationshi$ with the audited de$artment and ade*uate aess to $a$ers et(
In#ormation re*uirements will vary with the or&anization but in &eneral they should inlude"
the to$ mana&ement in#ormation systems>
a statement o# all $oliy ob'etives and instruments>
the or&anizational hart( ?ometimes the tele$hone diretory% i# u$ to date and or&anized
by setion% ma0es a &ood alternative>
all relevant #inanial data>
an understandin& o# the #inanial mana&ement ontrol systems(
Cross uts% and $riorities% should be re$orted to the 3ead o# internal audit(
15@
APPENDI/ 2B FACTORS AFFECTING RISI CRITERIA PRIORITIES
L"> 7i"i'y )i(D 7i"i'y
Area o# low e!$enditure 3i&h e!$enditure
Cow ris0 to GFM e(&("
lower inherent ris0
stron& ontrol environment
3i&h ris0 to GFM e(&("
hi&her inherent ris0
$oor ontrol environment
e##etive strate&i and bud&etary $lannin&
thorou&h $er#ormane review $roedures
$oor strate&i or bud&etary $lannin&
no $er#ormane review $er#ormed
#ew GFM o$$ortunities #ound in $rior
audits
history o# $oor GFM
+ood e!ternal re$ortin& arran&ements
$er#ormed
Cittle 9or no: in#ormation re$orted to
le&islature
Few worthwhile reommendations $ossible ?o$e #or ost e##etive
reommendations
Cimited E!eutives or $ubli interest Area o# ma'or ounil and $ubli onern
Cow ris0 to audit o##ie 3i&h ris0 to audit o##ie
-robable de$artmental obstrution to study( De$artment re*uest #or study(
-olitially ontentious or tehnially
om$liated(
Clear% $olitially neutral assi&nment(
Ma'or di##iulties in audit e(&( Audit strai&ht #orward% e(&("
data unavailable or di##iult to aess readily available data
e!tensive and so$histiated audit
tehni*ues re*uired
methodolo&y easy to develo$ and
a$$ly
ma'or sta## in$ut neessary *ui0ly and
hea$ly
?tudy an be delivered
Other ma'or wor0 $lanned or in $ro&ress
overin& same #ield
;o other reviews $lanned
Ma'or E!eutives han&es $lanned ;o develo$ments in near #uture
Or&anization struture a$$ro$riate to
o$erations
Bnneessarily om$le! or&anizational
struture in relation to o$eration
Clear internal and e!ternal lines o#
res$onsibility authority and aountability
Bnlear res$onsibilities between numbers
o# entities involved in deliverin& same or
related $ro&rams(
155
L"> 7i"i'y )i(D 7i"i'y
?enior mana&ement in lose ontat with
o$erational reality and deision ma0ers
Many level o# hierarhy between senior
mana&er and o$erational deision
ma0ers(
-ro&ram delivered throu&h entity ?i&ni#iant $ortions o# $ro&ram delivered
throu&h other entities(
-ro&ram em$loys assets that are intan&ible%
immovable or di##iult to dis$ose o#
-ro&ram em$loys ne&otiable assets that
an be aessed by third $arties(
Forthri&ht res$onses to in*uiries% orroborated
with #ats
Evasive or unreasonable res$onses to
audit in*uiries
E##etive internal audit #untion% su$$orted and
direted by senior mana&ers
Internal audit #untion non e!istent or
re$ortin& at low level
Reward systems reo&nize and re#let 0ey
dimensions o# $er#ormane
Reward systems unbalaned% #ous on
one as$et o# $er#ormane or on
e!traneous #ators(
?enior mana&ers aware o# ris0 inherent in
o$erations and o# ade*uay o# ontrol
measures
Bnawareness o# ris0s% la0 o#
mana&ement involvement in system o#
mana&ement ontrol(
A$$liable le&al authorities are identi#ied and
their im$liations re#leted in mana&ement
$roesses
Mana&ement has not identi#ied 0ey
statutory limits to authority(
On&oin& $ro&ram to review and maintain
systems and $roedures
?i&ni#iant wea0nesses remain
unorreted% even when identi#ied(
Com$etent e!$eriened aountin& and
systems sta##
Ine!$eriene% understa##in&% hi&h rotation
in aountin& and systems(
Few si&ni#iant de#iienies #ound% all
$reviously 0nown to mana&ement
Many si&ni#iant de#iienies% year end
ad'ustments deteted by audit(
)he listin& is not intended to om$lete( ;or does the e!istene o# one or more o# the hi&her ris0
indiators neessarily mean that there is a de#iieny or irre&ularity relevant to the s$ei#i
ob'etives o# an audit( )he $resene o# suh indiators should% however% hei&hten our awareness o#
the $ossibility o# inreased ris0s in any wor0 we underta0e(
15<
APPENDI/ ,B RISI ASSESSMENT FORM
Audi'ee
Audi' $e$ P"du&ed 5y
Pi"i'y Re=ie>ed 5y
Ti#i%( D$'e

CRITERIA COMMENT PRIORIT4
93i&h7medium7low:

Ka0&round

Materiality

Ris0 to value
#or money

-ubli
aountability

-ossible im$at

E!eutives7
$ubli interest

Ris0 to internal audit
De$artmental
issues

?uitability

Auditability

Other ma'or wor0
$lanned7in $ro&ress

Develo$ments li0ely
to a##et assessment

Conlusions and
overall $riority

156
APPENDI/ 10B RISI ASSESSMENT FORMS - *ORIED E/AMPLE
)his $art o# the &uide &ives an illustration o# the use o# ris0 assessment #orms as a$$lied to the
#itional De$artment o# Assorted IssuesV 9DAI: housin& new build sheme( A senario is &iven and
then the in#ormation used to om$lete the analysis sheet(
;ew Kuildin& ?enario
)he #ollowin& in#ormation was olleted durin& the overview on the de$artment o# assorted issues
new buildin& sheme"
)he sheme #unds the buildin& o# new houses and #lats by both the $rivate setor and
munii$alities( E!$enditure in 1DRR% EC% was birr 3< million to the $rivate setor and birr 58
million to the munii$alities( )here has been little han&e in the total or distribution o# &rant
over the last 3 years( )he ob'etive o# the sheme is to relieve aute housin& shorta&e in urban
areas% es$eially amon&st the $oorest setions o# soiety and #or the disabled>
the $rivate setor element is administered diretly by the DAI who are res$onsible #or
attratin& and a$$rovin& a$$liations% monitorin& wor0 in $ro&ress and $ayin& &rant a&ainst
invoies( DAI em$loy *uantity surveyors to assess whether invoies are reasonable> the J?s
s$ot he0 a$$ro!imately 28X o# all wor0s( A strit ontrol is 0e$t on the whih sites the J?s
visit throu&h the use o# random number tables>
there is no limit $laed on the amount whih $rivate individuals may a$$ly #or% thou&h house
buildin& #irms are not eli&ible( )he median 18X o# &rants was #ound to be in the ran&e 18%888
A 58%888 birr% but with an u$$er 18X in the ran&e 1D8%888 A 2@8%888 birr( Hhat limited wor0
has been done on those reeivin& &rant su&&ests that they tend to be $ro#essionally *uali#ied
in $rivate $ratie or business men% with an avera&e annual inome o# a$$ro!imately 58%888
birr( Most &rants were #or areas within Addis suh as bole road or old air$ort and to $eo$le
wishin& to e!$and or move to a lar&er house( 688 new $rivate setor houses were #unded in
1DRR>
munii$alities must a$$ly eah year #or a &rant alloation detailin& the $ro'ets and li0ely
e!$enditure under eah( )hey may inlude an estimate #or WreasonableW overheads( )he
de$artment reviews the munii$alitiesV intended rei$ients o# housin& and the areas $ro$osed
to ensure that they aord with the shemeVs ob'etives( )he DAI then $ays *uarterly a&ainst
totaled invoies and does a random s$ot he0 o# munii$alities to ensure that they are not
laimin& in advane o# need( )he DAI does not ollate in#ormation on the total number o#
units built eah year>
e!$enditure $ro#ilin& o# munii$ality invoies showed"
diret e!$enditure o# 11 million birr% and munii$ality overhead osts o# 1D million>
28X o# e!$enditure was #or 2 bedroom houses7a$artments aimed at #amilies with u$ to 3
hildren% 2@X o# e!$enditure was on lar&er aommodation and the remainder was
s$eial housin& #or the disabled or sin&le $arent #amilies>
median 18X e!$enditure on munii$ality $ro'ets was on aommodation ostin&
a$$ro!imately D%888 birr with an u$$er 18X ran&e o# 1@%888 A 38%888 birr>
the de$artment are onerned about the sheme% es$eially the munii$ality element( )hey #eel
that it is bein& used an area where munii$alities Wdum$W overheads and the de$artment #eel
unable to hallen&e overhead osts on the limited in#ormation that they ollet( 3owever they
are unli0ely to be able to start a ma'or review within the ne!t 2 years( )here are no other ma'or
reviews 0nown o# and there is no evidene o# either le&islature or $ress interest in the sheme(
)his is due in $art to the absene o# any #orm o# e!ternal re$ortin& by the de$artment>
15D
a brie# review o# some om$leted shemes by the audit team showed that whilst a ma'ority
were om$leted and maintained to a &ood standard% and all the $rivate housin& a$$eared to be
in e!ellent ondition% a si&ni#iant minority o# munii$ality housin& a$$eared to su##erin&
#rom both strutural and u$0ee$ $roblems( )here were also su&&estions that ma'or servies%
suh as water and sewa&e% were not ade*uate in some ases( DAI has no minimum re&ulations
#or the *uality o# new build>
there have been no internal audit or onsultany srutinies o# the area(
;o in#ormation was #ound #rom e!ternal a&enies( )he audit o##ie has #ull aess ri&hts to
the de$artment but no statutory aess ri&hts to the reords or sta## o# munii$alities( All
de$artment $a$ers are held entrally within the head*uarters loated in Addis Ababa(
1<8
RISI ANAL4SIS S)EET
Audi' $e$B 3ousin& A new build( P"du&ed 5y"
Pi"i'y" Medium Re=ie>ed 5y"
Ti#i%(" )his year D$'e" 2D71871DRR
CRITERIA COMMENT
PRIORIT4
93i&h7medium7low:
Ka0&round Ob'etive is to build new houses in areas o#
&reatest homelessness and overrowdin&(
Assistane &iven to munii$alities and $rivate
setor( Individual &rants are not limited in size(
Materiality )otal e!$enditure o# Kirr D<m(
+rants to $rivate setor" K 3<m(
-ubli setor e!$(" K 58m(
Medium
Ris0 to value
#or money
1( Munii$ality overheads har&ed to &rant
sheme run at M38X o# total $ubli setor
e!$((
2( -rivate setor e!$( not &oin& to $eo$le7areas in
&reatest need
3( Inade*uate ontrol over *uality o# new build A
some shemes ra$idly de&enerated(
1( Evidene some individuals reeived very lar&e &rants(
3i&h
-ubli aountability
E!$enditure medium $riority(
Re$ortin& to E!eutives very $oor(
;il re$ortin& on $er#ormane to date(
3i&h
-ossible
im$at
1( Im$roved re$ortin&(
2( Ketter tar&etin& o# &rants(
3( Im$roved de$artmental monitorin& and ontrol
o# munii$ality overheads(
3i&h
E!eutives7
$ubli interest
;il E!eutives interest to date% but $oor GFM
li0ely to arouse onern( ;o 0nown $ress
interest(
Cow
Ris0 to Internal
Audit
a stron& $ubli out ry about homelessness and
overrowd
3i&h
1<1
CRITERIA COMMENT
PRIORIT4
93i&h7medium7low:
De$artmental
issues
De$artment onerned about a$$arent munii$ality
abuse o# sheme( Ci0ely ne&ative
reation to review o# $rivate sheme es$eially the
e!essive &rants to individuals(
Medium
?uitability ;o 0nown $roblems( 3i&h
Auditability 1( Re$ortin& as$ets strai&ht #orwards
2( -roblems with aess to munii$ality reords(
3( Assessin& *uality o# new build will re*uire
outside s$eialist assistane(
Medium
Other ma'or wor0
$lanned7in
$ro&ress
;one 0nown o#(
3i&h
Develo$Vts li0ely
to a##et
assessment
De$artment onsiderin& review o# munii$ality
sheme but not within ne!t year(
Medium
Conlusions and
overall $riority
?heme has $oor GFM and aountability(
?ome su&&estion o# mal$ratie( ?tudy
di##iult but $ossible with outside
assistane( De$artment will have to be
handled are#ully but have no
le&itimate ob'etions to nature and
so$e o# study( )imin& in ne!t year
due to $ossible de$artmental review(
Medium
1<2
APPENDI/ 11B RISI ANAL4SIS OF T)E AUDIT FIELD A *ORIED E/AMPLE
NAME OF T)E AUDIT OFFICEB
AUDITEEB RE-ISED 64
PRODUCED 64 DATE
?)BDT I)EM Materiality Ris0
to
GFM
-ubli
aountVy
Im$ats E!eutive
interest
Ris0 to
Internal
Audit
De$artme
ntal issues
?uitVy AuditVy Other
wor0
Develo$ments OGERACC
-RIORI)T
)IMI;+
3ousin&
;ew Kuild Medium 3i&h 3i&h 3i&h Cow 3i&h Medium 3i&h Medium 3i&h Medium Medium 1D61A6@
Im$rovement o# urban
housin&
Im$rovement o# rural
housin&
Dis$laed $ersons housin&
et(
In$uts
Kuildin& ontrats
Interest $ayments
Ma'or $urhases et(
Fin( Mana&ement
Munii$alities
Sones
1<3
APPENDI/ 12B REJUIREMENTS FOR PRODUCING
STRATEGIC AUDIT PLAN PROPOSALS
-er#ormane audit assi&nment $ro$osals should be brie# 9not more than 3 to 1 $a&es $er
assi&nment: and should address the #ollowin& matters"
91: Ka0&round>
92: Main $oliy ob'etives and instruments in the #ield to be overed 9see note 1:>
93: Conerns re&ardin& value #or money and $ubli aountability>
91: -ro$osed so$e o# assi&nment 9inludin& materiality:% and the audit issues to be overed>
9@: Ce&islature and $ubli interest>
95: Assurane o# auditeeVs ae$tane o# $ro$osal% or details o# their ob'etions and how the
division $ro$ose to handle these>
9<: Details o# $ro$osed methodolo&y% inludin& soures o# evidene 9note 2:
96: E!$eted im$ats o# the study 9note 3:>
9D: Resoure needs in terms o# manAdays #or eah o# the 3 main assi&nment sta&es the #easibility%
the main investi&ation $lannin& and main investi&ation( 9onsultany and other e!ternal e!$ert
osts should be se$arately identi#ied:>
918: timin& o# #easibility% main investi&ation $lannin& and main investi&ation starts and
om$letions with e!$eted date #or dra#t re$ort(

N"'e1 B
l( -oliy Ob'etives7Instruments
?enior mana&ement re*uire all study $ro$osals to *uote diretly the audited entityVs $oliy
ob'etives and instruments in the area overed by the investi&ation( ?tudy $ro$osals should
identi#y the soure or authority #or the $oliy ob'etives and instruments 9e(&( relevant
le&islation% de$artmental statement &overnment re$ort:( Hhere no s$ei#i $oliy ob'etives
and instruments have been artiulated% this should be learly stated in the study $ro$osal(
2( Methodolo&y
-reise in#ormation is needed on how the study is to be arried out establishment o# riteria
a&ainst whih $er#ormane would be measured i(e( how eonomy% e##iieny and e##etiveness
issues would be e!amined> soures o# evidene> tehni*ues o# data olletion and analysis> and
ty$es o# onsultants and their $reise ontribution(
3( Im$ats
Eah audit outline should inlude a $ara&ra$h assessin& the $otential im$at or bene#its o# an
audit study% whih should be an im$ortant #ator in deidin& between studies or seletin& issues
#rom with in a study area( Ci0ely im$ats or bene#its inlude *uanti#iable savin&s% or
un*uanti#iable im$rovements suh as han&es in systems that stren&then aountability>
im$roved ontrol over assets> im$rovements in the *uantity o# out$uts and servies $rovided(
1<1
APPENDIX 13: STRATEGIC PLANNING - PLANNED USE OF
INTERNAL AUDIT RESOURCES - PRO FORMA
NAME OF THE ADIT OFFICE
PRODUCED 64 RE-ISED 64
DATE
RE?OBRCE REJBIREME;)?
-lan #or
1D61A6@
9sta## months:
-lan #or
1D6@A65
9sta## months:
Diret audit wor0
Fi%$%&i$l $udi'
Pe!"#$%&e $udi'
Overviews
Mar0in&
?trate&i $lannin&
Feasibility studies
Main investi&ation $lannin&
Main investi&ations and Re$ortin&
)otal diret wor0 91:
Indiret wor0
Divisional in$uts into
(((entral wor0 92:
Divisional mana&ement
Ceave
)rainin&
Other indiret
)otal Indiret ativities
)O)AC RE?OBRCE REJBIREME;)?
RE?OBRCE? -RE?E;)CT AGAICAKCE
HI)3I; I;)ER;AC ABDI) 91:
RE?OBRCE? REJBIRED
OGER7B;DER
AGAICAKCE
91: )his should inlude all available audit sta## on internal audit within the year(
92: Internal audit in$ut into entral wor0 inlude ontributions to trainin& ourses% attendane on
wor0in& $arties and ommittees(
1<@
APPENDIX 1!: PROPOSED USE OF CONSULTANT@ OUTSIDE
E/PERTS
NAME OF ADIT OFFICE:
PRODUCED 64 RE-ISED 64
DATE
1D61A6@ 1D6@A65
?ta##
months
Cost
birr
?ta##
months
Cost
birr
Overview
Mar0in&
Feasibility sta&e
1(
2(
3(
Main investi&ation $lannin&
1(
2(
3(
Main Investi&ations
1(
2(
3(
TOTAL
1<5
APPENDI/ 1+B IDENTIF4ING T)E MET)ODOLOG4 - A *ORIED E/AMPLE
NAME OF AUDIT OFFICEB
AUDITEE PRODUCED 64 RE-ISED 64 DATE
)his #ormat illustrates how the audit methodolo&y should be derived #rom the need to e!amine the issues
evaluative riteria% li0ely onlusions and e!$eted reommendations( )he e!am$le is based on the #itional
new build housin& $ro&ram introdued in this &uide $a&e 12 A 11(
ISSUES E-ALUATI-E CRITERIA LIIEL4 CONCLUSIONS E/PECTED
RECOMMENDATIONS
MET)ODOLOG4
)hat &overnment su$$ort #or
$rivate setor new build has
not &one to those in need(
)hat the &overnment should have
lear ob'etives #or the $ro&ramme
inludin& a statement o# need
Ob'etives learly stated( Only
&eneral statement o# need(
+ovVt should develo$ $reise
statement o# need and tar&et lient
&rou$(
Review o# de$artmental #iles and interview with
head o# entral $oliy unit 9C-B: and 3ead o#
housin& $oliy(
)hat the de$artment should have
assessed the harateristis o# those
in need
;o suh analysis arried
out(
As above( Review o# C-B and housin&
$oliy #iles(
)hat de$artment should have lear
s$ei#iation o# harateristis o#
those in need to be a$$lied when
assessin&
eli&ibility to &rant(
?$ei#iation wea0 and &ives
only #air re$resentation o#
harateristis o# those in
need(
As above( OA+ to
$rodue s$ei#iation(
91:Review o# de$artmental #iles and
&rant instrutions (
92: Audit team to draw u$ s$e(
based on de$artmental ob'etives
and a&ree with de$artment(
)hat de$artmental re&ulations and
instrutions should s$ei#y the riteria
to a$$ly in assessin& eli&ibility to
&rant( Criteria used should be based
on s$ei#iation o# harateristis o#
need
De$artmental re&ulations
ontain riteria #or seletion
o# a$$liants but these are
only #air re$resentation o#
those in need(
De$Vt should $rodue"
91: new &rant instrutVns
92: &rant assessment #orm #or
assessin& eli&Vy(
93: ?$e( o# &eo&ra$hial eli&ibility(
91: Review o# de$artmental instrutions to identi#y
any riteria
92: Com$arison o# riteria in instrutions with
s$ei#iation drawn u$ above(
)hat only those a$$liants satis#yin&
eli&ibility riteria should be seleted
to reeive &rant(
De$artment has not a$$lied
re&ulations ri&orously(
)hat there should be re&ular review
o# e##etiveness o# sheme inludin&
tar&etin& o#
&rants(
?am$le o# 188 ases over last 2 years% overin& all
sizes o# &rant and loations% to identi#y eli&ibility
riteria a$$lied and to om$are to s$ei#iation
#rom above>
)hat &rant should only &o to those in
need 9as de#ined by eli&ibility
riteria:
)hat &rant has not been limited
to those in need and si&ni#iant
number and value not satis#yin&
eli&ibility
riteria
As above( 91:Analysis o# in#ormation #rom sam$le
on the inome o# a$$liants and loaA
tion o# $ro'ets to assess whether
they aord with de$artmentVs s$e(
o# those in need(
92: ?u$$lementary survey o# a$$liants
1<<
to obtain in#ormation on inome(
1<6
APPENDI/ 1.B A-AILA6ILIT4 OF INFORMATION - A *ORIED E/AMPLE
NAME OF T)E AUDIT OFFICEB
AUDITEE RE-ISED 64
PRODUCED 64 DATE
)his #ormat illustrates the $roess o# identi#yin& in#ormation re*uirements #rom the methodolo&y% evaluatin& the in#ormation availability and
analysin& the e##et that any &a$s in the in#ormation may have on the li0ely onlusions and e!$eted reommendations(
LIIEL4 CONCLUSIONS E/PECTED
RECOMMENDATIONS
MET)ODOLOG4 INFORMATION
REJUIREMENTS
INFORMATION
A-AILA6ILIT4
COMMENT
Overall ob'etives o# $ro&ram
learly stated( De$artment have
only &eneral statement o# need(
+ovVt should develo$ $reise statement
o# need and tar&et lient &rou$(
Review o# de$artmental #iles and
interview o# head o# entral
$oliy unit and 3ead o# housin&
$oliy(
91: Clear statement o# $ro&ram
ob'etives
92:In#ormation on statement o#
need(
91: Available in de$tVal $oliy
$a$ers>
92: Bnli0ely to be available in #iles
but will obtain #rom interviews(
;o si&ni#iant $roblems
;o analysis by de$artment o# the
harateristis o# those in need(
As above( Review o# C-B and housin&
$oliy #iles
91: Details o# analysis or statement
that analysis not done(
91: Analysis not li0ely to be
available> statement to that e##et
#rom interviews>
;o si&ni#iant $roblems
De$artment has not a$$lied
re&ulations ri&orously in seletin&
those to reeive &rant
)hat there should be re&ular review o#
e##etiveness o# sheme inludin&
tar&etin& o# &rants(
?am$le o# 188 ases over last 2
years% overin& all sizes o# &rant
and loations% to identi#y
eli&ibility riteria a$$lied and to
om$are to s$ei#iation #rom
above>
91: Data on eah &rant &iven
inludin& 9a: size> 9b: loation 9:
riteria #or seletion 9d: inome o#
rei$ient 9e: total ost o# housin&>
92: s$ei#iation #rom de$tal
&uidelines o# need
91: ?ome in#ormation available but
and d unli0ely
92: to ome #rom $revious tas0s(
Ci0ely onlusion will
have to be limited to
$ointin& out that de$Vt
have inade*uate riteria
and have not alloated
&rants to ma!imise
e##etiveness o#
e!$enditure(
)hat &rant has not been limited to
those in need and that a si&ni#iant
number and value o# &rant has &one
to those not satis#yin& eli&ibility
riteria(
De$Vt should $rodue"
91: new &rant instrutVns
92: &rant assessment #orm #or assessin&
eli&Vy(
93: ?$e( o# &eo&ra$hial eli&ibility(
91:Analysis o# in#ormation #rom
sam$le on inome o# a$$liants
and loation o# $ro'ets to assess
whether they aord with
de$artmentVs s$ei#iation o#
those in need(
92: ?u$$lementary survey o#
a$$liants(
819A%$ly1i1 "! i%!"#$'i"% !"#
1$#7le "% 'De i%&"#e "!
$77li&$%'1 $%d l"&$'i"% "!
7"Ee&'1 '" $11e11 >De'De 'Dey
$&&"d >i'D de7$'#e%'K1 17e&;
"! 'D"1e i% %eed;
829 Su77le#e%'$y 1u=ey "!
$77li&$%'1 '" "5'$i%
i%!"#$'i"% "% i%&"#e;
91: as 1 above>
92: de$artmentally a&reed
s$ei#iation o# need>
91: $roblems #rom sam$le as
above> a$$liants unli0ely to &ive
data on inome>
92: #rom $revious tas0s
Ci0ely onlusion may
be unable to show
onlusively that &rants
have &one to ineli&ible
$eo$le
1<D
APPENDI/ 10B MAIN IN-ESTIGATION TIME AND COST
6UDGET
Inde! ;o( ^^^^^
NAME OF AUDIT OFFICEB
AUDITEE ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Date ^^^^^^^^^^^
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
)IME
HORP
DAT?
CO?)
A( DIGI?IO; CO?)?
Internal Audit De$artment
?enior auditor II
?enior auditor I
)eam leader
Auditor
Assistant auditor
)O)AC DIGI?IO;AC CO?)
9K: Other AO sta##
AO statistiian
)O)AC AO ?)AFF CO?)
9C: ?ubsistene osts
)O)AC AO I;)ER;AC CO?)?
9D: E!ternal osts
Consultany
Other e!ternal osts
)O)AC ER)ER;AC CO?)?
)O)AC CO?)
-re$ared by ^^^^^^^^^^^^^^^^^^^^ ?i&(^^^^^^^^^^^^^^^^^^ Date^^^^^^^^
Revised by ^^^^^^^^^^^^^^^^^^^^ ?i&(^^^^^^^^^^^^^^^^^^ Date^^^^^^^^
A$$roved by ^^^^^^^^^^^^^^^^^^^ ?i&(^^^^^^^^^^^^^^^^^^ Date^^^^^^^^
168
APPENDI/ 12B PRINCIPLES OF AUDIT E-IDENCE
*D$' i1 E=ide%&e
1( Evidene is the s$ei#i in#ormation obtained durin& our wor0 throu&h suh ativities as the
analysis o# reords and other data% interviews and observation( In $er#ormane audit evidene
means #ats or in#ormation to $rove or dis$rove $ro$osition or assertion 9riteria:( Conlusions
, reommendations must be based on hard audit evidene( Evidene olletion should be
direted towards e!aminin& *uestions o# the eonomy% e##iieny and e##etiveness in the audit
issues under review(
2( Auditors should obtain relevant and reliable evidene% su##iient enou&h to enable them to draw
reasonable onlusions , ma0e reommendations"
RECEGA;)" relevane re#ers to the relationshi$ o# the evidene to its use( )he
in#ormation used to develo$ an issue should be based on the most urrent
data available and must have a lo&ial% sensible relationshi$ to the issue in
*uestion( In#ormation that does not have this relationshi$ is unsatis#atory
as evidene( I# the latest available evidene seems out o# date we should
satis#y ourselves as to its ontinued relevane and &ive reasons #or its use(
RECIAKCE" )he evidene olleted should be the most aurate and obtainable throu&h
the use o# reasonable audit methods( In onsiderin& the reliability o#
evidene the auditor should are#ully onsider whether there is any reason
to doubt its validity or om$leteness( )his is im$ortant where di##erent
ty$es o# evidene su&&est inonsisteny( ?o i# there is doubt we should
see0 to obtain additional evidene but alternatively may *uali#y our
onlusions aordin&ly(
?BFFICIE;)" su##iient evidene is that whih would lead a reasonable $erson to the
same onlusions as our own( Determinin& the su##iieny o# evidene
re*uires are#ul 'ud&ment% $artiularly when there is on#litin& evidene
and we are re*uired to 'ud&e on whih side the balane lies( )his 'ud&ment
will be in#luened by a wide variety o# matters inludin&"A
the auditorVs 0nowled&e e(&( o# the audited entity and its environment>
the materiality o# the matter in hand>
the de&ree o# ris0 that insu##iient evidene will lead to a misleadin&
$resentation or onlusion>
the $ersuasiveness o# the evidene>
the li0elihood o# hallen&e by the audited entity(
)his 'ud&ment should only be made a#ter the relevane and reliability o#
the on#litin& material has been assessed% and should be reorded in
wor0in& $a$ers(
C$'e("ie1 O! E=ide%&eB
1( )here is no international a&reement about the ate&orization o# evidene( )he
lassi#iations o# evidene vary #rom literature to literature( In this &uide evidene is
ate&orized as doumentary analytial% $hysial and testimonial(
DOCBME;)ART" doumentary evidene onsists o# #ile $a$ers% mana&ement re$orts%
o$eratin& manuals% sta## instrutions et(( Doumentary evidene o#ten
$rovides the most reliable ty$e o# evidene althou&h it an be timeA
onsumin& to &ather and the auditor must &uard a&ainst misinter$retation(
It is im$ortant as orroboration #or oral evidene( Doumentary evidene
need not be internally $rodued by the audited entity( Evidene obtained
161
#rom outside soures is valuable althou&h in suh ases we need to be
$artiularly sure as to its validity(
A;ACT)ICAC" analytial evidene is obtained $rimarily by e!aminin& and ma0in&
'ud&ments about data olleted in the ourse o# audit wor0( It an #or
e!am$le inlude om$arisons% surveys and sam$les as well as #ats and
#i&ures obtained throu&h a variety o# *uantitative tehni*ues( Com$uter
and *uantitative tehni*ues an be used to analyze the evidene(
-3T?ICAC" obtained by diret observation o# $eo$le% $ro$erty or ativities( It is very
im$ortant that we reo&nize the value o# $hysial evidene and e##etively
use the tehni*ue o# observation( For e!am$le% we an observe the
onditions o# strutures and e*ui$ment and $eo$leVs ativities( O$$ortunity
should be ta0en where $ratiable to note the observations% $ro$erty or
other resoures o# those we audit beause a ondition seen is a use#ul #orm
o# evidene( 3owever it may be neessary to see0 #urther evidene to
onvine others( In $ratie the results o# $hysial observation will be
doumented in wor0in& $a$ers and suh orroborative evidene should be
sou&ht(
)E?)IMO;IAC" testimonial evidene is that whih is obtained #rom others throu&h oral or
written statements reeived in res$onse to audit in*uiries or throu&h
interviews( Reords o# interviews may onsist o# memoranda based on
notes ta0en durin& the interviews( ?tatements by o##iials o# the audited
entity 9e(&( e!$lanations% 'usti#iations% lines o# reasonin&% and intentions:
are valuable soures o# in#ormation not always readily available #rom
elsewhere( 3owever% they need to be used with aution as standin& alone
they have limited value as they may be #rom biased soures% will &enerally
be sub'etive% annot always be veri#ied and may not re#let the o##iial
view( Hhere suh evidene is ruial to our wor0 it should be orroborated
as #ar as $ossible 9i(e( by a&reein& the notes o# meetin&s:( ?uh evidene
an be e!tremely use#ul in &ettin& an u$ to date $iture on the audited
entityVs mana&ement view o# their own $er#ormane( 3owever are must
be ta0en to distin&uish between #at and o$inion(
Audi' E=ide%&e C"lle&'i"% Te&D%iGue1
2( )he main tehni*ues available in olletin& the above ty$es 9ate&ories: o# evidenes are
desribed below(
I%'e=ie>1
3( Interview is the tehni*ue #or olletin& testimonial evidene( )o be e##etive% interviews
should be $ro$erly $lanned and the interviewer needs to be #amiliar with the sub'et to be
disussed( )he *uestions that an be used durin& the interviewin& session should be
$re$ared in advane(
1( ;ote ta0in& is advisable durin& the interview and should be written as soon as $ossible a#ter
the interview( I# suh oral evidene olleted is si&ni#iant to the investi&ation% written
on#irmation o# the reord o# the interview should be obtained #rom the interviewee( )he
interview sheet used to ollet evidene should inlude the name o# the interviewee and its
$ost% the interviewer and the date(
162
File EC$#i%$'i"%
@( )he $rime soure o# doumentary evidene is the e!amination o# the auditee or&anization2s
#iles and $a$ers( )he in#ormation olleted #rom the #ile e!amination an be summarized
and reorded in the auditor2s own words on wor0in& $a$er #olders 9H-Fs:( :( 9Format
attahed as anne! 1 in this +uide an be used durin& #ile e!aminations(: Im$ortant
douments and those onveyin& si&ni#iant or $otentially ontroversial matters should be
$hotoo$ied and ori&inatin& #ile reorded on the o$y(
5( It is im$ortant #or the auditor to realize that all relevant $a$ers may not be ontained on
#iles whih are re&istered( )here may be other relevant #iles whih the auditor is not aware(
It is% there#ore% essential to see0 assurane on the om$leteness o# the evidene obtained(
EC'e%$l P$7e1
<( -a$er ori&inatin& #rom outside the audited entity may also $rovide a valuable soure o#
doumentary evidene( E!am$les inlude &overnment $a$ers% $ublished eonomi analysis
and re$orts #rom other $ubli and $rivate bodies% $a$ers #rom international o##ies and other
audit o##ie( Forei&n soures and om$arisons an be drawn u$on as well as those available
nationally(
S7e&i$li1' A11i1'$%&e
6( ?$eialist in the sub'et o# the investi&ation 9i# neessary: an enhane the so$e and
$enetration o# the e!amination( ?uh servie should be $ro$erly $lanned% obtained and
monitored to &et relevant% reliable and su##iient evidene that meets the e!$eted standard
o# *uality( -ossible soures inlude onsultany #irms% aademis% $ro#essional bodies%
researh or&anizations and seleted individuals( Detailed &uidane is &iven in this +uide on
9A$$ 1D:(
M$?e' Re1e$&D
D( Mar0et researh involves ommissionin& a survey by a s$eialist #irm or arryin& out the
survey usin& own sta##( It an $rovide use#ul evidene on the results ahieved by
$ro&rammes or $ro'ets% in $artiular where the intended im$at is direted on identi#iable
&rou$s( ?urvey an be ostly( It re*uires s$eial are in the hoie o# *uestion% struturin&
the *uestion and sam$le seletion( Contatin& and olletin& views #rom outside users o#
the or&anization2s servie on those a##eted by the ativities o# the or&anization ould be
used to smaller &rou$s( For e!am$le% use an be made o# the in#ormal views and omments
o# the e!ternal &rou$s suh as trade assoiations and other interested $arties(
A%$ly1i1
18( A olletion o# raw data may not by itsel# &ive meanin&#ul in#ormation( Further analysis
should be done( ?uh analysis may involve ta0in& evidene already &athered and reA
$er#ormin& it to $rodue #resh evidene( Evidenes olleted usin& the above tehni*ues
an sometimes be analyzed to $rodue #urther evidene( Bsin& statistial o$erational
researh% om$uter modelin& et( tehni*ues(
163
A;;ER 1
;AME OF )3E ABDI) OFFICE" I;DER ;O(^^^^^^^^^^^^^^
FICE ERAMI;A)IO; ?3EE)
ABDI)EE ^^^^^^^^^^^^^^^^^^^ -rodued by^^^^^^^^^^^^^^^^^^^^^^
Reviewed by ^^^^^^^^^^^^^^^^^^^^^
Date ^^^^^^^^^^^^^^^^^^^^
I11ue
8Su5 I11ue9 E=$lu$'i=e
&i'ei$
D$'e "! 'De
e=ide%&e &"lle&'ed E=ide%&e
&"lle&'ed
Fi%di%(@C"%&lu1i"%1
S"u&e
!ile Re!; Re#$?
161
APPENDI/ 1,B MANAGEMENT AND USE OF CONSULTANTS
1( I%'"du&'i"%
)his $art o# the &uide $rovides advise on the seletion and use o# onsultants in $er#ormane
audits( Consultany is e!$ensive( )his $uts a $remium on ostAe##etiveness and on the audit
o##ie mana&in& the use o# onsultants e##etively #rom the seletion $roess to the #inal review
o# their out$ut(
)o &et the best results"
Identi#y tas0s% o$$ortunities and new a$$roahes where onsultantsV e!$eriene and
e!$ertise ould bene#it the wor0(
?elet the ri&ht onsultants #or the 'ob(
Krin& them in early(
?et #irm ob'etives% lear terms o# re#erene and ti&ht bud&ets(
Inte&rate the onsultantsV ontribution with the wor0 o# the rest o# the team(
?u$ervise and mana&e the wor0 throu&h to a suess#ul onlusion(
Cearn lessons #or the #uture(
2( *Dy U1e C"%1ul'$%'L
Always thin0 throu&h e!atly what 0ind o# ontribution onsultants will ma0e to the wor0( As0
yoursel#"
Are their s0ills really neessaryF
Hhat e!tra dimension would they addF
Hhat are the e!$eted bene#its over doin& the wor0 inAhouseF
Are the bene#its li0ely to be worth the e!tra osts F
Could their em$loyment reate any s$eial $roblemsF
Are there lon&er term bene#its or ris0sF
)he $ossibility o# usin& onsultants% and on what tas0s% needs to be onsidered in the early
sta&es o# $lannin& the wor0( Deidin& to brin& in onsultants a#ter an e!amination has started
is unli0ely to be suess#ul( Remember it an ta0e u$ to three months A and sometimes lon&er A
#rom identi#yin& the need to issuin& a ontrat(
Always try to draw the attention o# onsultants to $ossible re*uirements #or their servies in
&ood time% both on s$ei#i tas0s and more &enerally( )hey an then $lan ahead to hel$ ensure
that they are in a $osition to o##er assistane( )oo short a $eriod o# notie ma0es it di##iult #or
them to res$ond to best e##et% and to $ut #orward the ri&ht sta##( )heir best $eo$le may be
boo0ed u$ #or some time ahead(
Main reasons #or usin& onsultants are"
to ta$ into outside e!$eriene and e!$ertise and draw on wider disi$lines and s$eialist
s0ills(
to add breadth and $enetration to e!aminations(
to identi#y new a$$roahes and introdue di##erent $ers$etives(
to survey best $ratie in relevant outside #ields and ativities(
to $rovide a rossAhe0 on the audit o##ieVs own a$$roah% methods and osts(
to $rovide e!tra resoures to meet $ea0 wor0loads(
to advane delivery dates and hel$ to meet deadlines(
to add wei&ht to #indin&s% onlusions and reommendations(
16@
3( *D$' ?i%d "! C"%1ul'$%'L
)here are no #i!ed rules on what 0ind o# onsultants are best suited to $artiular tas0s or
$ro'ets( Costs as well as bene#its need to be om$ared in deidin& whih ty$e o# onsultany
to hoose( And remember that the onsultant hosen will need to have the resoures and ability
to meet ti&ht deadlines and $ossible han&es as the wor0 develo$s(
In $ratie% the hoie is li0ely to lie within one o# three broad ate&ories"
a onsultany #irm or similar or&anization>
an individual or &rou$ with an aademi or researh involvement in the sub'et or area
under e!amination% or s0illed in relevant disi$lines or analytial tehni*ues>
someone with inAde$th e!$eriene and an e!$ert $ratial ba0&round in relevant
o$erations or business ativities(
Consultany #irms ommand the lar&est resoures and are able to o##er a wider ran&e o#
servies( )hey have the advanta&e o# bein& able to draw on a variety o# disi$lines to $rovide
teams o# sta## and mana&ers to wor0 in the #ield as $art o# the main investi&ation( A number
have a ba0&round in $ubli setor wor0( Remember that the neessary e!$ertise may be #ound
in the smaller s$eialist #irms as well as the lar&er mana&ement onsultany &rou$s(
Individuals mi&ht ty$ially be used to advise on the overview% mar0in& and strate&i $lannin&
and #easibility wor0 as well as on s$ei#i e!aminations( )hey an be used as $art o# an audit
team% but it is o#ten muh easier to use them #le!ibly A in short onentrated bursts A at
suessive sta&es o# an e!amination( Hor0in& in this way an be hi&hly ostAe##etive as well
as bein& attrative to the individuals onerned% sine their time is not then tied u$ #or lon&
$eriods(
Koth onsultany #irms and individuals may be used to review strate&i thin0in& and to su&&est
ideas #or #uture diretions or areas o# wor0( )hey may advise on $lans #or individual
e!aminations% and be brou&ht ba0 to review emer&in& main investi&ation results and $rovide
#urther analysis( And they may be used to review #inal results and the onlusions and
reommendations to be inluded in re$orts( )heir ontribution and su$$ort are o#ten valuable
in disussions with audited bodies at the end o# the main investi&ation about our #indin&s and
reommendations(
1( Telli%( 'De Audi'ed E%'i'y
)he intention to use onsultants on audit e!aminations should be disussed with the audited
body at an early sta&e( )hey should also be 0e$t in touh as neessary as the wor0 develo$s
and results emer&e(
)hou&h the audited entityVs views must be ta0en #ully into aount% deisions on seletion and
use o# onsultants are ultimately the res$onsibility o# the audit o##ie(
+ood ommuniations with the audited entity &ives them the o$$ortunity to"
$ut #orward any &eneral reservations or su&&estions about usin& onsultants>
on#irm their ae$tane that the $ros$etive onsultants an in $rini$le be e!$eted to
$rodue soundly based and authoritative onlusions>
raise any *uestions about the aess the onsultants will need to auditeeVs reords%
douments and other in#ormation>
disuss $otential di##iulties over individual onsultants or onsultany #irms% #or e!am$le
on seurity &rounds% on ommerial on#identiality% or beause o# $ossible on#lits o#
interest with other wor0>
see0 in#ormation on how the results o# the onsultantVs wor0 will be handled durin& and at
the end o# the e!amination>
advise on $ossible soures or andidates #or the assi&nment(
165
@( SD"'-Li1'i%( C$%did$'e1
3avin& deided on the ty$e o# onsultany re*uired% the ne!t ste$ is to identi#y $ossible
andidates( Ma0e an initial seletion #rom suh soures as"
Consultants who have $reviously arried out suess#ul assi&nments #or the audit o##ie>
In*uiries amon&st 0nown e!$erts in the #ield>
-ro#essional bodies and similar or&anizations% inludin& $rivate or&anizations>
Industrial -ro'et ?ervie>
?tandard re#erene soures>
?u&&estions by the audited entity>
One $ossible onsultants have been identi#ied #urther in#ormal in*uiries A #or e!am$le by
tele$hone A should enable a shortAlist to be drawn u$ o# those available to underta0e the
assi&nment and interested in *uotin& #or the wor0(
)hese initial disussions are valuable in $rovidin& an o$$ortunity #or an early assessment o# the
a$abilities o# $otential bidders( Kut avoid buildin& u$ a s$eial or $re#erential relationshi$
with any individual or onsultany #irm om$etin& #or the wor0 or otherwise &ivin& them an
advanta&e in seurin& the assi&nment( Com$etitive tenders should be the normal rule(
.; Fi%$%&i$l C"%'"l
Ci0ely osts have to be onsidered at all sta&es o# the wor0( It is the 3ead o# internal Audit 'ob
to ensure that su##iient #unds are available #or the assi&nment> that osts and ommitments are
monitored a&ainst a$$roved bud&ets> and that osts are ontained and $enalties avoided(
Kut remember that osts arenVt everythin&( +enerally you &et what you $ay #or% and the *uality%
s$eed and timeliness o# the wor0 are also ruial #ators( Pee$in& osts under ti&ht ontrol is
essential> but it would be #oolish to 'eo$ardize the use#ulness o# the wor0% and $erha$s hinder
the investi&ation as a whole% by ta0in& onern #or osts too #ar(
)o ensure sound #inanial ontrol"
Draw u$ a s$ei#iation o# the ob'etives% so$e and timin& o# the assi&nment>
-re$are a $rovisional estimate o# #ees and e!$enses as soon as $ossible% and ertainly
be#ore &oin& out to tender>
Con#irm availability o# #unds and $rovisional bud&et a$$roval>
Review the so$e o# the wor0 and7or bud&et in li&ht o# tenders submitted and on#irm
revised a$$roval as neessary>
Monitor osts a&ainst bud&et as wor0 $roeeds and a&ree $ries in advane #or any e!tra
wor0 to be arried out>
Revise wor0 $lans to 0ee$ within a$$roved bud&et% or obtain revised a$$roval as
neessary #or essential e!tras(
<( See?i%( 6id1
Kids should normally be obtained by om$etitive tender #rom 3A@ #irms( ?in&le tender ation
may be a$$ro$riate where the assi&nment e!tends an e!istin& ontrat won in om$etition% or
where there is learly only one soure o# assistane( E!e$tionally this may also be neessary
where time is very short(
)enderers should be $rovided with a ba0&round brie# whih overs suh matters as the
res$onsibilities and wor0 o# the audit o##ie( )he brie# should also outline the audited entityVs
res$onsibilities% main #untions% and or&anization> and it should set out the ba0&round to and
main aims and ob'etives o# the e!amination( )his &ives the tenderers a learer idea o# the 'ob
and hel$s them tailor their $ro$osals to the audit o##ieVs needs(
;e&otiations and disussions with the $otential onsultants are the res$onsibility o# the line
division onerned% ta0in& are to avoid any $remature ommitments( Disussions with
16<
tenderers should normally ta0e $lae in the audit o##ie on a strai&ht#orward WbusinessW basis(
Entertainment o#% or by% om$etin& onsultants should be avoided(
Main matters to be overed"
-rovide tenderers with a ba0&round brie#>
?et out lear terms o# re#erene #or the wor0>
E!$lain to tenderers how their wor0 will interat with the rest o# the team>
Ma0e it lear that the audit o##ieVs wor0 re*uires a hi&h standard o# evidene and
ri&orous analysis
Enoura&e tenderers to disuss the re*uirements and see0 #urther in#ormation and
e!$lanations>
Invite their ideas on alternative ways o# arryin& out the wor0>
Deide main riteria #or assessin& $ro$osals and bids(
6( A11e11i%( P"7"1$l1
Deide in advane the riteria to be used to evaluate the individual $ro$osals reeived #rom
onsultants( A #irst si#t o# the bids may then eliminate those whih are learly not suitable on
ontent% *uality or ost &rounds( Kut do not hesitate to &o ba0 to the onsultants i# any issues
have not been ade*uately overed% or there is unertainty over overa&e% $riin& or other
matters(
Main $oints to be overed in assessin& individual $ro$osals"
Are the onsultants e!$eriened in the #ield under e!aminationF Are they well versed in
$ubli setor one$tsF
Can they demonstrate ahievements and results in relevant areasF 3ave they a &ood tra0
reordF 9In*uiries into their $revious wor0 should sto$ well short o# e!$etin& them to
breah lient on#identiality:>
Do their $ro$osals on#orm to the terms o# re#ereneF Do they demonstrate a sound &ras$
o# the aims and ob'etives o# the o##ie and o# the $artiular e!aminationF
3ave they analyzed the tas0 re*uirements are#ully and thorou&hlyF Are their a$$roah
and methodolo&y soundF
Are the individuals who will $ersonally underta0e the wor0 a$able% e!$eriened and o#
hi&h *ualityF
Is there a lear ommitment o# $artner and senior mana&ement ba0 u$F
Hill additional resoures be available as neessary to hel$F
overome any $roblemsF
Is there an obvious willin&ness to meet the o##ieVs $artiular re*uirementsF Do they #ully
reo&nize the need to #it in with the rest o# the teamF
Are they ommitted to the timin& o# the wor0 and meetin& the a&reed deadlines and
delivery datesF
Do they reo&nize the im$ortane o# lear ontrol and re$ortin& arran&ementsF
Are the osts #irm and learly set outF Does the bid $rovide an a$$ro$riate analysis o#
time and har&eAout ratesF Are e!$enses and other osts learly identi#iedF Are there any
Whidden e!trasWF
D( CD""1i%( 'De *i%%e
Further analysis and in*uiries on the remainin& $ro$osals will normally $rodue a learAut
deision as to whih onsultant should be awarded the ontrat( )he administration division o#
the audit o##ie will then deal with the ontratual arran&ements% liaisin& as neessary with the
line division( )he tenderers not seleted will also be in#ormed and% i# they wish% &iven a brie#
e!$lanation as to why their $ro$osal was not suess#ul(
166
In some ases it may be di##iult to ae$t a onsultant on ost &rounds% even thou&h they are
learly the best e*ui$$ed to arry out the assi&nment( In this situation% the onsultants
onerned should be a$$roahed to disuss ways in whih the #ee mi&ht be redued% $erha$s by
modi#yin& or reAshedulin& the wor0( Kut remember that suh disussions need are#ul
handlin& to avoid underminin& the ori&inal tenderin& $roedures(
3avin& evaluated the individual $ro$osals"
Com$are the stren&ths and wea0nesses o# the om$etin& bids>
Che0 any di##erenes in the bases o# #ees and the om$arability o# $ries *uoted>
Eliminate any $ro$osal learly not suitable>
Draw u$ a list o# matters re*uirin& lari#iation on remainin& bids>
Arran&e meetin&s to disuss any doubts or lari#iations with those who are to do the
wor0( Assess their overall attitudes% a$abilities% suitability% and ommitment>
Hath #or inde$endene% ob'etivity% #reedom #rom $olitial bias% drive enthusiasm and
onstrutive ideas>
Deide whih $ro$osal re$resents best value #or money% on ontent% *uality and ost>
Review terms o# re#erene with the $rovisionally seleted onsultant and amend as
neessary as basis #or #ormal ontrat>
?u$$ly the administration division with doumented evaluation o# om$etin& bids and
reommend onsultant to be seleted(
18( *"?i%( Rel$'i"%1Di71
+ood wor0in& relationshi$s are essential to &et the best out o# onsultanies( All as$ets o# an
e!amination must remain under the o##ieVs ontrol> but remember that the onsultants are an
im$ortant $art o# the team and will $rovide better value #or money by bein& &iven every
o$$ortunity to de$loy their e!$eriene and abilities(
+enerally there should be a lear reo&nition that throu&hout the assi&nment the onsultants are
re$resentatives o# the o##ie> and they will be treated as suh and should at aordin&ly( 3i&h
standards are e!$eted on both $ro#essional and $ersonal ondut(
Hor0in& e##etively with the onsultants means the $rini$al auditor should"
?et u$ the neessary liaison arran&ements% inludin& timin& o# interim re$orts and
meetin&s at 0ey sta&es>
Ma0e sure #rom the outset that there is a lear understandin& about the so$e o# the
onsultantsV wor0% timetable% and deadlines>
Enoura&e twoAway tra##i and an e##etive wor0in& relationshi$ between the onsultants
and the rest o# the team>
Establish arran&ements #or identi#yin& and dealin& with any emer&in& $roblems>
Ensure that any variations to the wor0% and e!tra osts% are leared and a$$roved in
advane% and the ontrat amended aordin&ly>
Review and disuss the onsultantsV re$orts $rom$tly% lin0in& their #indin&s with wor0 o#
the rest o# the team and ensurin& #eedba0(
11( Re=ie>i%( Fi%di%(1
Hor0 done by onsultants in e##et beomes the audit o##ieVs wor0( He annot hide behind
their re$utation or e!$ertise( ?o their #indin&s and onlusions need to be inde$endently
reviewed to ensure that they meet the re*uired standards(
In s$eialist #ields this may not always be easy> but it annot be avoided i# the #inal audit O##ie
re$ort is to be $resented to the head o# audited entity(
Hhen reviewin& the onsultantVs wor0"
?atis#y yoursel# that the overa&e has been $ro$erly arried out and is based on sound%
doumented evidene>
16D
Ensure that the #indin&s and onlusions in the onsultantVs re$ort are aurate% #air and
balaned>
Hath that reommendations are $ratial and ostAe##etive>
Che0 the onsisteny o# their wor0% #indin&s and reommendations with those o# the rest
o# the audit team>
-ay s$eial attention to those as$ets whih have aused% or are li0ely to ause% $artiular
di##iulties with the audited entity>
Disuss and resolve $otential di##iulties with the onsultants% and see0 their advie on
how their wor0 an best be used(
)hin0 hard about the best ways o# dealin& with the onsultantsV #indin&s when deidin& on the
ontent and $resentation o# the #inal re$ort to be $ublished by the audit o##ie( Hhihever
ourse is ado$ted% it should be made lear that the audit o##ie stands by the end $rodut( He
annot distane ourselves #rom the onsultantsV #indin&s(
In some ases onsultants may wish the results o# some or all o# their wor0 to be $ublished
se$arately% or used #or other $ur$oses( )his re*uires our a$$roval and ases should be
onsidered on their merits in onsultation with the head o# audited entity(
Consultants #indin&s may be used in the #ollowin& ways"
;o written re$ort by onsultants% but #indin&s disussed and inor$orated as neessary in
#inal $ublished re$ort>
Consultants submit written re$ort to the audit o##ie% but this is wholly subsumed within
the #inal re$ort>
ConsultantsV #indin&s are inluded in whole or in $art in #inal re$ort% and are identi#ied
aordin&ly>
ConsultantsV re$ort% or summary% is inluded as se$arate ha$ter or anne! in #inal re$ort>
ConsultantsV re$ort is $ublished se$arately by the audit o##ie% as om$lementary to the
main re$ort(
12( A11e11i%( Pe!"#$%&e $%d Le$%i%( Le11"%1
It is im$ortant to realise the #ull bene#its o# the onsultany by learnin& lessons #or the #uture(
)his also hel$s to build u$ a reord o# $er#ormane as a basis #or $lain& #uture wor0(
Reviewin& the wor0 should be done in #ran0 disussion with the onsultant and with the rest o#
the audit team( )he aim should be to learn lessons #rom suesses ahieved as well as #rom any
di##iulties enountered(
Reviewin& the wor0 should be done as *ui0ly as $ossible% whilst thou&hts on both sides are
#resh( A brie# written re$ort% hi&hli&htin& &ood and bad $oints and assessin& the onsultantsV
overall $er#ormane% should be sent to the mana&ement division(
Main as$ets to be overed"
Did the wor0 meet the a&reed tas0 ob'etivesF
Has it om$leted within the a&reed ostF
Hhat di##iulties arose and whyF
Here $roblems antii$ated% or s$otted at an early sta&e% and satis#atorily resolvedF
Has there &ood oAo$eration and oAordination with the rest o# the audit teamF
Here the results o# the onsultantsV wor0 soundly basedF Did they ma0e a valuable
ontribution to the #inal re$ortF
Did the onsultants $rovide other Wadded valueW to the e!aminationF
Hhat ideas and su&&estions do the onsultants have #or im$rovin& #uture arran&ementsF
Do they have any widerAran&in& ideas and su&&estions #or other as$ets o# the audit
o##ieVs wor0% #or e!am$le in suh areas as $lannin&% sta##in& and mana&ementF
Are there any other lessons #or the #utureF
1D8
APPENDI/ 20B FACT S)EET
NAME OF T)E AUDIT OFFICE
AUDITEE DATE

AUDITORS
FAC)? COMME;)?
9by the Auditee:
E!am$le"
I( ?heduled and atual $ro'et im$lementation time"
-hases ?hedule7$lan Atual
I Qanuary 1D<6 Marh 1D<6
II Qanuary 1D63 A$ril 1D61
III A$ril 1% 1D66 Otober 1D66
)rue
II: Keside the delay in the ommenement o# eah o# the three $hase
o# the $ro'et% there were delays in the im$lementation o#
sheduled $ro'et ativities( )his #at an be seen by a lose
e!amination o# the wor0 $lan o# $hase III> whih is $art o# the
$ro'et doument and indiates the sheduled startin& and
om$letion time o# $ro'et ativities( ;o suh wor0$lan is
attahed to $ro'et douments #or the #irst 2 $hases( 3ene% it is
di##iult to ma0e analysis o# ativity im$lementation timin&(
)rue% the delays were due
to the e!eutin& a&eny
#ailure to dishar&e its
res$onsibilities(
-urhases and $laement
o# #ellows #or trainin&
were the main ativities
delayed(
?oure" -ro'et doument and $ro&ress re$orts(
FACT S)EET 8C"%'i%ued9
FAC)? COMME;)?
9by the Auditee:
Out$uts
I: )he $atholo&y laboratory was stren&thened with the assistane o#
the International e!$ert(
Dr(H(K(O(Robert
;o( It was established in
the $ro'et li#e(
II: E*ui$ment identi#ied in the $ro'et doument were reeived to
stren&then various laboratories in the Institute(
)rue(
III: )he $reliminary desi&n #or the laboratory buildin& o# the Institute
was done by the International e!$ert(
)rue(
?oure" -hase II $ro'et doument and res$etive $ro&ress re$orts
I, Dee5y &e'i!y 'D$' 'De $5"=e !$&'1 '"(e'De >i'D #y &"##e%'1 $e &"e&';
;ame -ost
?i&nature Date
1D1
APPENDI/ 21B TIME AND COST 6UDGETING AND
MONITORING
1;INTRODUCTION
1(1( )his $art o# the &uide outlines tehni*ues #or bud&etin& and monitorin& o# the time and
ost o# the main investi&ation(
1(2( .)ime/ an be de#ined as the hours that eah &rade o# sta## will s$end on eah o# the
o$erations in the main investi&ation( Its im$ortane is that sta## in$ut is normally the
$rini$al resoure we use to e!eute investi&ations( )ime must% there#ore% be ontrolled
e##etively i# studies are to be 0e$t on tra0 and delivered to bud&et(
1(3( .Cost/ is the #ull monetary value o# the resoures used in arryin& out the investi&ation( It
will inlude the value o# the sta## hours% any onsultant #ees and anillary osts 9e(&( travel
and subsistene $ayments:( Cost is im$ortant to mana&ement% #irstly% beause it hel$s us
assess whether we are usin& the various &rades o# sta## e##iiently 9$rini$al auditors ost
onsiderably more $er hour to em$loy than assistant auditors: and beause it allows us to
monitor sta## time% onsultant osts and anillary e!$enditure usin& the same base o#
measurement A money(
2; Pl$%%i%( S'$(e
2(1( As e!$lained in Cha$ter 3% the #irst ste$ in $lannin& the main investi&ation is to s$lit the
audit down into disrete% mana&eable tas0s and subAtas0s A herea#ter alled .o$erations/(
)he e!am$le in anne! 1 illustrates this $roess( ;ote that it inor$orates all o$erations
re*uirin& sta## in$ut durin& the study% inludin& all neessary $lannin& and ontrol% liaison
9both with the audited entity% outside bodies and any onsultants:% ommuniation within
the team% doumentation and review tas0s% as well as the &eneral e!eution o# audit
$ro&rammes( I# bud&ets are to be aurate% and monitorin& to be e##etive% the inlusion o#
all suh o$erations is essential(
2(2( )ime bud&et" the time bud&et
is $rodued by estimatin& the hours that eah &rade o# sta## will need to in$ut into eah
o$eration to om$lete the study suess#ully( An e!am$le is at table 1(
2(3( Estimatin& is lar&ely a matter o# e!$eriene but ertain .rules/ should be #ollowed"
ensure that you have allowed #or the time o# all sta## who you will need to em$loy on the
audit( In table 1% the audit o##ies statistiian2s time has been inluded% as well as the
main audit team>
reo&nize that the di##erent &rades o# audit o##ieVs sta## should have di##erent roles and
res$onsibilities within the audit( For e!am$le% 'unior sta## should not be made
res$onsible #or liaison with the audit entityVs to$ mana&ement( E*ually% usin& head o#
internal Auditors to e!trat #iles #or e!amination is ine##iient>
be realisti about estimates( I# in doubt% it is always better to err on the side o#
onservatism than o$timism( Estimators have a tendeny to be overly o$timisti% underA
estimatin& the time that o$erations will ta0e> to ounter this mana&ement should loo0
ritially at all estimates( I# bud&ets are too o$timisti they will $rove o# little value to
mana&ement durin& the main investi&ation>
avoid s$urious auray( )here are a variety o# estimatin& $roedures whih
mana&ement an use% but they are all o$en to some de&ree o# error round u$ estimates
9#ollowin& the $rini$le o# onservatism:% as a$$ro$riate( For e!am$le% mana&ement may
1D2
estimate that it will ta0e an avera&e o# 3(@ hours o# auditor time to e!amine eah o# 3@
ases% &ivin& a total time o# 122(@ hours( )his should be rounded u$ A say to 138 hours>
allow #or ontin&enies( It is rare #or a study not to $rodue some une!$eted and
un$lanned event( )hou&h these may lead to savin&s in time% they have a tendeny to
ause e!tra use o# resoures( In table 1% a 18X ontin&eny allowane has been built
in #or eah &rade o# sta##>
reo&nize that there will be a learnin& time #or all sta## on the study( )his an be built
into eah o$eration or into the ontin&eny allowane(
1D3
APPENDI/ 21@1B TIME "D#ETIN# FO$M
NAME OF T)E AUDIT OFFICE
$E%IE&ED "'
ADITEE APP$O%ED
P$ODCED "' DATE
T$1?
N";
T$1? de1&i7'i"% Pi%&i7$l
Audi'"
D"u1
Se%i"
Audi'"
II
D"u1
Te$#
Le$de
D"u1
Audi'"
D"u1
A11i1'K'
Audi'"
D"u1
AO
S'$'1
D"u1
TOTAL
6UDGET
)OURS
1 -lannin& 38 68 38 18 18 8 158
2 De$artmental ob'etives
2(1 Review o# C-B #iles 8 8 18 38 @ 8 1@
2(2 Review o# housin& #iles 8 8 18 38 18 8 @8
2(3 Interview o# C-B 8 8 @ @ 8 8 18
2(1 Interview o# housin& 8 8 @ @ 8 8 18
2(@ Doumentation o# tas0 2 8 8 1 18 8 8 11
3 ?$ei#iation o# need
3(1 AO draw u$ s$ei#iation @ @ 28 18 8 8 18
3(2 Ciaison with de$Vt re s$e( @ 18 @ 8 8 8 28
1 Review o# de$tal instrutions 8 @ @ 58 8 8 <8
@ Review o# sheme
$er#ormane
A sam$le o# 188 ases
@(1 De#inition o# sam$le 8 2 3 18 8 18 2@
@(2 ?am$le e!tration 8 @ @ 2@ 58 @ 188
@(3 ?am$le review 8 28 188 238 @8 8 188
5 Review o# sheme
$er#ormane
A survey o# a$$liants
5(1 ?eletion o# surveyees @ @ 18 28 8 18 @8
5(2 -re$aration o# survey @ 18 18 18 @ 28 58
5(3 Distribution o# survey 8 8 1 @ 1@ 8 21
5(1 Reminder to surveyees 8 8 1 @ 1@ 8 21
< Analysis o# review
<(1 In$ut to om$uter 8 8 @ 18 <8 @ D8
<(2 Analysis o# sam$le and survey @ @ 18 <8 18 188 288
6
6(1
6(2
Re$ortin&
outline
Dra#t Re$ort
2
@
3
18
18
@8
8
8
8
8
8
8
1@
5@
D Administration
D(1 ?ummary sheets 8 3 18 @ @ 2 2@
D(2 )eam meetin&s @ @ @ 13 @ 2 3@
D(3 Ciaison with de$ts @ 1@ 18 @ 8 8 3@
D(1 Mana&ement review o# H-Fs 18 1@8 28 8 8 8 218
18 Contin&eny 18 3@ 38 58 2@ 1@ 1<@
TOTA( 1)) 3*+ 3,! *)+ )+- 1*. 1.!*
1D1
2(1( Cost bud&et" beause sta## time is the $rini$al resoure used in $er#ormane audit the ost
bud&et is heavily based on the time bud&et( )he in$ut o# eah &rade should be multi$lied
by the a$$ro$riate hourly ost #or that &rade to ome to the total ost o# sta## in$ut( )o this
should be added any e!tra osts #or onsultants and anillary e!$enditure( )hus total
bud&eted ost e*uals"
9estimated $rini$al auditor hours ! the $er hour ost o# a $rini$al auditor: Z
9estimated senior auditor II hours ! the $er hour ost o# a senior auditor II:Z
Z(((((((((((((Z
9estimated assistant auditor hours ! the $er hour ost o# an assistant auditor: Z
Consultant osts Z
Anillary osts
An e!am$le o# a ost bud&et is at table 2( ;ote that the bud&et is ast at the tas0% rather
than o$eration level( )his will normally be su##iient both #or bud&etin& and ontrol
$ur$oses(
3; M$i% i%=e1'i($'i"% 1'$(e
3(1( Durin& the main investi&ation mana&ement must ensure that resoures are used e##iiently
and e##etively i# the study is to be delivered aordin& to timetables and to ost(
Mana&ement needs to monitor the use o# resoures aurately and $rom$tly% i# they are to
ontrol the study( )his should over both time and ost(
3(2( )ime monitorin&" as e!$lained above% beause sta## in$ut is the $rini$al resoures used%
the monitorin& o# sta## time is an essential $art o# the mana&ement $roess(
Monitorin& o# time onsists o#"
tra0in& o# time s$ent to date on eah o$eration>
identi#yin& the e!tent to whih the o$eration is om$lete the o$eration>
estimatin& the #urther time needed to om$lete the o$eration>
om$utin& the total time that eah o$eration will have ta0en #rom start to om$letion>
om$arin& to bud&ets to identi#y si&ni#iant variations(
3(3( An e!am$le o# a time monitorin& #orm is at table 3( )his has not been subdivided by
&rade% thou&h in the normal ourse o# events it should be( 9)hrou&h not always re*uired
#or ontrol o# sta## time% mana&ement will need in#ormation on the hours s$ent by eah
&rade on eah o$eration in order to monitor osts aurately:( Any additional o$erations%
over and above those ori&inally bud&eted% whih are needed to om$lete the study
satis#atorily% should be inluded 9o$eration no 11 in the e!am$le:( Mana&ement should
identi#y and onsider the reasons #or all ma'or variations 9e(&( o$erations 3 , @ in table 3:%
ta0in& a$$ro$riate orretive ation as neessary(
1D@
APPENDI/ 21@2B COST 6UDGETING FORM
NAME OF T)E AUDIT OFFICE
AUDITEE RE-IE*ED 64
PRODUCED 64 APPRO-ED 64
DATE
)as0
;o(
)as0 desri$tion -rini$al
Auditor
?enior
Auditor II
)eam
Ceader
Auditor AssistVt
Auditor
AO
?tats
TOTAL
TASI
)OURS

TOTAL
TASI
COST
86IRR9
Cost $er hour o# eah &rade 6(< 5 1(3 3(5 2(@ 3
9in birr:
?)AFF 3OBR?
1 -lannin& 38 68 38 18 18 8 158 D31
2 De$artmental ob'etives 8 8 31 68 1@ 8 12D 1<2
3 ?$ei#iation o# need 18 1@ 2@ 18 8 8 58 321
1 Review o# de$tal instrutions 8 @ @ 58 8 8 <8 256
@ Review o# sheme $er#ormane 8 2< 186 25@ 118 1@ @2@ 1D88
A sam$le o# 188 ases 8
5 Review o# sheme $er#ormane 18 1@ 22 18 3@ 38 1@2 @D3
A survey o# a$$liants 8
< Analysis o# review @ @ 1@ 68 68 18@ 2D8 D11
6 Re$ortin& < 13 58 8 8 8 68 688
D Administration 8
D(1 ?ummary sheets 8 3 18 @ @ 2 2@ D6
D(2 )eam meetin&s @ @ @ 13 @ 2 3@ 158
D(3 Ciaison with de$ts @ 1@ 18 @ 8 8 3@ 1D@
D(1 Mana&ement review o# H-Fs 18 1@8 28 8 8 8 218 1331
8
18 Contin&eny 18 3@ 38 58 2@ 1@ 1<@ <@8
)O)AC ?)AFF 3OBR? 122 356 3<1 526 26@ 15D 1D15
)O)AC ?)AFF CO?) 1881 2138 13@8 2251 <13 @8< 6<51
;O; ?)AFF CO?)?
Consultant osts ;il
Anillary ost
A travel and subsistene 1@8
TOTAL STUD4 COSTS 6D11
3(1( Cost monitorin&" monitorin& o# ost involves evaluatin& the monetary value o# sta## in$ut
addin& any #urther onsultant or anillary osts inurred( A&ain% mana&ement should"
tra0 e!$enditure to date on eah ost &eneratin& tas0 9sta## time% onsultant osts and
anillary e!$enditure:>
estimate the #urther ost needed to om$lete the tas0% addin& the ost o# any e!tra
tas0s% over and above those ori&inally bud&eted% whih are needed to om$lete the
study satis#atorily>
om$ute the estimated total ost o# eah tas0 #rom start o# the study to om$letion>
om$are to bud&ets to identi#y si&ni#iant variations and e!$lain any si&ni#iant
variations(
3(@( )hou&h the lar&est as$et o# ontrollin& study osts is by monitorin& and ontrollin& sta##
in$ut% ost monitorin& im$ortant in"
I identi#yin& the e##et o# varyin& the &rade o# sta## used to underta0e o$erations>
I ontrollin& onsultany and anillary osts> and
I assessin& the overall ost o# the study(
1D5
1( C"%&lu1i"%
1(1( E##etive monitorin&% and onse*uently ade*uate ontrol% re*uires su##iient reliable
in#ormation( Above all else mana&ement needs to 0now the level o# sta## in$ut into eah
o$eration( In the absene o# a #ormal time reordin& system within the audit o##ie%
mana&ement may #ind it use#ul to re*uire sta## to reord the time they s$end on eah
o$eration in the study eah wee0( A $roA#orma #or time reordin& on studies is at anne!( 2
1D<
APPENDI/ 21@3B TIME MONITORING FORM
NAME OF THE AUDIT OFFICE
REVIEWED BY
AUDITEE APPRO-ED 64
PRODUCED 64 DATE
T$1? T$1? 6ud(e'ed A&'u$l O=e@ Pe&e%' E1'i#$'e E1'i#$'ed E1'i#$'ed COMMENT
N"; de1&i7'i"% D"u1 '" d$'e 8u%de9 &"#7le'e '" T"'$l "% "=e@8u%de9
5ud(e' &"#7le'e C"#7le'e 5ud(e' "%
8D19 8D19 8D19 8D19 &"#7le'i"%
1 -lannin& 158 D8 A<8 5@ 68 1<8 18
2 De$artmental ob'etives
2(1 Review o# C-B #iles 1@ 1D 1 188 8 1D 1
2(2 Review o# housin& #iles @8 @< < 188 8 @< <
2(3 Interview o# C-B 18 @ A@ 188 8 @ A@
2(1 Interview o# housin& 18 1 A5 188 8 1 A5
2(@ Doumentation o# tas0 2 11 11 A3 188 8 11 A3
3 ?$ei#iation o# need
3(1 AO draw u$ s$ei#iation 18 ;7A ;7A ;7A ;7A ;7A A18 ?ee summary sheet
3(2 Ciaison with de$Vt re s$e( 28 ;7A ;7A ;7A ;7A ;7A A28 ?ee summary sheet
1 Review o# de$tal instrutions <8 32 A36 68 @ 3< A33
@ Review o# sheme $er#ormane
A sam$le o# 188 ases
@(1 De#inition o# sam$le 2@ 38 @ 188 8 38 @ _ Redued so$e
@(2 ?am$le e!tration 188 183 3 188 8 183 3 _ A see summary sheet
@(3 ?am$le review 188 68 A328 18 128 288 A288 _
5 Review o# sheme $er#ormane
A survey o# a$$liants
5(1 ?eletion o# surveyees @8 1@ A@ 188 8 1@ A@
5(2 -re$aration o# survey 58 <2 12 188 8 <2 12
5(3 Distribution o# survey 21 8 A21 8 21 21 8
5(1 Reminder to surveyees 21 8 A21 8 21 21 8
< Analysis o# review
<(1 In$ut to om$uter D8 8 AD8 8 1@ 1@ A1@ _ Redued so$e
<(2 Analysis o# sam$le and survey 288 8 A288 128 128 A68 _ A see summary sheet
6 Re$ortin&
6(1 Outline Re$ort 1@ 1@ 8 188 8 8 8
6(2 Dra#t Re$ort 5@ 5@ 8 188 8 8 8
D Administration
D(1 ?ummary sheets 2@ 12 A13 28 32 <
D(2 )eam meetin&s 3@ 1@ A28 28 3@ 8
D(3 Ciaison with de$ts( 3@ 33 A2 18 <3 36
D(1 Mana&ement review o# H-Fs 218 3< A1<3 1<8 28< A3
18( Contin&eny 1<@ @ A1<8 ;7A 18 1@ A138
11 Additional tas0s
11(1 ?urvey o# Sones and re&ions ;7A 8 ;7A 8 128 128 128 _
11(2 Gisit to Sones7re&ions to _ see summary sheet
review and ollet data ;7A 8 ;7A 8 128 128 128 _ on 1 st riteria
11(3 Analysis o# data #rom R(2 ;7A 8 ;7A 8 38 38 38 _
TOTAL 1655 568 A1125 D<2 15@2 A211
1D6
APPENDI/ 21-ANNE/ 1 - SU6DI-ISION OF A STUD4 INTO TASIS AND SU6-TASIS
)his anne!% based on the study o# housin& in whih $resented in this +uide A$$(1<% illustrates the
$roess o# dividin& a study into disrete and mana&eable tas0s and subtas0s as a #irst sta&e in
estimatin& time and ost bud&ets( ;ote that it inor$orates all o$erations that re*uire sta## in$ut
inludin& $lannin& 9tas0 1: and administration 9tas0 D:(
Methodolo&y
9#rom $a&e 13:
)as0
;o(
)as0
desri$tion
1 -lannin& A
Review o# de$artmental #iles and
interview with head o# entral
$oliy unit 9C-B: and 3ead o#
housin& $oliy
2
2(1
2(2
2(3
2(1
2(@
De$artmental ob'etives
Review o# C-B #iles
Review o# housin& #iles
Interview o# C-B
Interview o# housin&
Doumentation o# tas0 2
Audit team to draw u$ s$e( Kased
on de$artmental ob'etives and
a&ree with de$artment(
3
3(1
3(2
?$ei#iation o# need A
AO draw u$ s$e(
Ciaison with de$2t re
s$ei#iation
91: Review o# de$artmental
instrutions to identi#y any riteria
in instrutions with s$ei#iation
drawn u$ above
1 Review o# de$tal
Ainstrutions A
?am$le o# 188 ases over last 2
years% overin& all sizes o#
eli&ibility riteria a$$lied and
om$are to s$ei#iation above>
91: Analysis o# in#ormation #rom
sam$le on the inome o#
a$$liants and loation o#
$ro'ets to assess whether they
aord with de$artment2s
s$ei#iation o# those in need(
@
@(1
@(2
@(3
Review o# $er#ormane
A sam$le o# 188 ases
De#inition o# sam$le
?am$le e!tration
?am$le review
92: ?u$$lementary survey o#
a$$liants to obtain in#ormation on
inome
5
5(1
5(2
5(3
5(1
Review o# $er#ormane
A survey o# a$$liants
?eletion o# surveyees
-re$aration o# survey
Distribution o# survey
Reminder to surveyees
<
<(1
<(2
Analysis o# review
In$ut to om$uter
Analysis o# sam$le and
1DD
Methodolo&y
9#rom $a&e 13:
)as0
;o(
)as0
desri$tion
survey
D
D(1
D(2
D(3
D(1
Administration
?ummary sheets
)eam meetin&s
Ciaison with de$ts
Mana&ement review o#
H-Fs
APPENDI/ 21 - ANNE/2 - TIME RECORDING PROFORMA
NAME OF T)E AUDIT OFFICE
?)BDT )I)CE ^^^^^^^^^^^^^
;AME ^^^^^^^^^^^^^^^^^^^^
HEEP E;DI;+ ^^^^^^^^^^^^^^^^^^
?BK)A?P DE?CRI-)IO; ?BK)A?P
;BMKER
3OBR? ?-E;) I;
HEEP
1( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
2( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
3( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
1( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
@( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
5( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
6( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
D( ^^^^^^^^^^^^^^^^^^^^^^ ^^^^^^^^^^ ^^^^^^^^^^^^^^
)O)AC 3OBR? ?-E;) I; HEEP O; ?)BDT
288
APPENDI/ 22B TIMETA6LES AND MILESTONES
1( I%'"du&'i"%
1(1 It is the res$onsibility o# line de$artment mana&ement to $lan% monitor and ontrol the
$ro&ress o# main investi&ations so that they are delivered on time( )he #ollowin& $art o# this
+uide desribes how to"
$lan the timin& o# all ativities o# the main investi&ation>
identi#y and estimate the neessary delivery dates o# all ma'or ativities> and
monitor the suess o# the study in meetin& a&reed deadlines(
)he a$$endi! inludes
illustrations o# the $roedures and tehni*ues #or $roduin& study timetables and outlines how
milestones an be used in monitorin& the $ro&ress o# studies(
2( Pl$%%i%( $&'i=i'ie1 $%d 'i#e'$5li%(
2(1( Earlier in the time and ost bud&et setion desribes how the #irst ste$ in $roduin& time
and ost bud&ets is to s$lit the study into disrete mana&eable o$erations( WO$erationsW are
de#ined as any tas0 or subAtas0 re*uirin& sta## or onsultant in$ut( In the same way% to $rodue
realisti and hel$#ul tar&et dates and timetables% we must #irst s$lit the study down into all its
various ativities( In this onte!t% an WativityW is anythin& that ta0es u$ a si&ni#iant amount
o# ela$sed time durin& the study(
2(2( WAtivitiesW di##er #rom Wo$erationsW in that they should inlude"
every ste$ that will ta0e u$ ela$sed time% re&ardless o# how little sta## or onsultant
in$ut may be re*uired( For e!am$le% it may ta0e us only one day o# sta## in$ut to
arran&e a meetin& with the audited entity% but we may need to &ive them at least 2
wee0s notie( ?uh an ativity would be relatively immaterial in terms o# bud&etin& o#
sta## in$ut but will be si&ni#iant #or timetablin&% es$eially i# we are unable to start
other ativities until the meetin& has ta0en $lae( )imetables% and the onse*uent
deadlines and tar&et dates% should be based on ela$sed time% not sta## in$ut>
all ste$s that are neessary #or the suess#ul om$letion o# the study% re&ardless o# who
is arryin& them out( I# we i&nore any ativity that ta0es a si&ni#iant amount o# ela$sed
time% even i# $eo$le other than the Audit O##ie needs to om$lete it% there is a real
dan&er that the study timetable will *ui0ly &o o## ourse(
2(3( An e!am$le o# s$littin& u$ tas0s into ativities is at table 2171( It is based on % 9)ime
Kud&ets #orm:( It inludes estimates o# the re*uired ela$sed time #or eah ativity and also
notes the neessary se*uenin& o# ativities% i(e( the order in whih ativities need to be
arried out i# the study is to run e##iiently( -lanned sta## in$ut has been inluded #or
om$arison(
281
APPENDI/ 22 - TA6LE 1 - ACTI-ITIES, ELAPSED TIMES AND SEJUENCING
T$1?
N";
T$1?@O7e$'i"%
de1&i7'i"% 8!"#
'Di1 (uide 7$(e
A&'i=i'y
N";
A&'i=i'y de1&i7'i"% E1'i#$'ed
el$71ed 'i#e
SeGue%&i%( "!
$&'i=i'ie1
T"'$l
S'$!!
D"u1
'Di1
(uide
7$(e
1 -lannin& 1(1 Alloation o# tas0s to
study
1 day At start 5
sta##
1(2 Reastin& o# timetables 3 days a#ter 1(1 11
1(3 Initial team meetin& 1 day a#ter 1(2 <
1(1(1 ?etAu$ o# initial meetin&
with
audited de$artment 2 wee0s At start 3
1(1(2 Initial meetin& with
de$artVt
1 day a#ter 1(2 and 1(1(1 3
2 De$artmental
ob'etives
2(1 Review o# C-B #iles 2(1(1 Arran&e aess to C-B
#iles
1 wee0 A#ter tas0 1 2
2(1(2 Review C-B #iles 5 days a#ter 2(1(2 35
2(1(3 Evaluate #ile evidene 2 days a#ter 2(1(2% be#ore
2(372(1
5
2(2 Review o# housin&
#iles
2(2(1 Arran&e aess to
housin& #iles
1 wee0 A#ter tas0 1 2
2(2(2 Review housin& #iles < days a#ter 2(2(2 12
2(2(3 Evaluate #ile evidene 2 days a#ter 2(2(2% be#ore
2(372(1
5
2(3 Interview o# C-B 2(3(1 Arran&e C-B meetin& 2 wee0s A#ter 2(172(2 3
2(3(2 Meetin& with head% C-B 1 day a#ter 2(3(1 3
2(1 Interview o# housin& 2(1(1 Arran&e housin& meetin& 2 wee0s A#ter 2(172(2 3
2(1(2 Meetin& with head%
3ousin&
1 day a#ter 2(1(1 3
2(@ Doumentation o#
tas0 2
2(@ Collation and
doumentation
3 days 11
)O)AC ECA-?ED
)IME 9a$$ro!(:
6 wee0s )O)AC ?)AFF
I;-B)
1@3 3R?

Assum$tions"
1( )as0 1 must be om$lete be#ore any other tas0s be&in
2( )he study must be $lanned be#ore the initial meetin& with the de$artment
3( Koth C-B and housin& #iles must be reviewed and evaluated
be#ore the heads o# C-B and housin& are interviewed
2(1( Identi#yin& the orret se*uene o# ativities is im$ortant i# we are to $lan the wor0 in a
lo&ial order( For e!am$le% we annot hold a meetin& with the audited entity be#ore we
arran&e it( E*ually% we annot write the minutes o# the meetin& be#ore the meetin& ta0es
$lae( ?e*uenin& also assists mana&ement to $lan resoure re*uirements e##iiently 9see
$ara&ra$h 2(6 below:
282
2(@ Hith the study bro0en down into ativities% with estimates o# ela$sed time and with $ro$erly
identi#ied se*uenes o# ativities it is relatively strai&ht#orward to $rodue a study timetable(
Mana&ement need to $lot out the order and the ela$sed time o# eah ativity to $rodue a
lo&ial #low o# wor0( As mentioned in Cha$ter 3% timetables o# ativities and o# sta##
involvement in the study are re*uired( )able 2172 shows the ativity timetable #or table 2171(
2(5( In $roduin& timetables mana&ement should onsider the #ollowin&"
it is o#ten hel$#ul to start s$ei#yin& ativities #rom the o$erations identi#ied #or time
bud&etin& ( Ativities an be viewed as the olletion o# ations that need to be
om$leted to underta0e o$erations suess#ully( )his is illustrated in table 1 where
ativities have been &rou$ed under the relevant o$erations>
ativities should inlude all neessary "
study $lannin&% monitorin&% review and ontrol ativities>
mana&ement involvement% inludin& that o# $rini$al auditors and audit o##ie
senior mana&ement>
there should be realisti $rovision #or une!$eted delays>
ela$sed time is best estimated at the level o# days or wee0s( )imetables should not be
$lotted at the level o# hours" this im$lies a level o# auray that we annot ahieve>
i# sta## in$ut is used as the basis #or estimatin& ela$sed time% mana&ement should ae$t
that sta## are unli0ely to wor0 188X o# eah day( < hours wor0 is li0ely to ta0e 1 O days
ela$sed time>
thin0 are#ully about all the ativities that must be om$leted be#ore a new one starts(
For e!am$le% in table 1% both 1(1(1 and 1(2 must be #inished be#ore 1(1(2 ta0es $lae>
timetablin& o# sta## in$ut should re#let the &rades that need to om$lete the ativities>
base initial timetablin&% at the start o# a study% on a ombination o#"
detailed $lannin& o# all ativities in earlier tas0s> and
broad estimates o# the ela$sed time #or later tas0s 9not &oin& down to the level o#
ativities:(
)he $reise timin&% and $ossibly the ontent% o# later tas0s will de$end on the outomes o#
earlier ones" early detailed $lannin& o# later tas0s is there#ore li0ely to be hi&hly s$eulative%
and have very limited value>
estimate the best tradeAo## between the ela$sed time o# the study and the number o# sta##
involved( )here is a balane to be drawn( )oo many sta## adds to learnin& time and
inreases the ris0 o# $oor ommuniation or inonsistent a$$roahes> too #ew sta## an
ma0e s0ills mathin& di##iult and lead to lon& studies with attendant ris0s o# tunnel
vision and $oor motivation>
try to eliminate or minimize any downtime( WDowntimeW is when sta## have little or no
wor0 to do whilst waitin& to start a new ativity( )his arises beause $reedin&
ativities% re*uirin& little sta## involvement% are not om$leted( In table 1% sta## annot
start ativities 2(3(2 and 2(1(2 9holdin& meetin&s with the 3eads o# C-B and 3ousin&:
until 2(3(1 and 2(1(1 are om$leted% reatin& a twoAwee0 $eriod when sta## will have
nothin& to do(

2(<( A use#ul tehni*ue to hel$ timetablin& is that o# networ0 analysis( )his is a $itorial
re$resentation o# the #low o# ativities( An e!am$le #or table 1 is at #i&ure 1( Eah ativity is
re$resented by a line between two irles 9normally alled events:( Cines are $lotted to re#let
the se*uenin& o# ativities" a line to the ri&ht o# an event re$resents an ativity whih an
only start one the ativity de$ited by the line to the le#t o# the event has been om$leted(
283
APPENDI/ 22 -TA6LE 2 - ACTI-IT4 TIMETA6LE
Ativity Ativity Estimated *ee?
;o( desri$tion ela$sed 1 2 3 1 @ 5 < 6
time
1(1 Alloation o# tas0s to
study sta##
1 day R
1(2 Reastin& o# timetables 3 days
RR
R
1(3 Initial team meetin& 1 day
1(1(1 ?etAu$ o# initial
meetin& with
audited de$artment 2 wee0s RAAAAAAAAA
AAAAM
1(1(2 Initial meetin& with
de$artVt
1 day R
2(1(1 Arran&e aess to C-B
#iles
1 wee0 RAAAM
2(1(2 Review C-B #iles 5 days RRRRRR
2(1(3 Evaluate #ile evidene 2 days RR
2(2(1 Arran&e aess to
housin&
1 wee0 RAAAM
#iles
2(2(2 Review housin& #iles < days RRRRRR
2(2(3 Evaluate #ile evidene 2 days RR
2(3(1 Arran&e C-B meetin& 2 wee0s RAAAAAAAAM
2(3(2 Meetin& with head%
C-B
1 day R
2(1(1 Arran&e housin&
meetin&
2 wee0s RAAAAAAAAM
2(1(2 Meetin& with head%
3ousin&
1 day R
2(@ Collation and
doumentation
3 days RR
R
281
2(6( ;etwor0 analysis has a number o# advanta&es"
mana&ement an develo$ a lear $iture o# the se*uenin& o# ativities>
ritial ativities 9i(e( those that must be started and om$leted e!atly on time i# the
study is to meet its deadlines: are easy to identi#y( In #i&ure 1 these are re$resented by
the dotted line>
mana&ement an see the advanta&es and disadvanta&es o# varyin& levels o# sta##
numbers( For e!am$le% in #i&ure 1% the o$timum use o# sta## is to em$loy 2 e!aminers
#rom $oint @ to $oint 13" one $er#ormin& ativities 2(1(1 to 2(1(3 Z 2(3(1 Z 2(3(2% the
other doin& 2(2(1 to 2(2(3 Z 2(1(1 Z 2(1(2( All ativities #rom $oint @ to 13 an then be
om$leted in a$$ro!imately @ wee0s ela$sed time( Em$loyin& only one e!aminer will
mean that tas0s 2(1 and 2(2% and tas0s 2(3 and 2(1% will have to be done in se*uene
rather than runnin& in $arallel( )his means that it will ta0e a$$ro!imately 18 wee0s to
move #rom $oint @ to 13( I# we em$loy more than 2 e!aminers there will be very little
savin& in ela$sed time( Em$loyin& a #urther 2 members o# sta## 9ma0in& 1 in total: will
only allow us to halve the time it ta0es to om$lete 2(2(2 Z 2(2(3 Z 2(1(2 and 2(1(2 Z
2(1(2 Z 2(3(2( All other tas0s 9those with the lon&est ela$sed time: will be una##eted as
they do not involve si&ni#iant sta## in$ut( )he savin& in total ela$sed time will be only
@ wor0in& days( 9;ote" with only one e!tra e!aminer A i(e( with 3 in total A there will be
no savin& in ela$sed time( 3alvin& the time it ta0es to om$lete 2(1(2 Z 2(1(3 does not
halve the time it ta0es to om$lete the $arallel ativities o# 2(2(2 Z 2(2(3( )he latter have
to be om$leted be#ore we move on to tas0s 2(3 and 2(1:>
it is relatively easy to analyze the networ0 to show the $oints at whih there is ris0 o# a
si&ni#iant amount o# downtime(
2(D()hou&h networ0 analysis an be use#ul% it should not be used slavishly( It is an aid to
mana&ement not a neessary re*uirement #or all $er#ormane audits( It will be most hel$#ul
where the se*uenin& o# events is om$liated and di##iult to a$$reiate #ully without some
#orm o# $itorial re$resentation( 3owever% whether mana&ement use networ0 analysis or not%
they must thin0 are#ully about the lo&ial e!eution o# ativities be#ore $roduin& timetables(
3; M"%i'"i%( 7"(e11B #ile1'"%e1
3(1( -lannin& ativities and sta## in$ut is only $art o# mana&ementVs res$onsibility( )hey must
also monitor and ontrol $ro&ress so that the study is delivered on time( )imetables are an
essential $art o# this $roess as they show e!atly where the audit should be at any $oint in
time( Mana&ement an om$are $ro&ress with $lanned ahievements and estimate the li0ely
im$at on deadlines% ta0in& orretive ation as neessary(
3(2( Milestones" Mana&ement may also #ind it use#ul to monitor $ro&ress a&ainst milestones(
In this onte!t milestones are intermediate $oints% throu&hout the study% whih at as
benhmar0s o# $ro&ress( )hey are desri$tions o# onditions or states that the investi&ation
must ou$y at various $oints in its $ro&ress in order #or it to ahieve its deadlines( Eah
milestone has three $arameters whih assist mana&ement to monitor and ontrol the study"
a statement o# e!$eted out$ut or ahievement 9i(e( o# *uality: at the milestone>
a $lanned ost% in either monetary terms or sta## in$ut% #or reahin& the milestone 9#rom
the time and ost bud&ets:>
a date by whih we e!$et to ahieve the milestone 9#rom the timetable:
3(3( )he hoie o# milestones is de$endent on the study and the re*uirements o# mana&ement
to maintain ade*uate ontrol( Coo0in& at table 1 and #i&ure 1% #or e!am$le% the #irst milestone
9M1: mi&ht be the holdin& o# the initial meetin& with the audited de$artment( )his is a ruial
event A without it no $ro&ress an be made on the study( Further milestones ould inlude"
28@
M2" om$letion o# ativities 2(1(3 and 2(2(3% evaluation o# C-B and housin& #iles" until
review and evaluation is om$lete the audit team will not have the in#ormation to
ondut well researhed interviews with the 3eads o# C-B and 3ousin&>
M3" om$letion o# ativity 2(@% doumentation o# tas0 2( )his si&ni#ies the #ormal
om$letion o# all ativities in tas0s 1 and 2(
3(1( I# mana&ement 'ud&e that they need a &reater de&ree o# ontrol they an add additional
intermediate milestones( It is essential% however% that"
there are su##iient milestones to maintain ade*uate ontrol over the whole ourse o# the
study>
milestones inlude all si&ni#iant events durin& the study( E!ludin& any im$ortant
event inreases the ris0 that the study will wander o## ourse>
mana&ement must de#ine #ully the state or ondition that eah milestone re$resents( For
e!am$le% by milestone M2 we e!$et to have olleted and evaluated all the available
doumentary evidene on the de$artmentVs aims and ob'etives( )his should be
su##iient to &uide our interviews with the 3eads o# C-B and 3ousin&( Ky milestone
M3 we should have a #ull and u$AtoAdate statement% both doumented and oral% o# the
aims and ob'etives( He should have su##iient on#idene in the relevane% reliability
and om$leteness o# the in#ormation we have olleted to see0 the de$artmentVs
a&reement to it as the de#initive statement on their aims and ob'etives(

3(@( 3avin& identi#ied the neessary milestones% and de#ined the W*ualityW as$et o# eah%
mana&ement should om$ute the $lanned delivery date and e!$eted ost #or eah milestone(
Assumin& that we are &oin& to em$loy two e!aminers on the investi&ation% we $lan to ahieve
the milestones M1AM3 by the #ollowin& dates and at the #ollowin& ost"
T$5le 3B Pl$%%ed deli=ey d$'e1 $%d &"1' !" #ile1'"%e1
Milestone -lanned delivery date E!$eted
WostW
9#rom #i&ure 1:% 9#rom table 1:
?tart o# study 9M8:
M1 M8 Z 2 wee0s% 1 day 33 hours
M2 M8 Z 3 wee0s% 18 days 12< hours
M3 M8 Z @ wee0s% 11 days 1@3 hours

9;ote" this ma0es no allowane #or reduin& WdowntimeW% as disussed above(:
3(5( Milestones have a number o# advanta&es"
285
we tend to use them naturally to monitor $ro&ress% settin& ourselves tar&ets a&ainst whih to
'ud&e how well we are $roeedin&( Establishin& a #ormal milestone system ensures
onsisteny% lo&i and om$leteness>
assessin& $ro&ress a&ainst re&ular milestones may be less timeAonsumin& than onstant
re#erene to timetables and bud&ets( Mana&ement an monitor $ro&ress with a relatively
li&ht touh whilst allowin& sta## #reedom to mana&e their own areas o# wor0>
milestones $rovide reo&nizable tar&ets #or all in the study to ahieve A i# all wor0 towards
these milestones there is a better hane that the study as a whole will be delivered on time
and to ost>
milestones allow mana&ement to draw all three main ob'etives o# the study to&ether A
*uality% ost and time 9delivery dates: A &ivin& an inte&rated $roess o# tar&ets% monitorin&
and ontrol(
3; C"%&lu1i"%
1(1( Ahievement o# deadlines is an im$ortant as$et o# ondutin& an e##iient investi&ation(
?i&ni#iant deviation #rom deadlines should be reti#ied wherever $ossible( I#% in s$ite o#
mana&ement monitorin& and ontrol o# $ro&ress% it a$$ears that the study annot be delivered
to the a&reed deadlines% line division mana&ement should in#orm AO senior mana&ement at
the earliest o$$ortunity(
1(2( Mana&ement should% however% reo&nize that ahievin& a&reed deadlines is only one
as$et o# ondutin& an e##etive e!amination( I# the study sari#ies *uality 9relevant%
reliable and su##iient evidene and analysis: to ahieve deadlines the e!amination will be o#
little or no value( Mana&ement must inte&rate monitorin& and ontrol o# all the studyVs
ob'etives A *uality and ost 9inludin& sta## in$ut: as well as deadlines(
28<
APPENDI/ 23B RE-IE* OF COMPLETED IN-ESTIGATION
3erewith% attahed is a he0list #or om$letion at the end o# the investi&ation by the head o#
internal auditor then submittin& to the head o# $ubli body( At the end o# the main
investi&ation and re$ortin& sta&e the head o# internal audit should review the doumentation and
su$$ortin& wor0in& $a$er #older to ensure that whether the audit wor0 was done as $er the $lan%
and the audit ob'etives ahieved ost e##etively( Any lesson learnt #rom the study and the
$roblem enountered should be assessed to aid #or #uture audit $lannin&(
;AME OF )3E ABDI) OFFICE
ABDI) COM-CE)IO; C3ECP CI?)
ABDI)EE ^^^^^^^^^^^^^^^^^^^^^^^^^
-RO+RAM7-ROQEC) ^^^^^^^^^^^^^^^^
-rini$al Auditor ^^^^^^^^^^^^^^^^^^^^^^ Date ^^^^^^^^^^^^^^^^^^^^
Item
;o(
Desri$tion Tes ;o Comment ,
Initial
Feasibility ?tudy
1 Has the #easibility study underta0en in
aordane with the $er#ormane audit Manual%
+uides and standardsF
2 Did the audit issues% evaluative riteria and audit
methodolo&ies ommuniated and ae$ted by
the auditeeF
3ad any disa&reements e!$ressed and reordedF
3 Did the #easibility study re$ort #ollow the
standard &uidane o# the manualF
I# not what modi#iation were made and whyF
1 Has the #easibility study re$ort ae$table to
senior mana&ementF
I# not what han&es were neessaryF
@ Main Investi&ation -lannin&
Has the $lannin& $a0a&e $re$ared inludin& the
audit $ro&ram% the onsultants )OR 9i#
neessary:% time bud&et% liaison $lan et(% in
aordane with the $er#ormane audit Manual%
+uides and standardsF
286
Item
;o(
Desri$tion Tes ;o Comment ,
Initial
5 Did the audit $lannin& doument su##iiently
om$lete to inlude all tas0s and tests relevant to
arry out the investi&ationF
A I# not what han&es where relevantF
<
E##etiveness o# the Investi&ation
Did the investi&ation ahieve its a$$roved
ob'etivesF
6 Could the ob'etives have been better de#ined% or
a better audit a$$roah ada$tedF
I# so% &ive in brie# how it ould have beenF
D Did any #ators emer&e whih $revented the
ahievement o# the ob'etivesF
I# so% how #ar they ould have been #oreseenF
18( Hould &reater resoures or the use o# other
s$eialists have $rodued better resultsF
11 Did any other $otential GFM sub'ets emer&eF
3ow were they treatedF
12
E##iieny o# the Investi&ation
Has the timetable #ound to be realistiF
13 Has the investi&ation om$leted on the $lanned
dateF
A I# not% what were the main reasons #or the
delayF
11 Could the delay have been #oreseen and
$reventedF
1@ Here sta## o# a$$ro$riate &rades and e!$eriene
available when re*uiredF
15 Here tas0s reasonably balaned between team
membersF
28D
Item
;o(
Desri$tion Tes ;o Comment ,
Initial
1< Has su##iient% relevant% and reliable evidene
$roduedF
I# not% was there &ood reason #or the short#all in
standardF
16 Could the same audit ob'etives have been
ahieved ade*uately with #ewer resoure or with
less evideneF
1D Here re&ular $ro&ress evaluation meetin&s held
with team membersF
3ow did this bene#it the studyF
28
Doumentation
Has the doumentation ade*uate and om$lete
to su$$ort the audit onlusionsF
21 3ave the main investi&ation summary re$orts%
#at sheets% minutes et( $re$ared been #atually
sound% su$$orted by relevant% reliable and
su##iient audit evideneF
22 Did the re#erenin& o# $a$ers #ailitated reviewF
23 Did issues $resented #or divisions by senior
mana&ement e##eted dulyF
21 Has the om$letion o# the audit wor0 he0ed
a&ainst the audit $ro&ramF
2@
)ehni*ues
Here any s$eial analytial or other tehni*ues
a$$lied 9e(&( statistial% mathematial% om$uter
analysis:F
3ow did this assist the $ro&ress o# the studyF
25 Here $er#ormane measures develo$edF
Here they $rodued in on'untion with the
audited entityF
2<
Cost e##etiveness o# the study
Has the study ost e##etiveF
Ky what riteriaF
26 Hhat was the ost o# the studyF
218
Item
;o(
Desri$tion Tes ;o Comment
, Initial
2D Has the ost assessed at the #easibility sta&eF
3ow did the out turn om$are with the estimateF
38
Re$ort
3as the outline re$ort been $re$ared in aordane with
the $er#ormane audit manual and standards be#ore the
#inal re$ortF
31 3as the outline re$ort been a&reed with the audited
entityF
32 Did the #inal re$ort #ollow the outline re$ortF
Hhat was the e!tent o# han&esF
33 3as the #inal re$ort been $re$ared in aordane with the
$er#ormane audit manual and standardsF
31 Here the reommendations &iven in the re$ort #easible
and ould be easily im$lemented and #ollowedAu$F
3@ Here ade*uate re$ort learane arran&ement made and
e##etedF
35
Ciaison with Audited Entity
Has liaison with the audit entity satis#atoryF
3< Has the liaison o##ier assi&ned% om$etent and
0nowled&eable about the audited entityF
36 3ow ould have the liaison system been im$rovedF
3D Here there any $roblemsF
211
APPENDI/ 23B OUTLINE REPORTS
1( )he #orm o# an outline re$ort is a matter #or the senior mana&ement% $robably the head o#
internal audit% to deide aordin& to the irumstanes( )he outline should% however% avoid
ba0&round and desri$tive material unless essential to an understandin& o# the issues and
#indin&s( An outline re$ort should ontain but not limited to"
relatively short e(&( no lon&er than 3A1 double s$aed $a&es>
$rovide only a brie# indiation o# how re$ort is to be strutured in the #orm o# a list o#
main headin& and 9$ossibly: subAheadin&s>
identi#y and onentrate on the 3A1 audit issues arisin& #rom the investi&ation>
state brie#ly the im$ortant #indin&s% onlusions and reommendations #or eah audit
issues>
learly identi#y any overall 9wider: onlusions and reommendations> and
indiate the main #ats% #i&ures% e!am$les or other evidene available to su$$ort the
onlusions 9reo&nizin& that at the time the outline is $re$ared suh in#ormation may
not have been #ully reviewed:(
2( )he outline should be written in a way whih ta0es aount o# the #at that the o$y will
normally be sent to senior mana&ement in the audited entity as a basis #or disussion( Findin&s
and onlusions should be stated learly and #ran0ly but e!$ressed in moderate and
un$rovoative terms 9#or e!am$le% it mi&ht re#er to .delays/ but not .inde#inite #oot dra&&in&/
in dealin& with matters:(
3( In submittin& the outline re$ort to more senior sta## audit mana&ers 9$rini$als: should deal
with any as$ets #or internal onsideration in short overin& memo 9minute:( De$endin& on
irumstanes the memo 9minute: mi&ht over"
how #ar #ield wor0 has been om$leted>
whether si&ni#iant matters remain to be $roven or substantiated>
any reservations on the *uality o# evidene>
the need to u$date evidene or to ta0e aount o# im$endin& results #rom other reviews
or e!erises by the audited entity or others>
$ro&ress a&ainst tar&et dates or deadlines>
any di##iulties in establishin& #ats or handlin& learane with the audited entity> and
-ossible e!eutive 9or media: reation to the eventual re$ortA#or e!am$le% where
di##iulties may arise beause o# lin0s with $oliy or $olitial issues% 0nown interests o#
e!eutive members% or seurity% ommerial on#identiality or other $ubli interest
onsideration(
1( ;ormally% a o$y o# the outline re$ort should be sent to the auditee shortly a#ter a$$roval by the
internal audit head( )he internal audit head should ensure that the overin& letter to the head o#
$ubli body ma0es the $ur$ose o# the outline lear and indiates the time #rame within whih a
res$onse and disussion should ta0e $lae( )he $eriod o# res$onse should not normally &o
beyond 2A1 wee0s( )his has to be learly stated in the overin& letter( It may also be
a$$ro$riate to remind the audited entity o# the $ur$oses o# any disussion o# the re$ort outline
to avoid $rolon&ed and un$rodutive debate(
@( It is worth remindin& all rei$ients o# this outline that"
it is based on the results o# the #ield wor0 to date it is $ossible that han&es may result
#rom later #ield wor0>
it should be made $er#etly lear in the re$ort the di##erene between #indin&s and
onlusions whih are already su$$orted by hard evidene and those whih are still to be
$roved> and
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any $ossible o$tion to narrow or widen the so$e o# the a$$roved investi&ation should be
$ut #orward in the memo 9minute: at this sta&e i# thou&ht to be desirable(
+enerally s$ea0in&% the outline re$ort will $rovide senior mana&ement with #irst o$$ortunity to
he0 on the detailed $ro&ress o# the whole investi&ation and it should there#ore be submitted
at an early enou&h sta&e #or any $ossible han&es o# em$hasis or diretion to be
aommodated(
213
APPENDI/ 2+B INTERNAL AUDITORFS REPORT
1( )here is no ideal dra#tin& model whih is suitable #or all re$orts( A ri&id #ormat ould beome
umbersome and unima&inative( )he main onsideration is how the #ats% #i&ures and
onlusions on a $artiular sub'et an most e##etively be ommuniated and what #orm o#
$resentation best meets that $ur$ose( Above all% eah re$ort is uni*ue and its $re$aration
re*uires lear and #le!ible thin0in&% avoidin& a slavish or mehanial modelin& on $revious
re$orts( Di##erent sub'ets will re*uire di##erent strutures to ensure that the re$ort #ully
re#lets the 0ey #indin&s and enables the le&islature to handle the material most e##etively(
3owever% there are two &eneral strutures to be ada$ted(
I( A .?trai&ht throu&h/ re$ort inor$oratin& onlusions and reommendations in the main
te!t> 9whih is the ae$ted struture #or internal audit re$ort to the audited entity:
II( A re$ort $reeded by a summary and onlusions 9whih is used #or the annual internal
audit re$ort #or the e!eutive:(
Koth #ormats may be su$$orted by a$$endies(
2( )he lon&er the re$ort the &reater the bene#its o# o$tion 9II: above( Re$orts o# more than about
18A1@ ty$esri$t $a&es should normally be $reeded by a summary o# #indin&s% onlusions and
reommendations( )he summary should be onise% but should still brin& out su##iient salient
$oints o# the main issues and #indin&s to $rovide the reader with a lear view o# the $ur$ose
and results o# the investi&ation% and to serve as the main #ous o# *uestions by the e!eutive(
3( )he summary is not intended to be #ree standin&% miniAre$ort and should ontain the minimum
o# desri$tion and narrative( )he o$enin& $ara&ra$h should summarize the so$e o# the
investi&ation and draw attention to any si&ni#iant limitations in overa&e( Only 3A1 #urther
$ara&ra$hs should then be neessary be#ore listin& the main #indin&s% onlusions and
reommendations( )here should be lear lin0s between the themes in the summary and the
su$$ortin& evidene and e!am$les illustratin& them in the re$ort( It is not always neessary%
however% #or matters dealt with in the summary to #ollow the same se*uene as in the re$ort( It
may be $re#erable to arran&e the summary in themes seleted aross the board #rom the re$ort(
3owever% the summary should be rossAre#erened to the relevant $ara&ra$hs in the re$ort(
Any overall #indin&s and onlusions should be &iven at the end o# the summary in one or two
$ara&ra$h( )his is neessary when the $oints bein& made do not emer&e automatially #rom the
listed #indin&s and onlusions(
1( )he re$ort should be a$able o# bein& read without the need to re#er to other soure material o#
$ublished in#ormation( It is a ondensed desri$tion o# main issues% #indin&s and onlusions(
?u$$ortin& #ats% #i&ures and e!am$les should be restrited to what is needed to su$$ort%
e!$lain and illustrate the results o# the investi&ation and to $resent the audited body2s views
and res$onses( )he essential a$$roah should be to"
brin& out the really im$ortant matters>
$lay down the less im$ortant>
omit the unim$ortant> and
&enerally be seletive and onentrate on analysis rather than on desri$tions and
narratives(
Dia&rams% )ables et(
@( Full use should be made o# #ats% #i&ures and relevant e!am$les to &ive li#e to the re$ort and to
$oint the reader to si&ni#iant issues and onlusion( Dia&rams% harts% &ra$hs and tables
should be used to hel$ &et aross im$ortant messa&es( )hey need also to be inor$orated in the
211
te!t not only in a$$endies( )his an save a lot o# e!$lanation and $rovided they are sim$le
and well laid out% an o#ten onvey more in a short s$ae than strethes o# narratives(
A$$endies
5( More detailed in#ormation whih is essential to an in#ormed readin& o# the re$ort should
wherever $ossible be $rovided in a$$endies( )he rules o# relevane sim$liity and brevity
a$$ly e*ually to a$$endies as to the main re$ort( )hey are not a vehile #or inludin&
desri$tions o# detailed systems or $roedures o$erated within the audited body in areas
overed by the investi&ation(
Gl"11$y
<( Abbreviations in re$ort should be 0e$t to a minimum( Hhere #ive or more abbreviations 9or
s$eialized terms: are neessary to be used in the re$ort then all abbreviations and terms
inluded should be listed at the be&innin& $art o# the re$ort(
21@
APPENDI/ 2.B PLANNED IMPACTS, DEPARTMENTAL
COMMITMENTS AND AC)IE-EMENTS
1( Im$ats in $er#ormane audit% is e!$eted mainly to be derived as a result o# ations ta0en by
the auditee durin& the ourse o# the study% ensuin& #rom the re$orts or #ollowin& e!eutive
reommendations( )here are also im$ats whih ould be derived #rom #inanial7re&ularly
audit% whih the $er#ormane auditor need to onsider( )he three #undamental bases o#
assessin& im$ats are $lanned im$ats% de$artmental ommitments and de$artmental
ahievements(
2( -lanned Im$ats are those identi#ied at the #ormulative sta&es o# $er#ormane audit( )hey are
im$ats that ould be identi#ied and antii$ated durin& the #easibility study% as bein& the li0ely
im$ats o# the study ob'etives( In the #easibility sta&e% i# the e!$eted im$ats o# the seleted
audit issues are limited or the ontributions o# the study are not onsiderable% we need either to
rede#ine the issues or reonsider the #easibility o# the study( )his is beause the audit o##ie
should not ommit its resoures on studies whih have no bene#iial bene#its( In addition
ade*uate identi#iation o# $lanned im$ats ould also #ailitate monitorin& and #ollow u$ o#
the study results( In #inanial audit% similarly% it may also be $ossible to identi#y a $lanned
im$at be#ore a mana&ement letter is sent(
3( De$artmental ommitments arise #rom the auditee2s $romises to ta0e ation in res$onse to the
internal audit or e!eutive onlusions and reommendations( )he ommitment an be made
in the audited entities res$onses to the onlusions and reommendations made in the Internal
audit or e!eutive re$orts or other out$uts suh as mana&ement letters% and sometimes in the
ourse o# the study( 3ere% ommitments are de#ined as the $ro'eted e##ets o# auditeeVs
ations #or the year #or whih initial delivery is $romised by the auditee( It an be later than
the year in whih the ommitment is made( I# the time assumed #or im$lementation o#
ommitment is short% it would also be a$$ro$riate to ta0e two alendar years(
1( De$artmental ahievements are the internal audit best assessment o# the audited entities
$ro&ress a&ainst ommitments( ?uh ahievements should be validated where $ossible by
a&reement with the audited entities% in $artiular where measurable savin&s are involved% or
should be su$$orted by reliable evidenes( Ahievements will be reorded by internal audit on
the basis o# what has atually been delivered in the three years $eriod a&ainst ommitments to
deliver in that $eriod(
E!am$les o# ty$es o# Im$ats
@( Althou&h not e!haustive% some o# the ty$es o# im$ats o# $er#ormane audit are"
a: Im$roved Eonomy"
Introdution o# har&es where none e!isted $reviously or revision o# har&es>
redution in osts throu&h better ontratin&% bul0 buyin& et(>
redution in osts throu&h eonomies on usa&e>
redution in osts throu&h $rovidin& servies7&oods to the hi&h standard o# *uality>
rationalization o# #ailities(
b: Im$roved E##iieny"
&reater out$uts #rom same in$uts>
remedyin& du$liation o# e##ort or la0 o# oordination(
: Im$roved E##etiveness"
better identi#iation7'usti#iation o# need>
215
better identi#iation and tar&etin& o# lients>
lari#yin& ob'etives and $oliies to #ailitate ahievement>
introduin& better sub ob'etives and tar&ets>
reatin& or7and ma!imizin& bene#its>
better ahievement o# ob'etives by han&in& nature o# out$uts or im$roved tar&etin&(
d: Im$roved *uality o# servies"
im$rovin& the standard time #or servies that lient wait>
reduin& the number o# om$laints due to $oor *uality(
e: Im$roved mana&ement $lannin& and ontrol
#: Im$roved aountability"
im$roved aountability #or e!$enditure to e!utives and to the auditees su$ervisin&
authorities>
im$roved #orms o# aount% inludin& ommerial #ormats>
im$roved e!ternal ontrol and monitorin& by the auditees su$ervisin& authority>
better and7or more aurate $er#ormane indiators>
better om$arison between similar or&anizations>
&reater in#ormation on setoral $er#ormane>
lear and more in#ormative $resentation(
21<