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PROJECT AUDIT There are several prerequisites for the successful planning and implementation of a project.

Professional management of project needs a methodology to carry out a regular check as to whether the project is processing as scheduled, in scope and in time. In other words, a good system of project audit will go a long way in facilitating prompt and effective project implementation. PROJECT AUDIT: DEFINATION AND SCOPE Project audit as a formal and systematic examination of the performance of an ongoing project as compared to its requirements. It involves measurement against predefine and relevant standards. It also constitutes as independent and authentic source of information and critique on the project and might often call for the auditors personal judgment. Without impinging on enterprise managements prerogative and responsibility. It supports management in diagnosis and decision-making. The enterprise management should perceive project audit as a normal component of its quality management initiatives. In carrying out this examination, the project auditor has to investigate the underlying records ascertain the tangible records of the work done, look at the process and caliber of project management, examine the project methodology and techniques and get a clear picture of the project organization and controls. He should then be able to: 1. Comment on current status; 2. Forecast the future status; 3. Highlight critical management issues; 4. Point out exposure to risk and potential losses. Comment on current status Current status is the actual status at the time of the audit as against the commitment of the contractors or the project management group and the expectations of the management. The project audit report audit report on current status covers aspects of the project cost performance projects performance in relation to schedule, progress performance, quality performance compliance with work commitments and compliance with managements expectations. The report on projects cost performance comments on the actual costs incurred by time periods, and cumulatively, as compared with the budget costs for the corresponding time periods and cumulative to date. Comparison of the contractual milestones of the project as to committed dates and measures of completion with reference to actual accomplishments in terms of dates and measures of completion of the milestones is made and commented upon. Statement on progress performance compares the work done with related cost highlights deviations form the financial assumptions made at the time of planning the project. A separate report focuses on the quality of performance of the project to enable revision or modification of methods of work or control mechanisms. There are also statements highlighting the significant deviations from contract or work commitments and exception and exceptions that have not figure in the above report and also the status of compliance or otherwise with special managements exceptions on project performance, if any.

Forecasting of future status In the light of the progress to date, the forecasting of the project status for future time periods or milestone has to be made and compared with contract or work commitments and management expectations. These reflect the project auditors considered conclusion assuming the observed trends persist, except to the extent that some observable trends of improvements are reckoned. Critical management issues Aspects of particular significant that require management attention should be identified and reported. Observed and existing weakness or deficiencies that are bound to undermine the progress and out come of the project, unless prompt and effective managerial actions are taken, come for special mention. Exposure to risk and potential losses Some of the possible occurrences or events, that have some probability of occurrence, have to be interpreted in terms of expected risk or losses and their implications in financial terms, also in term of adverse effects on the contractor or customers or other interested parties. The management can then consider possible action to protect the interest of those likely to be affected. Mounting project cost may lead to pricing decisions that will impair the financial results of the clients. There could be certain aspects where the contractor is forced to pay liquidated damages through part of the responsibility for delay or non-fulfillment on his part lies with the project owner. Summary report on above aspects should be supported with detailed audit findings and related documents. If the management has special expectations from the project audit these have to be listed out. The contractual documents and agreement have to be studies and their adequacy assessed. The commitments of the owner or management respect of providing infrastructure or other facilities also have to be studies and the impact of inadequacy, if any, in this regard on projects success has to be assessed. The project organization, administration, record keeping and control also come for scrutiny. Where the project auditor makes his forecast on future status of the project. He should detail the relevant assumptions and scenarios on which he has based his forecasting. Special care in needed while commenting on the terms of people or individuals involved in the implementation of the project. Negative information involves individuals or groups of individuals should be conveyed without specific reference to the individuals, wherever possible. Project Auditors Role The project auditor is an expert in measuring, confirming, investigating, and reporting the status of the project with a view to reducing the under certainties that encourage the project. He should not arrogate to himself the role of a consultant or technical. He should not fill his report with recommendation or suggested action plan. He should confine himself to interpretation of studied facts. In case he feels compelled to make recommendations. It should be in the form of a separate document distinct from the project audit report so that the enterprise management can view the suggestions without linking them with the report. There are good reasons why the project auditor should refine from prescribing action plans or making recommendations:

The intention to determine action plans may bias his interpretation of facts relating to the performance of the project. He might be influenced by some predetermined notions. Any problem may have a wide range of feasible solutions and the project auditor may neither have the time nor the competence to examine threadbare all such possibilities. Discussions on recommendations may lead the management astray and it may miss to note the crux of the underlying problem. But there could be occasions when the project auditor is required to give advice or make recommendations. Solicited action plans should be the outcome of the conviction of the enterprise management that the auditor is competent to prepare action plan and has the requisite time and information for verification. Unsolicited action plans should come up only if the project auditor feels strongly the items covered in his recommendations are very important in the context of the findings of project audit. Contract baseline Contract baseline comprises the set of documentations that establish what the project should do, when and how. It is the baseline with reference to which the auditor should measure the present and future state of the project. The current document relating to commitments and agreements relevant to the project constitute the formal contract baseline. There can be informal baseline also in the form of verbal agreement or documents not signed by authorized persons. The auditor will have to evaluate these contract baselines and gave his judgment on their adequacy or otherwise for achieving the objectives of the projects. He should conform the existence of the requisite baselines, see if they are adequate and complete, examine if they are accurate and consistent and also see if they provide the measurements for judging the project. in addition to relating the extent and conditions of contractors obligations to the owner or enterprise management, the contract baselines also relates to contractors agreements with subcontractors, suppliers, etc., and these will also come under project auditors par view. What and how is measure? There should be clarity about the tangible deliverables at each stage or project execution. These form the basis for evaluating whether the project is achieving its goals as per plan. Progress measurement points in the project that can be independently verified are referred to as confirmable milestones and the auditor has to identify them and use them as a yardstick for evaluation of progress. He should also decide on an appropriate and consistent method of assigning value to work done. The process The project auditor should have a clear understanding with the owner or audit requestor, as to what is to be accomplished by the audit. If there are constraints such as restrictions on contracting certain people for information, etc., these have to be explicitly started these should then be documented in a memorandum, which will form the base line for the project audit. After getting a clear understanding of the scope as expected by the owner or audit requestor, the next step is to define the project base line in more detail, in

consultation with the project team and with the help of visits the project sites. This will involve the identification and analysis of the set of contractual documents which collectively define the extent and details of the projects obligations, determination of additional management resource allocations, pricing and costing assumptions and the development of the detailed audit program. The phase of audit program execution will have the following steps: Preliminary examination of the projects organization, record keeping, control and planning and working methods and techniques performed in order to establish the extent to which they are an adequate basis for budgeting up the statements of project status, current and future. Preparing the statements of projects status, current and future, giving a detailed list of completed work as compared with the projects performance baseline, recording the cost expendably the project team to carry out the work to date, comparing the fulfillment of contractual obligations against commitments, establishing the quality of work done by the project team and recording observing facts on project planning, project organization and staffing, project administration and record keeping, working methods and techniques, communication, project facilities and environment, contract administration and controls, and controls over suppliers and subcontractors etc. Then will follow the preliminary analysis and presentation of results accompanied by audit report preparation and transmittal. Difficulties in establishing audit purpose and scope The purpose of project audit is to clarify the state of the project in certain key areas for the enterprise management or audit requester. It is a part of quality control effort. There can be differences in the perceptions of the auditor, the management or audit requester and the project team as to the purpose to be served by the audit. If this is not clarified and understood by all, the auditor may run into problems while carrying out his audit work. The management and audit requester may often have unrealistic expectations, where by the auditor is viewed as a miracle agent who can spot everything good or bad about the project in record time. The auditor should clearly spell out what he can accomplish in the context of the time and information constraints that he is likely to face, depending on the track record of the project as observed by him during his preliminary assessment. The management might prefer that the auditor confine himself to the technical audit of the project where as the auditor might find that the audit of project administration, record and controls is essential. These differences will have to be sorted out prior to commencement of audit. The auditor should refrain from giving recommendations, but the management might require him to give suggestions. If so, he should make it clear that these will be independent of the audit report finding based on analysis of facts and available information. The auditor could often be misled by wrong information or out of date or incorrect documentation. He should have a system of cross verification and checks so as not to be led astray. It might some time be found that person who are to be working on the project are not there and those who are not supposed to be in the project are there. Some might have been assigned to the project but may be performing duties not connected

with the project. The auditor will have to report these aberrations indicating their implications for the project. Where those who are not assigned to the project are performing significant task connected with the project, there will be understatement of project cost and the auditor will have to point this out. Difficulties might arise identifying the baseline contract or work statement set. Work could be carried out on the basis of verbal agreements without proper contract documentation. Even where the documentation exists, the project team might be unaware of some of the important provisions therein. Where the main contractor does not subcontract the work properly or there are several vendors who have not been properly rated and selected the investigation by the auditor has to be more exhaustive. Absence of deliverable specifications in the contract baseline and inadequacies in delivery procedure or acceptance criteria are often problems requiring special attention. There could be general claims as to completion of milestones without supporting proof or milestone completion may be linked to payments rather then completion of specified physical tasks or assignments. The auditor will have to resolve such ambiguities. Having identified and analyzed a variety of problems pertaining to the formulation and implementation of the project audited by him, the project auditor can evolve guidelines that can be useful for other projects, present or future, of the enterprise. Objectives of project audit The objectives of project auditing can be viewed in terms of the help in renders to the enterprise management in: Creating awareness among the project staff of the types and magnitude of the problems that are likely to be encountered in completing the project and producing quality products, in planned volume and at competitive costs. Providing a clear picture from time to time, of the actual status of the project. Prompt identification of the factors that might cause product quality problems or lead to time and / or cost overruns. Timely sporting of a variety of generic problems that are associated with execution of projects. Enabling the creation of a good information base for a proper estimations and costing of the project. Assisting in the establishment of appropriate standards and systems and recommending suitable work techniques. Identifying the specific training needs with reference to the project tasks. Formalizing the experience and expertise in project management in order to be able to provide consultancy services to other enterprise.