Professional Documents
Culture Documents
Are sound and valid procurement procedures in place and being followed?
Efficiency and economy audits should be undertaken by the Council’s auditor or an independent,
suitably qualified person. The person identified to undertake the examination, and to produce the
report, must do so without undue influence from any individual Council Member or the Chief
Executive Officer or other staff of the Council. When commissioning the audit, the auditor
should be advised of the program area and required to develop an understanding of the policy
that drives the program and once fully understood, adopt the appropriate audit procedure.
In most countries, efficiency audits of governmental activities are carried out by the external
audit bodies at federal or state level. Many of these audit bodies have established guides for
conducting efficiency audits which explain how efficiency audits are planned, conducted and its
results reported.
INTOSAI, the international association of Supreme Audit Institutions, has published generally
accepted principles of efficiency auditing in its implementation guidelines. In the United States,
the standard for government performance audits is the Generally Accepted Government Auditing
Standards (GAGAS), often referred to as the "yellow book", maintained by the federal
Government Accountability Office (GAO). Similarly, the European Court of Auditors (ECA) has
developed a "efficiency audit manual" for its audits of the sound financial management of the
European Commission and the programmes funded through the EU budget.
Efficiency audits may also be conducted by Internal Auditors who are employees of the entity
being audited. However, some national governments require agencies, departments and branches
to periodically retain outside auditors to conduct them.
The scope of efficiency audits may include the detection of fraud, waste and abuse, although
often these are not included in the scope. Prior to engaging in a efficiency audit, the auditor must
have a scope and plan defined which will be used to guide the audit process.
Internal Audit
Thus, internal audit activity can play an important role and support the board and management in
fulfilling an essential component of their governance mechanisms. The internal auditor furnishes
analysis, appraisals, recommendations, counsel and information concerning the activities
reviewed. The internal auditor can suggest ways for reducing costs, enhancing revenues, and
improving profits.
A Partnership...
It is worth remembering that internal audit works in partnership with management and provides
the board, the audit committee and executive management assurance that risks are held at bay
and the organization’s corporate governance is strong and effective. They work in the same team
and want the organisation to be and remain successful.
Purpose of Internal Auditing
It’s the responsibility of the Board to ensure that risks are managed and controlled. This task is
delegated to the executive management which
This assurance from the management is fundamental. There is a need for additional assurance
from a different source. Internal audit can be the key source providing objective assurance that
all the significant risks have been identified, risk management process is working effectively
and efficiently, risks are being reported and controls are effective. As part of this work, the
internal audit activity will provide advice, coaching and facilitation services to assist executive
management in carrying out their responsibilities.
The external auditors have to express an opinion on accuracy and fairness of financial
information. The scope of internal audit is much wider than statutory/external audit. It should
ideally cover all the organisation’s activities. They include:
Financial audit –accuracy, completeness and fairness of financial statements
Operational audit- effectiveness and efficiency of operations
Safeguarding of assets
Review of projects
Management audit
Fraud detection- developing fraud exposures for every audit and detecting red flags
Review of effectiveness of internal control
Compliance with laws, regulations, policies and procedures
Preservation of ethical culture – monitor the ethical climate and report on red flags that
may compromise ethics
Providing advise on reducing waste or inefficiency
Financial Audit
Operational Audit
Grant Audit
Project Audit
Information System Audit
Compliance Audit
Investigative Audit
Due Diligence
Management Audit
As per John C. Burton, “in a management audit, the auditor will see the management is
getting information relevant to the decisions and actions which it must take. This will require a
much more intensive analysis of information needs and the efficiency of the existing system in
meeting them. The auditor will not have to decide whether management is making the right
strategic and operative decisions but rather whether the management has available to it and is
using the relevant information and techniques necessary to evaluate the various alternatives that
exist.”
Complete management audit evaluates the firm’s current activities and measures the gaps
between its existing policies and the objectives, and its actual activities.
They simply present their observations to the top management. The top management
consults to personnel to decide whether, what, or how corrective action should be taken.
Efficiency Audit
Efficiency audit is conducted to ensure that money is so utilized as to generate handsome returns.
The objectives of efficiency audit are:
Propriety Audit
Propriety audit is conducted to examine the effect of the management’s decisions and actions on
the society and the public. While conducting the audit, the auditor examines all transactions of
the company to find out whether any of the transactions has negatively affected public interests.
The following steps should be taken for organizing the Management Audit