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

In most countries, performance 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 performance audit
Audit
The general definition of an audit is an evaluation of a person, organization, system, process, enterprise, project or product. The term most commonly refers to audits in accounting, but similar concepts also exist in project management, quality management, and energy conservation.- Accounting...

s which explain how performance audits are planned, conducted and its results reported.

INTOSAI
International Organization of Supreme Audit Institutions
The International Organization of Supreme Audit Institutions is a worldwide affiliation of governmental entities. Its members are the Chief Financial Controller/Comptroller General Offices of nations.INTOSAI was founded in 1953 in Havana, Cuba...

, the international association of Supreme Audit Institutions, has published generally accepted principles of performance auditing in its implementation guidelines. In the United States, the standard for government performance audits is the Generally Accepted Government Auditing Standards (GAGAS), often referred to as the "yellow book", maintained by the federal Government Accountability Office
Government Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...

 (GAO). Similarly, the European Court of Auditors
European Court of Auditors
The Court of Auditors is the fifth institution of the European Union . It was established in 1975 in Luxembourg to audit the accounts of EU institutions...

 (ECA) has developed a "performance audit manual" for its audits of the sound financial management of the European Commission and the programmes funded through the EU budget.

Performance 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.

In the USA, all auditors who follow GAGAS standards are required to maintain independence, supervision, continuing professional education, and conduct the audit using a specific process designed to increase the quality of the audit and reduce the politicization of audit work. Although there are separate professional credentials and certifications for Financial Auditors, the persons that conduct Performance Audits in the USA are often Certified Public Accountant
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...

s, Certified Internal Auditors, or have a broad background in public policy, business or public administration.

The scope of performance audits may include the detection of fraud, waste and abuse, although often these are not included in the scope. Prior to engaging in a performance audit, the auditor must have a scope and plan defined which will be used to guide the audit process.

Performance auditing differs from performance measurement, the latter being the responsibility of management of the entity. In addition, performance measurement may include a broad variety of activities that do not meet the rigour of an independent external assessment.

See also

  • Government performance auditing
    Government performance auditing
    Government performance auditing was developed in the late 1960s and shepherded by the United States Government Accountability Office, . Government performance auditing has since spread to most state governments and many closely managed local governments...

  • Total quality management
    Total Quality Management
    Total quality management or TQM is an integrative philosophy of management for continuously improving the quality of products and processes....

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