Module 4 - Introduction to Performance Audit_4A

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Given the similarities between the work of internal auditors and external auditors, it can be very useful for internal audit functions and SAIs to work together toward the shared goal of evaluating the economy, effectiveness, and efficiency of public sector practices at the policy, system, project, entity, or sector-wide level. Audit providers need to maintain their independence and remain free to plan and operate without interference. Auditors are responsible for the results of their audits even when they rely on the work of other assurance providers. However, there are opportunities for working together that do not impede these basic principles. Examples include: Discuss audit themes, trends, and priorities. Share details of audit plans with each other and consider adjusting plans to coordinate activities where possible to avoid bunching, excessive coverage, or audit fatigue as well as aligning on topics of joint concern. Share resources and expertise, with the potential for internal auditors to act as guest auditors or subject matter experts for an external audit and vice versa. Collaborate on audit training on topics of mutual interest. Use each other’s results when work is relevant, timely, and reliable. Advocate jointly with stakeholders and influential agents for the importance of assurance and advisory services that are competent, well-resourced, appropriately positioned, and independent. 4A.1: Reflection Does your internal audit function provide performance audits? How close in approach and subject matter are the performance audits of internal auditors and external auditors? Is it important for internal and external auditors to communicate and coordinate activities regarding performance audits? In addition to the generic internal audit competencies included in The IIA’s Internal Audit Competency Framework, are there specific competencies – focusing on distinct knowledge, skills, and mindsets – needed for performing performance audits, and if so what are they? 4A.2 Distinctive Features of Performance Auditing Performance audits start with two fundamental considerations: What performance is to be reviewed (i.e., what needs to be examined among public sector programs, activities, functions, and entities, and over what period)? What level of performance is expected, desired, or possible? Accordingly, auditors must be fully acquainted with performance management systems and how they are organized. These are generally aligned with program budgeting and budgetary control, although performance is not to be considered purely in financial terms. The auditor must also be familiar with planning and review cycles and how these are used by management to regulate and monitor activity. 12
The IPPF does not prescribe specific sequential steps an internal auditor must follow when completing an engagement. The mechanics of such audits follow the usual processes related to planning, performing, and communication and in accordance with the relevant standards. As for all engagements, prior to planning a performance audit, a decision is made to include it in the audit plan, including the area of focus or topic (although this is refined as part of the audit preparation when the scope and objectives are more fully developed). Inclusion of performance audits in the internal audit plan and consideration of topics are covered in section 4B.1. The processes adopted for a performance audit may be defined in the audit manual with supporting documentation. Many auditors (both internal and external) follow an approach akin to the illustration below (based on Performance Audit ISSAI Implementation Handbook). 18 Step 1 •Select audit topic Step 2 •Design audit Step 3 •Conduct audit Step 4 •Develop audit outputs Step 5 •Communicate audit outputs Step 6 •Follow up Performance Audit Process: Overview In this context, “audit outputs” refers to findings, conclusions, and recommendations. The following internal and external audit standards are especially relevant to these six steps: Step 1 IIA Select audit topic 2010 – Planning 2100 – Nature of Work ISSAI Three Parties in Performance Auditing 300/16-18 Subject Matter and Criteria in Performance Auditing 300/19-20 18 See Performance Audit ISSAI Implementation Handbook, IDI, 2021. 13
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Module 4 - Introduction to Performance Audit_4A

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