Module 4 - Introduction to Performance Audit_4A

4A. Introduction to Performance Auditing (10%)
4A. Learning Outcomes
On completion of this Module, students will be better able to:
Define performance auditing as it is conducted in the public sector.
Differentiate performance auditing from other types of audit engagements (notably
financial and conformance).
Differentiate between the performances audits of internal auditors and external
auditors (especially those conducted by SAIs).
Identify appropriate standards and competencies for performance auditing.
Describe the importance of supervision in performance auditing.
Describe the importance of materiality in performance auditing.
Assess the importance of audit recommendations.
4A.1 The Role of Performance Audits in the Public Sector
Performance audits (also known as operational or value for money audits) are a distinctive
feature of public sector auditing (although they can be applied to private sector organizations
and activities). They are routinely conducted by both internal auditors and external auditors.
Definition of Performance Auditing
The Institute of Internal Auditors (IIA) offers a brief definition of performance auditing in
Practice Guide: Unique Aspects of Internal Auditing in the Public Sector:
Evaluations of achievement of agency/program stated outcomes to determine
whether public funds have been used with economy, effectiveness, and efficiency,
also known as operational or value-for-money auditing. 1
For external auditors, performance audits are one of the three main types of engagements
recognized by the International Organization of Supreme Audit Institutions (INTOSAI) (the
other two being financial and compliance audits, with additional consideration given to
jurisdictional audits). INTOSAI provides the following definition:
Performance auditing carried out by SAIs [Supreme Audit Institutions] is an independent,
objective, and reliable examination of whether government undertakings, systems,
operations, programmes, activities, or organizations are operating in accordance with the
principles of economy, efficiency, and effectiveness and whether there is room for
improvement. 2
(The three key terms economy, efficiency, and effectiveness are defined below.) This
definition is equally applicable to performance auditing conducted by internal auditors,
although different (but comparable) professional standards are used, and the scope of an
internal audit engagement is limited to the entity (or entities) to which the auditors are
accountable. The scope of SAIs, by contrast, in evaluating the use of public funds in respect
of national priorities, is the entirety of the public sector, although many entities and their
1
Practice Guide: Unique Aspects of Internal Auditing in the Public Sector, The IIA, 2022.
2
ISSAI 3000 Performance Audit Standard, INTOSAI, 2019.
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