There is no denying the fact that a Value for money audit is a critic of the economy, efficiency and effectiveness of what has been contemplated rather than just the real reporting of the accounting results of what has been revitalised. The end product of the audit will be an assessment of the management of the audited body. Such audits should be tailored to the circumstances of the audited body. Auditors should plan their work to be able to identify problems and determine the scope for improvement. They should include following up on significant areas from earlier years to see if previous recommendations have been followed and savings or benefits achieved.
In regard to Value for Money Audit, it is not criteria of the audit to identify the policy virtually, but the auditor should find out the effects of policy and how policy decisions are arrived. Suffice it to say that the auditors may consider whether there are satisfactory arrangements for considering alternative policies, whether policy aims and objectives are transmitted clearly to staff, whether different policies conflict, and whether costs at alternative levels of service have been considered. Auditors should pay particular attention to the criticsof good practice in performance audits and may refer to studies produced from time to time by C&AG and to comparative performance indicators. The scope of a performance audit can be wide but might include, for example:
strategic direction and performance review
systems for planning and financial management
internal controls and management practices
human resource issues
performance against identified good practice
Economy, efficiency and effectiveness
These three key elements of performance audit can be defined as follows
economy – are input resources acquired at the lowest cost while maintaining quality – for example are school textbooks supplied at the lowest cost
efficiency – are inputs used well to generate a certain level of outputs – for example can more children be taught to the same standard for the same cost
effectiveness – compares the intended output with the actual output. Resources are being used but are they being used wisely. For example, are school examination results improving as a result of additional spending.
Performance audit techniques
In gathering evidence for a performance audit auditors might consider
It should be a major objective in the financial management of any organisation to put in place internal controls so that errors, misstatements and irregularities are prevented from occurring or detected if they have occurred. Internal controls can thus be either preventative (preventing the error) or detective (detecting errors which have occurred). Preventative controls are better as then no error should occur in the first place.