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Practice Guide to Auditing Efficiency

Conducting the Examination Phase

Selecting Audit Procedures

The challenge in this phase of the audit process is to ensure that audit procedures are robust enough to enable the auditor to determine whether the audit criteria are met and to conclude on the audit objectives. Also, the auditor should be selecting audit procedures to increase audit impact. Each audit is unique and there is no substitute for professional judgment when making key decisions on audit procedures.

Table 7 includes examples of audit procedures that could be used to audit the efficiency of a regulatory inspection and enforcement function.Note that some procedures apply only to audits with a systems or results emphasis, while others apply to both categories.

Table 7 - Sample Audit Procedures for Auditing Efficiency of Regulatory Inspection and Enforcement Function

Audit Emphasis

Audit Procedure

Related Management Activity

Systems or results

Performance measures and targets

Review reported results to determine if there are indications of inefficiency. Compare with benchmarks or standards.

Performance monitoring and reporting

Systems or results

Data analysis and benchmarking

Timelines – Analyze information related to the time taken to process a sample of applications on a step-by-step basis. Were service standards and performance expectations met for each phase of the process? Are there any steps in the process that are taking longer than they should?

Historical trends – Review history to determine trends in number of licences processed, timelines, and so on.

Costs – Determine the average cost of processing a licence or application. How does it compare with management expectations? Benchmark with similar application and licensing functions. Calculate cost savings if all processing met benchmarks or management expectations.

Access and capacity – Compare the volume of transactions with system capacity. Is the capacity appropriate for the volume of transactions? Determine whether there are backlogs awaiting processing at any point in the system. What constraints are causing backlogs? Is there indication of excess capacity? (For example, are there call centre or other program staff with significant free time?) Have options for using the excess capacity been explored?

Commitment and tone from the top, operational planning, project and operations management, performance monitoring and reporting


Potential for automation or system improvements

Perform walkthroughs of the system – The goal is to ensure that auditors understand the systems, interfaces, and manual processes. Are there indications that the systems need to be improved? Are there cost-effective improvements that should be made?

Look for process inefficiencies – Are there indications of duplication? For example, information that is entered at the beginning of the process should not be re-entered at a later stage. Are there indicators of other process or procedural inefficiencies (such as unnecessary process steps)?

Evaluate potential for online services – Are services provided online? If not, has this option been explored?

Project and operations management, information technology (IT) systems, continuous improvement and innovation


Verification processes for information on applications

Obtain answers to the following questions:

  • Is the approach risk-based?
  • How much time is spent on verification procedures?
  • Is there indication that verification is useful in reducing program risk?
  • Are there more efficient ways of verifying information? For example, could some information be verified through data-sharing agreements with other levels of government? Has this option been explored?

Strategic planning, project and operations management, information technology (IT) systems, continuous improvement and innovation

Systems or results

Incomplete applications

Determine the number or percentage of incomplete applications and the process to achieve completion. If possible, quantify the time and costs to deal with incomplete filings. Determine whether there is anything that should be done (such as clarifying instructions for applicants) to reduce the number of incomplete filings.

Strategic planning, project and operations management, performance monitoring and reporting


Staff training

Interview a sample of application-processing and licensing staff to determine approach to training. Review policies and training records. Is there indication of insufficient training or that training does not promote efficiency?

Operational planning


File documentation

Review sample of application and licensing files to determine whether policies and standards are followed. Is documentation well-organized and easily accessible? Are there feasible ways of making the documentation process more efficient (that is, using less costly options to maintain the same quality of output such as scanned documents as opposed to paper files)?

Project and operations management, IT systems, continuous improvement and innovation

Systems or results

Administrative overhead

Benchmark administration costs with those of similar application-processing and licensing functions. Administration costs could include administration staff, office space, and other components of overhead. Calculate the savings that would result if performance met benchmarks.

Operational planning, project and operations management, performance monitoring and reporting

Systems or results

Potential innovations to increase efficiency

Options Analysis  Conduct research on options, especially shared services, and discuss feasibility. If the government has public service centres, access centres, or similar one-stop shopping models for government services, determine whether the function being audited is included and, if not, why not.

Process Automation – Conduct research to determine whether there are ways to automate processes – for example, electronic document submission, capture and storage; electronic application submission or auto-adjudication mechanisms for defined low-risk applicants.

Performance monitoring and reporting, continuous improvement and innovation

Considerations Relating to Reliance on Information Produced by the Auditee

During the examination phase, the question of whether it is appropriate to rely on information produced by an entity’s management systems will likely arise. This is especially true for audits that emphasize the results of the application process, or an entity’s performance monitoring and reporting systems.

In order to rely on information produced by an entity’s management, auditing standards require auditors to conduct sufficient, appropriate audit procedures to reduce the risk that information produced by management is incomplete or inaccurate. These audit procedures may include reviews of internal controls and systems, analytical procedures, and/or reliance on the work of other auditors or specialists. The requirement to audit management information systems and reports may consume significant audit resources. Auditors need to thoroughly plan and conduct procedures to support a conclusion that the risk of relying on the information produced by an entity’s management is low.