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Practice Guide to Auditing Efficiency

Assessing the Level of Emphasis Placed on Efficiency in an Entity

Both the processes for selecting an audit topic and for planning a specific audit depend on acquiring a solid knowledge of business about the entity or program considered for audit. When assessing a candidate topic for an audit of efficiency, the auditor should assess whether special emphasis has been placed on efficiency in the entity or program. In developing this knowledge of business for audit selection, the auditor may determine that an entity or program falls under one of three scenarios:

1. The entity may have already implemented or is in the process of implementing an efficiency-focused spending review and/or a recognized improvement framework such as Lean or Six Sigma. (Such a review or framework could be a government-wide initiative or it could be specific to an entity.)

2. The entity may have existing management systems and service delivery mechanisms that place emphasis on achieving efficiency or service improvement.

3. The entity may not be able to demonstrate that it places emphasis on achieving efficiency at all, despite being a good candidate to do so.

Each of these situations could influence whether the entity or program will be selected for audit and, if so, the focus and type of audit approach that will be adopted.

For example, in a case where an entity has successfully implemented a recognized efficiency improvement framework, the auditor may conclude that risks to efficiency are low and that an audit of efficiency is not warranted. Alternatively, if the implementation of the recognized efficiency improvement framework is recent, the auditor may decide to audit efficiency using design and implementation best practices for this framework as criteria to audit the framework.

GOOD PRACTICE: It is important for the auditor to be aware of the methods, frameworks, and specific tools used by public sector entities to achieve efficiency. Where necessary, auditors should consult specialists to identify industry- or sector-specific tools and methodologies to support efficiency achievement.