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Practice Guide to Auditing Efficiency

Acquiring Knowledge of Business

Once a topic has been selected for an audit of efficiency, the audit team should start conducting research and interviewing entity officials in order to acquire (or further develop) a sound knowledge of business and an understanding of the risks facing the entity and programs being audited. This information will be used to determine what the main risk areas are and what type of audit should be conducted.

Auditors may want to start by asking broad or high-level questions in order to obtain information that will help them understand whether:

  • management has any concerns related to efficiency;
  • expected outcomes are being achieved;
  • the organization has to meet certain policy obligations that may limit its efficiency;
  • there are critical dependencies that may affect the organization’s efficiency; and
  • there are any outstanding performance issues identified in previous audit reports.

GOOD PRACTICE: During the planning phase, it is useful for the auditor to have a conversation with the auditee about the meaning of efficiency in relation to the program being audited. This could include a discussion about management’s attempts to achieve efficiency and plans for future efficiency improvements and innovations. Having such a discussion will help the auditor to focus on the most relevant components of efficiency within the program’s environment.

Once high-level questions have been addressed, auditors will need to obtain more detailed information on selected areas. One approach that can be adopted at this stage is to focus on some of the main management activities that foster efficiency in public sector entities and programs.

As presented in the Concepts and Context part of this Practice Guide, seven general management activities that can foster efficiency are:

  1. Commitment and tone from the top
  2. Strategic planning
  3. Operational planning
  4. Project and operations management
  5. IT systems
  6. Performance monitoring and reporting
  7. Continuous improvement and innovation

By clicking on each of the seven management activities listed above, auditors can consult suggested questions that can be used as starting points to obtain knowledge of business about an entity or a program in an audit of efficiency. These questions are equally applicable to audits that focus on systems and audits that focus on results.

Other sources of information can also help auditors to prepare relevant questions. For example, auditors can consult audits published by other audit offices on similar topics to identify common risk areas.

Our publication Focus On Efficiency provides summaries of recent audits of efficiency published in Canada and in other countries.