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Practice Guide to Auditing Efficiency

Drafting Audit Objectives

As explained in the Determining the Audit Approach section of this Practice Guide, audits of efficiency will generally include audit procedures related to management systems and controls, or to results, or (preferably) both. Accordingly, audit objectives will tend to focus on systems and controls or on results.

Audit objectives need to be aligned with the focus of the audit. At this stage, auditors will have acquired knowledge of business information and should be able to answer the following questions:

  • Has an entity implemented a recognized improvement framework?
  • Does the management of an entity or program have general systems and practices that foster the achievement of efficiency?
  • Are comparative efficiency benchmarks and standards, baseline data, or key performance targets and indicators available?
  • Does management measure efficiency?
  • Could the auditor measure efficiency?

Knowing the answer to these questions will help auditors to determine their audit focus and audit objectives.

The INTOSAI’s Fundamental Principles of Performance Auditing recognize three basic types of audit objectives: descriptive, normative, and analytical.

  • Descriptive audit objectives ask the question, “How is it?” —How are the systems performing or what are the results? An example of a descriptive objective would be “to assess the progress made by the organization in implementing its efficiency improvement program.”
  • Normative audit objectives ask the question, “Is it as it ought to be?” —Are systems meeting expectations or best practices, or are results meeting expectations, performance targets, or best practices? An example of a normative objective would be “to determine whether the efficiency improvement program is meeting its stated objectives and targets.”
  • Analytical audit objectives ask the question, “Why is it not as it ought to be?” —Why are systems or results not meeting expectations? An example of an analytical objective would be “to determine why the efficiency improvement program has not delivered its expected outcomes.”

INTOSAI standards state that normative and analytical audit objectives are more likely to add value. While normative audit objectives are commonly used in practice by Canadian external and internal auditors, analytical objectives are not since they are an integral part of a problem-oriented audit approach, which is rarely used in Canada. For this reason, the following guidance focuses on descriptive and normative objectives.

GOOD PRACTICE: When drafting audit objectives for an audit of efficiency, auditors should adopt normative or analytical objectives whenever possible. Normative objectives lead to conclusions against clear expectations and so are more likely to add value than descriptive objectives.