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Practice Guide to Auditing Efficiency

Developing Criteria for an Audit with a Results Emphasis

As explained in the Determining the Audit Approach and Drafting Audit Objectives sections of this Practice Guide, auditing results in an efficiency audit is possible when:

  • performance information is available;
  • benchmarks, baselines, or performance targets are available; and
  • management assesses its efficiency or the audit team could assess it.

In general terms, the objective of an audit with an emphasis on results will be to assess the level of efficiency achieved in relation to benchmarks, a baseline, or performance targets.

Accordingly, criteria and sub-criteria that would support a results objective could relate to:

  • The reliability and other characteristics (such as timeliness, relevance, and completeness) of the efficiency information produced by the entity. For example: “the organization uses timely, relevant, reliable, and complete information to assess its efficiency…”.
  • The benchmarking processes used by an organization and the choice of appropriate benchmarks. For example: “the organization has selected relevant and reasonable benchmarks to assess its efficiency performance.
  • The comparison of an organization’s efficiency performance with benchmarks, baselines, or performance targets. For example: “the organization (or program) meets the efficiency targets set out in its annual operational plan” or “the organization (or program) meets recognized sectorial efficiency standards.
  • The conclusions drawn by an organization on its efficiency performance. For example: “the organization draws appropriate conclusions on its efficiency based on performance data and benchmarks, baselines, or performance targets.

In cases where auditors will rely on the organization’s performance and benchmarking information, auditors will need to test the reliability of the data made available to them.

If such information is not available in the organization, auditors may decide to observe operations directly, take their own measurements, and conduct their own benchmarking exercise (as was done by Audit Scotland in its 2012 audit of Cardiology Services and its 2010 audit of Review of Orthopaedic Services). In such cases, auditors should consult with subject matter experts to identify appropriate benchmarks, striving to select benchmarks that will provide a comparison of the organization’s efficiency against best practices.

Whether they plan to conduct their own benchmarking exercise or to audit the benchmarking processes used by an organization to assess its efficiency performance, auditors may benefit by consulting the short practice guide to benchmarking produced in 2008 by the Business Performance Improvement Resource (BPIR, a source of benchmarking information). This document includes principles of benchmarking and describes the four phases of a sound benchmarking process.