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Practice Guide to Auditing Efficiency

Developing Criteria for an Audit with a Systems Emphasis

If the audit objective emphasizes or relates to assessing management’s systems and practices for achieving efficiency, the audit criteria should be based on good management practices and systems for achieving efficiency.

The auditor may also want to select criteria related to the specific tools for efficiency improvement that the entity is using. For example, if the entity has implemented Lean manufacturing techniques, criteria related to best practices for Lean implementation and compliance with the organization’s Lean policies may be included in the audit plan. (In effect, this is an effectiveness audit of an efficiency program.)

Criteria for a systems emphasis could also be derived from broad control frameworks such as the CICA’s Criteria of Control or the US COSO control framework. Other criteria may need to be more specific to the program or entity being audited. Indeed, internal auditors must ascertain the extent to which management has established adequate criteria to determine whether its objectives have been accomplished; when these criteria are adequate, internal auditors must include them as part of their audit plan.

In addition to the above suggestions, criteria for an audit of efficiency that emphasizes systems can be based on the seven main management activities that can foster efficiency in public sector organizations.

As presented in the Concepts and Context part of this Practice Guide, the seven general management activities that 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 categories listed above, auditors can consult suggested audit criteria that can be used to assess whether or not an entity or a program meets the audit objective(s). Of course, the focus of the audit will usually lead to the selection of a subset of criteria rather than the complete list.