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Practice Guide to Auditing Efficiency

Can Efficiency Be Audited Independently from Economy and Effectiveness?

The complexity of the relationship among the 3 Es, coupled with the nature of audit office mandates, gives rise to a second key question: should efficiency be audited separately from economy and effectiveness?

In theory, it is feasible to audit efficiency independently from effectiveness. However, an audit that focuses exclusively on efficiency (that is, a “stand-alone” audit of efficiency) would not answer questions related to whether a program is achieving its intended outcomes. Conversely, auditing program effectiveness exclusively would not answer questions related to whether a program is efficient.

So, while it may well be possible to do a stand-alone audit of efficiency, it may not be desirable to do so if the audit will not be able, in the end, to answer the key questions of its intended audience. For example, parliamentarians and decision makers may be equally interested in knowing that an entity is efficient and that it is effectively meeting its mandate.

Some practitioners believe that effectiveness outranks economy and efficiency because “there is no redeeming value in doing the wrong things well.” Similarly, some practitioners believe that effectiveness should be audited before efficiency, since there is no point in auditing efficiency if outcomes are not being achieved.

Ultimately, there is no simple answer to the question of whether efficiency can or should be audited in isolation from economy or effectiveness. The answer is influenced by the professional judgment of the auditor, the specific circumstances of the program being audited (that is, where the risk is), the audit office’s mandate, and the needs of parliamentarians, public sector decision makers, and audit committees.