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Practice Guide to Auditing Efficiency

Mandates to Audit Efficiency

Auditing efficiency is a critical component of the “value-for-money” mandate of legislative audit offices, often referred to as auditing the “3 Es”: economy, efficiency, and effectiveness. Value-for-money mandates were first introduced in Canadian legislative audit offices in the late 1970s.

For their part, internal auditors are mandated to audit efficiency (among other things) by the International Professional Practices Framework (IPPF), which sets out the standards for assessing adequacy of controls for the efficiency of operations and programs in achieving business objectives, in order to add value and improve organizational operations. Internal auditors fulfill this mandate by examining the controls that contribute to the management objective of efficiency.

However, there may be limitations to this mandate. In the federal government, for example, the mandate of the internal audit function is restricted to the specific areas of risk management, control, and governance processes. The assessment of program performance and results falls under the mandate of the evaluation function. To audit the efficiency of operations, internal auditors need to coordinate with evaluation teams in order to determine their respective roles and avoid overlap.