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Practice Guide to Auditing Efficiency




Auditability refers to the ability to carry out an audit in accordance with professional standards and internal audit policies. Although some areas may be significant, they may not be auditable for the following reasons:

  • the audit team does not have or cannot acquire the required expertise,
  • the selected area is undergoing significant and fundamental change,
  • suitable criteria or approaches are not available to assess performance, or
  • the information or evidence required is not available or cannot be obtained efficiently. 

The entity whose performance is being audited.

Audit conclusion

An informed judgment made by an auditor based on sufficient and appropriate audit evidence.

Audit observation

The outcome of an objective evaluation of audit evidence against selected audit criteria.

Audit program

A detailed outline of the audit work to be undertaken during the audit examination phase to gather sufficient and appropriate evidence. Each audit activity outlined in the program includes the applicable criteria to be used and the audit steps, tasks, resources and time required to complete the work.

Audit recommendation

A measurable statement for corrective action made by the auditor and addressed to the audited entity. Recommendations must address the causes of deficiencies identified in audit reports.

Audit focus

Refers to the breadth and depth on an audit, the risk areas and issues selected. Since different audit offices use the term ‘audit scope’ in different ways, the Practice Guide avoids this word and instead uses the expression ‘audit focus’ to refer to the depth and breadth of an audit.



The process of comparing an organization’s business processes and performance metrics to leading practices in its sector or best practices from other sectors. (Items typically measured are quality, time, and cost.) Benchmarking can also relate to the process of comparing an organization’s current performance with its performance in the past.


Control objectives

There are three kinds of control objectives:

  • Operations objectives that pertain to the effectiveness and efficiency of an entity’s operations, including operational and financial performance goals, and safeguarding assets against loss.
  • Reporting objectives that pertain to the internal and external financial and non-financial reporting required of an entity.
  • Compliance objectives related to the requirement for an entity to comply with the laws and regulations to which it is subject.



Refers to the extent to which resources are acquired at the lowest cost, taking into consideration their quality and quantity.


Refers to the extent to which an entity’s or a program’s objectives have been achieved.



The resources allocated to an organization to carry out activities, produce outputs and accomplish results.



The consequences of a policy, program, initiative or activity. An intended outcome is the 'end' that is being sought by an organization, a policy, a program or an initiative.


Outputs are the goods and services delivered in order to achieve desired outcomes.


Performance audit

A performance audit is an independent, objective, and systematic assessment of how well government is managing its activities, responsibilities, and resources in a given sector of activity.


Results audit

In a results audit of efficiency, the focus is on determining whether a program or activity is efficient. Generally, results audit work involves the comparison of current or recent performance against benchmarks, a baseline, or key performance targets. It is also possible to assess efficiency performance over time.


The probability (likelihood and impact) that an event or action may have an adverse effect on an intended outcome.



The relative importance of a matter within the context in which it is being considered, including quantitative and qualitative factors. Such factors include the magnitude of the matter in relation to the subject matter of the audit, the nature and effect of the matter, the relevance of the matter, the needs and interests of third parties, and the impact of the matter to the audited program or activity.

Systems audit

In a systems audit of efficiency, the focus is on the management systems and practices, including systems of internal control, used by an organization to achieve, maintain, demonstrate, and improve the efficiency of its services or operations.