Obtaining Knowledge of Business

During this phase of the audit process, auditors need to acquire a sound knowledge of business and an understanding of the risks facing the efficiency of the inspection and enforcement function.

By clicking on the links in the list below, auditors can consult Tables 1(a) to 1(g), which present questions that they can use to develop their knowledge of business  pertaining to a specific regulatory inspection and enforcement function. These questions are based on the general questions presented in the Practice Guide and have been adapted and expanded to reflect a regulatory inspection and enforcement function. (Additions to the questions and related risks from the Practice Guide are shown in italics.) Note that the questions have been classified according to the seven functional areas enabling efficiency:

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

In addition to understanding key risk areas, auditors will also need to collect and analyze basic information on inputs, outputs, and outcomes during the planning phase of the audit.

Collection and analysis of information on inputs (such as financial and human resources) and outputs (such as inspection coverage and frequencies, and regulatory actions taken) will help auditors to determine whether there are indications of inefficiency. During this preliminary phase of the audit, auditors would not perform a detailed benchmarking exercise; rather, they would ask program management for its own analysis. If management has not been analyzing this information, or there is indication of declining input-output ratios over time, or performance is below relevant benchmarks and targets, then there would likely be value in conducting an audit of efficiency.

Obtaining a basic understanding of a program’s effectiveness (achievement of objectives or outcomes) is key to determining whether the program’s major challenges are related to efficiency or to effectiveness. If the program is not meeting its objectives or targeted outcomes, then auditors might be well advised to focus on determining the root cause of the ineffectiveness in addition, or as an alternative, to doing an efficiency audit.

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