A Primer on Performance Auditing By Muhammad Akram Khan Former Deputy Auditor General of Pakistan makram1000@gmail.com Abstract Performance auditing is an expansion in the scope of traditional auditing. It examines the management of resources in the framework of economy, efficiency and effectiveness. It aims at improving management of resources and sharpening of accountability of the public managers. Performance auditing techniques follow the familiar cycle of planning, executing and reporting. However, each performance audit assignment is unique as it relies on distinct set of criteria, derived from various sources such as project or program plans, generally accepted management practices and technical specifications of assets and services. Besides, performance auditing gathers evidence from diverse sources beyond the internal documents. The performance audit report presents achievements of the management along with any suggestions for overcoming the shortcomings noticed during the audit.
___________________________________________________________________ 1. Introduction (a) Evolution of performance auditing Performance auditing is a recent expansion in the scope of financial auditing. Traditionally, financial auditing has been concerned with financial control and accuracy of accounts. Generally, a single auditor used to check the accounts. The scope of audit covered checking of hundred per cent transactions. For centuries, it had been like that. With the advent of Industrial Revolution and Joint Stock Company, it became difficult for a single person to check hundred percent transactions. It led to at least two changes. First, the single-person auditing gave way to teams of auditors. Second, hundred percent checking became impossible and the auditors adopted sample testing. Simultaneously, the auditors realized that it was not possible to certify accuracy of accounts without hundred percent checking. These developments were quite slow by themselves. But they were slower in government auditing. In the government sector, for centuries, the auditors had been concerned with regularity of expenditure and compliance with regulations. They used to report to the rulers about any frauds or leakages in revenue collection and any waste of public funds. But this role remained in its rudimentary form for centuries. The government auditors did not react to the developments that were taking place in the private sector accounting and auditing. There was a state of complacency. But developments in concepts of democracy and public administrations jerked the government auditors out of their slumber in early seventies of the last century. There was a noticeable change in the scope and approach of government auditing. It originated from USA, Canada and some countries of Europe like Sweden and West Germany. The elected representatives of the people started demanding information on the efficacy and effectiveness of the public expenditure. They expected a greater accountability of public managers in the management of public resources. Government auditors in developed countries responded to this challenge by developing techniques and methods for auditing performance of the government. This ultimately led to the birth of ‘performance auditing’ as we see it today. The idea of performance auditing spread like a wild fire among Supreme Auditing Institutions. In 1977 Ninth Congress of the International Organization of Supreme Audit Institutions (INTOSAI) in Lima drew attention to performance auditing. Several countries