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Need for Performance audit guidelinesNeed for Performance audit guidelinesNeed to follow the international best practice;Serious shortcomings in the existing way the

performance audits (reviews) were carried out;Existing guidelines and instructions incomplete and

sporadic;Extension of financial audit techniques and

conclusions based on assorted issues without much of a design; and

Recommendations by the consultants (NAO under IDF grant.

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The status: strategic planning for The status: strategic planning for performance auditperformance audit

No strategic goals and strategic objectives to be achieved through performance audits set. No scope of assessment of the accomplishment of any goals;

Strategic planning more judgmental. No risk and materiality analysis, not at least transparently. Selection-mainly budget-based; Nominal scores of subjects rather than guided by impact

(value addition) of performance audits followed by impact assessment;

In short, no defined purpose for conducting the reviews;

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The status: strategic planning (cont)The status: strategic planning (cont)Cutting-edge core governance subjects and sunrise

issues, particularly those related to the major policy shifts by-passed in planning and selection of subjects;

Annual cycle applied to all performance audits, i.e. presumed that all reviews could be conducted within one year or;

Distinction between financial and performance audit either not clearly understood by many and more importantly, not applied by even those who understand them; and

Quality assurance procedures not established.

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Skill and knowledgeSkill and knowledgeIllusion of all pervading knowledge, skill and

competence;Misconception that merely by virtue of joining the

department all are competent to audit and deliver opinion on all subjects;

No assessment of knowledge and skill required for individual performance audits and of in-house availability to plan for bridging the gap; and

No specialization for performance audit nor any need-based training and skill development programme.

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Status: Individual performance auditsStatus: Individual performance audits The reasons for conducting a performance audit not determined

(audit objectives). As a result, the reasons assembled and quite often invented after completion of audit, necessarily limited to what was the audit had thrown up;

Performance measures (criteria) not determined; Prior determination of the types and sources of evidence for audit

test programmes against criteria not made; Performance audits conducted in complete isolation of the entity;

and Methodology for evidence analysis, audit findings and causes of

findings not established transparently; and No practice of settings experienced impact to be achieved through

performance audit and no system of assessment of the actual impact.

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ReportsReports Developed on the basis of the result of the audits rather than

on pre-determined parameters; Consequent: incoherent or unconvincing observations or

findings; No risk-based approach nor transparent use of statistical

sampling techniques; Blurred or non-existent distinction between audit

observations and audit findings. In fact, most performance audits culminated in stating various audit observations, rather than with audit findings/conclusions, followed by recommendations;

Mainly an assortment of regularity audit points rather than conclusions on performance.

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The status: Reports (cont)The status: Reports (cont)Economy, efficiency and effectiveness issues not

addressed as objectives – either individually or severally;

Too involved and cluttered with data and statistics; the all pervading undercurrent of laborious effort to establish the audit observations;

Mixed up issues: generally presented as part of the general volume containing the regularity points: lost purpose and focus; and

Readability-rather confused and involved: purpose of the report, particularly of reviews not understandable.

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The status: strategic planningThe status: strategic planningNo strategic goals and strategic objectives to be achieved

through performance audits set, even if most offices have of late started preparing strategic or perspective plans. Thus, no scope of assessment of the accomplishment of the set goals;

Strategic planning not transparent nor based on comprehensive data / information;

No risk and materiality analysis in strategic planning;Selection-mainly budget-based;Nominal scores rather than guided by impact of

performance audits, followed by impact assessment;

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The status: follow-upThe status: follow-up The purpose of the reports ended with their presentation; Position obtaining in Centre: selection of paragraphs (1 per

cent of the total), reviews seldom selected – preference for short, one-off issues. ATN on non-selected paragraphs (nominal rather than substantive) and vetting by audit limited to form rather than substance. Thus the legislative committee and;

States – complete reports – unacceptable levels of arrears in evidence and much more in issue of reports.

Brings the entire exercise to naught: the fundamental reason for all pervading indifference among the executive abated by the absence of a clear sense of purpose of the reports, particularly performance audit reports.

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Internal accountability and quality assurance systemInternal accountability and quality assurance system

Minimal for the entire performance audit process of planning-strategic as well as individual subjects, assessment of skill and knowledge, setting of audit objectives and criteria, evidence gathering, evidence analysis, working papers/documentation and, for securing entity cooperation. etc;

No process or audit management documentation, containing imprint of application of mind on all important issues during the entire process; and

No quality assurance review procedures.

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The status: dialogue with entityThe status: dialogue with entity Minimal-generally dealt with at accountants levels; Exception only when the legislative committees selects a subject

for detailed examination; Even in the cases selected for detailed examination: all

pervading defensive attitude; Seldom makes an impact on public sector programmes; Failure to settle the matters of facts, figures evidence, findings,

and conclusions with the entity at various levels necessitates cluttering of the report with data for justifying the audit observations; and

Encourages the executive to reopen the issues relating to correctness of facts and figures all over again when the matter comes up for evidence before the legislative committee: successful deflection of the main issues.

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Recommendations by the consultants: NAORecommendations by the consultants: NAO

Change in the current character of primarily policing role into one that will become a more effective agent for change;

Changes in audit methodology and the way in which the findings are presented – to demonstrate continuing effective contribution to the improved delivery of services;

Re-examine its current audit methodology and in particular consider merging the various audits into two categories-financial and performance audit.

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Recommendations by Consultants: NAORecommendations by Consultants: NAO Clear objectives for each (performance and financial audits)

should be established, which reflect the new vision and mission of the organization;

Emphasis on training, greater use of risk-based approach and statistical sampling techniques and develop additional approaches to gathering audit evidence.

Establish financial audit and performance audit methodology teams to assist in development of new approach and monitor and evaluate its introduction;

Seek to produce more balanced report and offer constructive and practical recommendations;

Establish co-operative relation with the counterparts in the executive; and

Establish specialist VFM teams.

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Guiding objectives in development of the guidelinesGuiding objectives in development of the guidelines

Self-contained and comprehensive – exhaustive both in principles and practices.

Should be universally understandable and useful for all users: the Section Officer in the field to the Headquarters office;

Similar understanding of the principles and practices by all;

Principles and practices kept together-side by side;Linked to Auditing Standards in each chapter;Quality assurance system to be included in each

chapter, each representing a stage in the performance auditing process;

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Guiding objectives (cont)Guiding objectives (cont) Find answer to any question on performance audit

principles and practices within the guidelines; Perspective yet scope for deviations warranted by the

different entity and auditing environments-but with general or special authorization;

Clear distinction between regularity and performance audits on parameters of objectives, evidence, etc;

The practices and principles followed with in CAG of India synthesized with those of ASOSAI, INTOSAI and other best practices-to develop the most comprehensive document; and

Should provide compliance procedures and controls to make sure that the principles and procedures are actually are followed.

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Guiding objectives (cont)Guiding objectives (cont) Consists of 10 chapters and five appendices; Intend to bring out separate performance audit series

publication on important issues like sampling, evidence-gathering techniques , evidence-analysis techniques, procuring the services of consultants/experts and outsourcing, surveys, assurance memo formats etc;

The two appendices containing brief-introduction to evidence-gathering techniques and evidence analysis techniques respectively (D and E) included in the exposure draft to be taken out in the final version for inclusion in the separate publication; and

Intended to replace all existing instructions and provisions in MSO (Audit), in so far they relate to performance audit.

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Theoretical Sessions on 10 Chapters Theoretical Sessions on 10 Chapters Chapter 1: Introduction - Consists mainly of the

principles of performance audits, distinction between regularity and performance audits etc;

Chapter 2: Strategic planning- Contains guidance on strategic planning, principles and procedures as well as documentation;

Chapter 3: Implementation plan for the selected subject understanding the subject of performance audits, preliminary survey/pilot study, setting audit objectives and audit criteria, audit programme, detailed guidelines, etc.;

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Structure of the draft guidelines – chapters (cont)Structure of the draft guidelines – chapters (cont) Chapter 4: Field audit- entry conference/interview, audit

memoranda, evidence gathering, audit test programme, developing audit findings, conclusions and recommendations, discussion papers, audit observations and field audit report, etc.;

Chapter 5: Evidence and documentation- standard of evidence, types of evidences, evidence gathering techniques, standards of documentation/working papers, etc.;

Chapter 6: Reporting process- characteristics of good report, reporting process, reporting style, draft report and report approval process, structure of performance audit report, etc.;

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Structure of the draft guidelines - chaptersStructure of the draft guidelines - chapters

Chapter 7: Supervision, review and quality control;Chapter 8:Follow-up procedures- follow-up

procedures and programme, inventory of recommendations, assessment of impact of performance audit (s);

Chapter 9: Quality assurance system – quality assurance review programme, training and skill development, etc.;and

Chapter 10: critical issues in performance audit-Summary of most important issues contained in all the previous chapters.

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Theoretical sessions on the followingTheoretical sessions on the following Appendix A: Potential impact of performance audits; Appendix B: Performance auditing in IT environment; Appendix C: Important issues in performance audit of

public sector programmes; Appendix D: Introduction to evidence gathering

techniques; Appendix E: Introduction to evidence analysis techniques

and Glossary. The Courseware is designed exactly the same sequence as

the actual conduct of performance audit explained in the guidelines.

Each Session starts with recap of the earlier sessions and brief of the topics of the Session.