Performance auditing explained
What is performance auditing?
A performance audit evaluates whether an organisation is effectively meeting its objectives, and using its resources economically and efficiently.
It can cover all or part of the activities of an agency or agencies. Such audits are undertaken in accordance with the provisions of section 15 of the
Audit Act 1994 and are funded from Parliament’s appropriation, and therefore are not paid for by the agency audited.
Performance audit reports provide an independent assessment of an area of public sector activity and seeks to improve resource management
and add value to an agency through recommendations on improving operations and procedures. While recommendations from an audit can
address improvements to operational methods, the Auditor-General cannot and does not question the merits of government policy.
The Auditor-General determines the annual program of performance audits after consultation with the Parliament’s
Public Accounts and Estimates Committee. Details are provided in the Office’s
Annual Plan
which is tabled in Parliament. The Committee is also consulted on the proposed objectives and scope of each performance audit.
Why have performance audits?
Performance audits undertaken by the Office provide an independent assurance to Parliament and the community that
funds appropriated for particular activities are spent wisely and in accordance with Parliament’s expectations.
Performance audits reinforce the accountability of Ministers and public sector managers for their performance, as well
as recognising and advising Parliament of management initiatives and achievements.
The performance audit process
Methodology
All audits are conducted using the Office’s own performance audit methodology, known as VPAM which complies
with the Audit Act and relevant Australian Auditing Standards AUS 806: Performance Auditing and AUS 808: Planning Performance Audits.
Audit evidence
During the fieldwork phase of an audit, sufficient evidence is gathered to enable conclusions and recommendations to be made on the specific audit objectives.
An audit team frequently works on-site at an agency. Audit staff undertake examinations of files and other documentation, analyse data and
conduct interviews with relevant members of staff.
Audit work may also include conducting surveys or client questionnaires, discussions with special interest groups, gathering and analysing
information from contracted agencies where applicable, and special studies. The Office may engage specialists with particular technical expertise to assist or advise the audit team.
Access to information
In undertaking an audit, provisions of the Audit Act 1994 define the rights of access and obligations of confidentiality. Staff of the Office have
unrestricted access to information held by agencies, irrespective of any restrictions on disclosure imposed by legislation such as secrecy provisions.
Audit files and working papers, which include all information obtained from agencies during the course of an audit, are exempt under the
Freedom of Information Act 1982 and may not be accessed from the Victorian Auditor-General’s Office, thus ensuring confidentiality.
Communication
Agreeing the conduct of a performance audit involves ongoing discussions and interviews with personnel. A communication protocol is agreed
at the entry interview with the agency.
Significant findings and emerging issues arising during an audit are progressively discussed with an agency’s CEO and/or nominated
contact officer to ensure they are kept fully informed.
What happens after a performance audit?
Improvements to resource management
While action taken on audit recommendations is the prerogative of the Parliament and the Executive Government, the Minister for Finance reports
to the Parliament annually on action taken by agencies resulting from all reports to Parliament, including performance audits.
From time-to-time, the Public Accounts and Estimates Committee holds hearings on various matters contained in reports of the Auditor-General.
The Committee may seek a briefing from the Auditor-General’s Office and/or require attendance of an agency at such a hearing to advise of actions taken.
Briefing members of parliament
Shortly after the tabling of a performance audit, the Office provides Members of Parliament with a briefing that outlines the outcomes from the audit.
Agency feedback
Following completion of a performance audit, the Auditor-General’s Office requests feedback via a survey forwarded to the audited agency.
The survey seeks views on 2 key aspects: the audit process and the parliamentary report. Survey results are used by the Office to identify improvements for
future performance audits and for external reporting of its performance.
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