Learning Techniques for AUI3703 Audit Objectives and Audit Procedures Economy, Efficiency and Effectiveness

Relationship between PA IO Planned/Actual Input/Output Economy Relationship between Planned Input and Actual Input Combine 1st Letter in Blue Ball with 1st letter in green ball P+I = Planned Input then do the same with 2nd letters A+I = Actual Input PA II Efficiency Relationship between Actual Input and Actual Output AA IO Effectiveness Relationship between Actual Output and Planned Output AP OO

When you have to consider economic aspects refer to the following: Economy When you have to consider economic aspects refer to the following: PA II the purchasing policy of the organisation material prices and service costs staffing in relation to functions that have to be performed surplus stock on hand use of more expensive equipment than necessary prevention of losses and wastage of resources

When you have to consider efficiency aspects refer to the following: AA IO division of projects into logically manageable tasks efficiency and application of operating systems & procedures efficiency of documentation flow performance of unnecessary tasks or duplication of tasks allocation of responsibilities and authority in organization speed of production and completion time for projects

adequacy of management's measure of effectiveness When you have to consider effectiveness aspects refer to the following: AP OO organisation's approach to the development of realistic targets; objectives and plans. adequacy of management's measure of effectiveness extent to which goals & objectives are met or results achieved id factors inhibiting satisfactory performance of results

Audit O Objectives To Determine To Establish P Procedures To Evaluate To Inspect To Identify

Audit Procedures   Efficiency Evaluate the adequacy of staff allocated to the department and whether the reporting structure allows for adequate delegation of authority. Review the job descriptions and personnel allocation in order to identify positions that may be overburdened, duplication of effort, idle positions, etc. Ensure that duties are divided into logical and executable tasks, efficiency of operating systems and procedures and their utilisation, no duplication of efforts and unnecessary steps performed. Evaluate the efficiency of the systems and procedures of the XXXX process, and whether they are being used in this manner. Review the efficiency of the document flow and the provision of management information throughout the XXXX process. Evaluate the allocation of responsibilities and authority in the XXXX process and determine if it promotes efficiency.

Analyse whether losses and waste in the XXXX department are minimised Audit Procedures   Economy Analyse the purchasing policy with regard to the purchase of XXXX and ensure that the policy is such that material can be economically procured. Enquire from management if and why there are surplus materials on hand. Analyse the organisation’s staffing in relation to the functions being performed. Analyse whether losses and waste in the XXXX department are minimised Ensure that the activities of the XXXX department are grouped in logical, feasible processes or tasks Review the efficiency of the document flow and the provision of management information throughout the XXXX process.

Audit Procedures   Effectiveness Determine whether realistic goals and objectives have been set for the XXXX processes. Evaluate the approach followed by the management of XXXX to establish the targets and objectives for the XXXX processes. Evaluate whether there are adequate measures that the management of XXXX can use to evaluate the effectiveness of the XXXX processes. Evaluate management reports and interview management to establish the extent to which the results are being achieved. Identify the factors that impede satisfactory performance or the achievement of results, and recommend ways to address these. Evaluate the adequacy of policies and procedures put in place to achieve the objectives. Compare current targets with the previous year’s targets for both years in order to determine whether the department is meeting expected outcomes.

Audit Objectives   Efficiency To establish whether the equipment used in the XXXX process is utilised both economically and effectively. To determine whether staffing is adequate in relation to the functions that should be performed in the XXXX process. To determine whether the activities of the XXXX process are grouped into logical, feasible processes or tasks. To determine whether the systems and procedures of the XXXX process have been formulated to achieve efficiency, and whether they are applied in this manner. To determine whether document flow and the provision of management information are efficient throughout the XXXX process To determine whether all activities performed during the XXXX process are meaningful and to ensure that there is no duplication of work To determine whether the allocation of responsibilities and authority in the XXXX process promotes efficiency

Audit Objectives   Economy To determine whether the organisation’s policy on purchases will ensure the most economical and effective utilisation of resources. To determine whether the stock holding is economical without jeopardising the effectiveness of the XXXX department. To determine whether losses and waste in the XXXX department are minimised To determine whether the activities of the XXXX department are grouped in logical, feasible processes or tasks To determine whether document flow and provision of management information throughout the XXXX department are efficient

Audit Objectives   Effectiveness To determine whether realistic targets, and objectives and procedures for attaining those targets, have been developed for the XXXX department. To determine whether management has a method of measuring effectiveness and whether it is adequate. To determine to what extent the targets and objectives of the XXXX department are being met. To determine whether there are any factors that impedes satisfactory performance or the achievement of results within the XXXX department.

AUDIT TECHNIQUES FOR EFFECTIVENESS Examine existing documentation, such as policy and procedure manuals to establish whether criteria for measuring the performance of the administrative department has been formalised and whether they are accurate. Analyse policy and procedures to establish whether they are clear and will lead to the achievement of the goals set by the management of the organisation. Hold interviews with the XXXX and YYYY to determine whether they are informed about the organisation‘s mission, performance standards and measuring criteria and whether there are any issues that may hamper the achievement of objectives. Analyse rates, changes and trends by performing analytical review procedures on the operations of the department. Send questionnaires to the staff members, to determine factors which may hamper the achievement of objectives. Interviews with management of the department to ascertain the achievement of objectives. Review reports to determine compliance with policies and procedures and the achievement of objectives.

Questions for management Efficiency   Efficiency Are the XXXX processes divided into logically manageable tasks or are there areas where the processes could be improved? What adjustments would you make to the XXXX processes in order to improve the manageability of the administrative processes? Provide details. To what extent is the capacity of your machines and staff utilised? In which areas do you experience capacity shortages? Is your staff satisfied with their workload or have you received any complaints regarding this issue recently? In which areas can documentation flow be improved to be more efficient? Are there any areas where unnecessary tasks are performed or where tasks are duplicated? Provide details. In which areas could the allocation of responsibilities and authority within the XXXX department be improved? How does the speed of production and completion time for tasks in your department compare to that of other departments in the industry? What process is in place to minimise wastage?

Audit procedures that can be used to determine whether the equipment has been economically procured   Analyse the purchasing policy of the XXXX department with regard to the purchase of equipment and ensure that the policy is such that equipment can be economically procured. Evaluate the procedures followed when purchasing the equipment and ensure that the procedures followed are in line with the purchasing policy and that the equipment purchased was of the best quality and was purchased at the best price. Discuss the amount spent on procuring the equipment with management and ensure that there are valid reasons for the purchase of the equipment Verify whether cost-benefit studies were completed before the equipment was purchased. Analyse the finance terms of the purchased equipment, for example was it bought on a hire-purchase agreement, for cash or with a loan. Ensure that the finance method used is the most beneficial for the company. Enquire from management what they did with the old equipment: for example, did they sell it or trade it in, and ensure that this was the most economical option for the company. Ensure that the replacement policy provides for the economical use of equipment. Ensure adherence to the purchasing and replacement policy. Ensure that three or more quotes were obtained and considered before the final decision was made. Ensure that the equipment purchased is not more expensive than market or industry prices. Ensure that a need exists for the new equipment.