RTI, MUMBAI / CH 41 IMPLEMENTING THE PERFORMANCE AUDIT PLAN FOR THE SELECTED SUBJECT DAY 4 SESSION NO.1 (THEORY) BASED ON CHAPTER 4 PERFORMANCE AUDITING GUIDELINES

RTI, MUMBAI / CH 42 Learning Objective In the last 3 days we have discussed about the salient features of the Performance Auditing, Auditing standards and mandate, Strategic planning and selection of subjects. We have also discussed about the Performance audit and implementation plan. Today we will discuss about implementing the performance audit plan.

RTI, MUMBAI / CH 43 Cont… In the first theoretical session we will discuss :  Audit engagement process  The entry conference  Field audit process  Developing audit questions  Developing the audit programme  Audit programme in the context of audit jurisdiction  Audit approaches  Level of details in the audit programme  Audit test programmes  Study & evaluation of internal controls  Lessons learnt from sensitivity to error

RTI, MUMBAI / CH 44 In the second theoretical session we will discuss :  Developing findings  Developing recommendations  Recommendation Development process  Inventory of recommendations  Communication of audit findings  Audit memoranda, discussion papers.  Exit conference  Level of communication  Supervision, monitoring & review of implementation  Audit implementation cycle  Quality assurance in the implementation of performance auditCont…

RTI, MUMBAI / CH 45 Audit engagement process: The entry conference  The Accountants General are encouraged to make a formal presentation of the performance audit plan to the entity highlighting the scope, audit objectives, audit criteria, test programmes, the duration of audit and the locations where the audit could be conducted, etc.  Entry conference at the commencement of each field audit serves more than one objective.  The entry conference affords an opportunity for the audit officer to explain the audit plan as applicable to the entity consisting of the audit objectives, approach and time frame besides apprising the entity of the data, information and documents that will be required by the audit team

RTI, MUMBAI / CH 46 Field audit process The field audit to test the audit objectives and criteria with help of an audit programme consists of procedures that include:  observing, interviewing and documenting;  testing and checking; and  analysing.

RTI, MUMBAI / CH 47 Developing audit question  Develop an ‘issue analysis’ and a ‘study design matrix’. Issue analysis consists of the main questions, mostly linked to the main audit objectives  Develop a study design matrix, which will provide, at a glance, the procedure to find answers to the issues (questions) and sub-questions.  For each question/sub-question forming the first column of the matrix, the performance auditor will be called upon to identify the criteria, evidence required, source(s) of evidence, data collection method(s), data analysis method(s), and what can be concluded from the tests, etc. in the form of different columns for each row

RTI, MUMBAI / CH 48 Developing the audit programme  In developing the audit programme, it is important that the focus is retained throughout the field audit on the criteria, which are also inherently related to the audit objectives.

RTI, MUMBAI / CH 49 Audit programme in the context of audit jurisdictions & other factors that influence it.  In developing the audit programme, the focus is to be retained throughout the field audit on the criteria, which are also inherently related to the audit objectives.  Performance audit programmes need to be customised for each audit.  The Accountants General responsible for audit of different sectors of entity operations will develop the audit programme as per the entity environment and audit jurisdiction within the SAI and include the coordination and consolidation procedures in the guidelines to ensure high quality of audit and consistency in approach and audit test programmes

RTI, MUMBAI / CH 410 Cont… Some of the factors to be considered when developing the programmes include:  Size  geographic dispersion  audit environment –  the components of the programme/activity Once fieldwork is under way, new issues may arise that could warrant reconsideration and revision of the initial criteria.

RTI, MUMBAI / CH 411 Audit Approaches Audit Approach in the context of performance audit is the method and means adopted for analysis of data for deriving audit conclusions. Some of the approaches are:  Analysis of procedures  Use of existing data or evidence provided by the agencies;  Analysis of results;  Case studies;  Surveys; and  Quantities analysis.

RTI, MUMBAI / CH 412 Level of details in the audit programme  The complexity of the audit issues to be tested;  The extent of the audit;  The level of the staff carrying out the audit; where junior staff has responsibility for carrying out fieldwork, a more detailed programme would normally be appropriate  For multiple-entity audits, the main issue in the programme is whether each audit step needs to be carried out in each unit of the same entity or different entities (state governments).

RTI, MUMBAI / CH 413 Cont…  Different requirements for sample sizes may lead to some audit steps being carried out in only certain units or entities and some others to be carried out in all..  For multiple-entity audits, the main issue in the programme is whether each audit step needs to be carried out in each unit of the same entity or different entities (state governments). Different requirements for sample sizes may lead to some audit steps being carried out in only certain units or entities and some others to be carried out in all.

RTI, MUMBAI / CH 414 Audit Test Programmes Chart Audit objective Audit criteria Test methodology Test questions/ analysis Audit findings Test Programmes Examine findings and reassess/confirm criteria if unacceptable findings emerge.

RTI, MUMBAI / CH 415 Audit test programme Test programmes should not be prescriptive, but should have the following characteristics  Clear purpose  Easily understood  Sound logic  Good layout/design  Flexibility  Cost effectiveness

RTI, MUMBAI / CH 416 Study and evaluation of internal controls  Business of the entity in an economic, efficient and effective manner, ensuring adherence to the management policies and producing reliable and timely, financially management and performance information. The study and evaluation of internal control depends on the objectives of the audit and the degree of reliance intended.  Documentation and test will form part of the working papers and the audit findings and conclusion will be included in the report.

RTI, MUMBAI / CH 417 Lessons learnt and sensitivity to error/risk signals  Performance auditors may be required to assess the adequacy of the internal control system to ensure that remedial measures are taken on significant weaknesses in the systems and procedures pointed out earlier by audit or which had emerged from the feedback system, review, complaints and evaluations, etc.  The lessons learnt procedure could operate in the context of the programme/. subject of performance audit and should take into account similar weaknesses brought out in other programmes within the entity.

RTI, MUMBAI / CH 418 Cont…  The lessons learnt procedure could operate in the context of the programme/subject of performance audit and should take into account similar weaknesses brought out in other programmes within the entity.  Sensitively and dependability of the procedure may be carried out with reference to high-risk error signals or alarms that the management may either generate.  The impact of inefficient or insensitive system may be established with appropriate evidence by linking the audit findings to the inefficient procedures for lessons and insensitivity to the error signals.

RTI, MUMBAI / CH 419 Session Summary In this session we discussed:  Audit engagement process: The entry conference  Field audit process  Developing audit question  Developing the audit programme  Audit programme in the context of audit jurisdiction  Audit approaches  Level of details in the audit programme  Audit test programmes  Study & evaluation of internal controls  Lessons learnt from sensitivity to error