Page 611 - Encyclopedia of Business and Finance

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Performance Audits

Requirements in generally accepted government 2. The scope, which is established by determining the
auditing standards (GAGAS) are identified by boundaries for the engagement and should reflect
statements that include the word “should.” Audi- the audit objectives.
tors are expected to comply with these require-
ments if they apply to the type of work being 3. The methodology, which comprises what is to be
performed. (GAO, p. 5) done to gather and analyze data to achieve the
objectives.
General Standards. The general standards that guide gov- Supervision: During an audit, staff must be properly
ernment auditors, as well as other independent auditors, supervised. The tasks of supervision primarily
stated in summary style, are: include providing appropriate guidance to staff
members, maintaining alertness to significant
• Independence: The auditor and his/her firm must be problems that arise, reviewing the work while it
free, in both fact and appearance, from all types of is in progress, and providing useful on-the-job
impairments of independence. training.
• Professional judgment: The auditor should use profes- Evidence: The major task of the auditors’ work
sional judgment in planning and performing all relates to gathering evidence that is sufficient,
audits. competent, and relevant to the data for meeting
• Competence: Those individuals assigned to the audit the objectives of the audit. Ultimately, it is the
must possess adequate professional competence for evidence that supports the judgments and con-
the tasks required to complete the engagement. clusions relevant in the report.
• Quality control and assurance: Audits must be per- Auditors, to meet the objectives of their audits, are
formed by auditors whose organizations maintain an able to use different types of evidence. Com-
internal quality control system and have an external monly used evidence sources include: direct
peer review on a regular basis. observation of individuals, properties, events;
documents, such as memoranda, charts, reports;
As noted, these general standards are the same for all
inquiries, interviews, questionnaires; and analyti-
types of audits that are GAO engagements. These general cal evidence that includes computations and dis-
standards impose responsibility on both the audit entity aggregating information for detailed assessment.
and the individual auditors to ensure that those who par- Auditors must make a professional judgment
ticipate in such audits are independent in fact and appear- about the sufficiency of their evidence in relation
ance, able to make good judgments, and qualified for
to the objectives earlier identified. There are no
engagement tasks. Furthermore, it is expected that the
quantified requirements for the amount of evi-
entity that employs auditors for such audits maintains dence.
oversight of the work performed to be assured that the
quality of performance is adequate and the tasks have Audit Documentation: Auditors are expected to pre-
been completed. pare and maintain sufficient documentation to
provide a complete account of the planning, con-
ducting, and reporting related to the audit.
Field Standards. The field standards deal with planning;
Everything from planning to conclusions must be
supervising staff; collecting evidence that is sufficient,
documented. The supervision, as well as other
competent, and relevant; and preparing adequate audit
reviewers of documentation, must determine if
documentation.
the work performed is satisfactory or needs to be
Planning: All aspects of the work of the audit must extended. Quality control at the firm, which is
be adequately planned. While planning for a per- confirmed through periodic outside peer reviews,
formance audit is a continuous process, initial is primarily based on audit documentation. A
planning is important. Decisions to be made ini- framework for the assessment of audit documen-
tially include determining: tation is the standards established by the GAO.
1. Audit objectives, which state operationally what is Reporting. There are two reporting standards, communi-
intended to be accomplished, must be recorded. cating results and content.
Audit objectives, for example, may be the cost-effec-
tiveness of program performance or the extent to Communicating Results. An audit report is to be
which specific organizational goals are being appropriate for its intended recipient and is to be
achieved. provided in writing or in some other retrievable

588 ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION