Performance Audit: A Tool for Improvement


In the face of increasing liabilities and decreasing resources to fund the new initiatives, it has become the need of time to adopt such measures that the best output and outcome is achieved but no new expenditures are incurred. This objective is achievable; if an organization adopts a system of monitoring and accountability itself or with the help of some other organs of the state. Performance Audit is one such mechanism that can be utilized to ensure the efficiency of the organization including its administration, financial management, and improving its final outcome.

In the different countries of the world, Performance Audit has done wonders by identifying many fault lines that were eating away the efficiency of the organization and also reducing its profits. A performance audit is a new phenomenon in the world and it is rapidly getting popular due to its deliverables in the form of economy, efficiency, and effectiveness. In Pakistan, it was introduced only three decades back and it has produced some remarkable reports where it has shown that how the proper use of resources could have given much better results than it has been doing in the absence of any such controls and guidelines as of Performance Audit. Despite being the pioneer in this field (Khan, Executing Performance Audit November 1988), Pakistan has not been able to fully benefit from this skill only due to paucity of funds and resources and the neglect of the concerned authorities both in the Department of the Auditor General of Pakistan and government of Pakistan.

Statement of the problem:

A performance audit is an accepted recipe for improvement because it refers to an assessment of various programs of a government and to decide that they are using available resources economically, efficiently, and effectively.  In most countries, performance audits of governmental activities are carried out by the external audit bodies at the federal or state level. Pakistan is one of the pioneers in Performance audit but still, it has spared only nominal funds for the Performance Audit Wing (PAW). The scope of performance audits may include the detection of fraud, waste and abuse. Studies have proved that the frequency of Performance Audits improves quality. (Daujotaitė and Mačerinskienė 2008) This study will critically evaluate whether Performance audit in Public Sector organizations in Pakistan is a tool for improvement or not.

Significance and scope of the study:

The significance of this study cannot be overemphasized in the present circumstances where we have accumulated a huge debt that is over and above the limit provided in the law (Assembly 2005) and most of the public sector organizations are not fulfilling the objectives for which they have been established. The lethargy and inefficiency have set in the overall structure of the public sector organizations in Pakistan. Be it Pakistan International Airlines, Pakistan Railways, or Pakistan Steel, they are all on the verge of bankruptcy. It should not be ignored that the same organizations were a few decades back examples of excellence and were providing guidance and training to many now renowned organizations world over ranging from the middle east to some Far Eastern countries. Although the financial audit and sometimes audit by the private audit firms is being conducted on regular basis but the mere analysis of the financial side is not enough to bring these organizations out of their present state of affairs. It is only the performance audit that can help provide some solid guidelines on which a strong structure can be built to make these organizations as profitable concerns. The scope of this paper will be the public sector organizations of Pakistan. How they are working and what is lacking in their performance and how it can be improved? The results at the end of the study will be helpful to understand the reasons for the bad performance of the public sector in particular and how it can also be applied to the private sector in general. This study will be helpful for future research on the subject and also will help the Department of Auditor General of Pakistan to give more importance to this type of audit over the traditional financial audit.

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