Performance Audit: A Tool for Improvement


The methodology of research is a mix of descriptive and analytical. In order to prove my hypothesis in the statement of the problem, a detailed description is provided. I have analyzed the available data on the prevalent procedures in Pakistan and have used the best practices available internationally.

The analysis used in the paper is qualitative in nature, although quantitative data has been utilized from some select organizations whose performance audit has been conducted in the past. The reason for using qualitative rather than quantitative data is the paucity of relevant data in this field. This is still a new phenomenon in Pakistan. The manual on Performance audit, prepared by the Department of Auditor General of Pakistan has been finalized first time in April this year (2012) and it is still in the form of a draft. The manual contains detailed instructions for Performance Audit and in the absence of such a document in the past auditors had to rely on varied literature for guidance.

Organization of the paper:

The organization of the paper is on the following lines. The part following this section is the main body of the paper that deals with the whole research. This part is further sub-divided into three sections and further sub-sections. Section I gives details about the main features of performance when it is practically applied. Section II provides data on the performance audit of public sector organizations. Section III discusses the results and analysis and tries to relate them to our statement of the problem. The last part of the paper is the conclusion which flows naturally from the text. It is followed by recommendations for future research and also to various stakeholders. This section also mentions lacunas that have been left in the study and points outs the areas where future research may focus.

Performance Audit in Practice

The main aim of the Performance Audit is to get an improved project, program, performance, and quality. For this end in mind, the audit points out the weakest areas of performance and snags and difficulties but it also gives recommendations to improve this state of affairs. After the advent of democratic institutions and systems, the demand for accountability and better performance has increased. (Z. Ahmad, Understanding Performance Audit 1993) The selection of entities for audit is considered if a big financial outlay is involved and the level of vulnerability of the project is high. The importance of an activity or project like infant mortality rate reduction program, family planning, reduction in agriculture production also is a reason for selection for audit. A performance audit can be started at any stage i.e. at the midpoint, immediately before completion, and on or after completion of a project.

Audit Criteria

The audit criteria are derived from common sense and professional bodies dealing with auditing and accounting also set the criteria of their own use. Sources of audit criteria are basic planning documents on which the project is approved like PC-1, standards of international bodies, various policies and directions set by the government, prevailing laws, rules and regulations, past performance, and interviews of various stakeholders. (Z. Ahmad, Understanding Performance Audit 1993) In addition to this audit, criteria should be set in such a manner that it is quantifiable, achievable, and specific about time and cost, appropriate to the overall standards, and understood by all concerned.

Value for Money

Value for Money is an important feature that is considered by the Performance Audit as the benchmark to assess the working of an organization. The following examples will show that value for money is how much important.  If in a project of 460 tube wells in the waterlogged area that was completed in time but at the end, 2% increase in the project was recorded and electricity for tube wells was not available for another 3 years. In another project, a ski resort and a hotel was built in Swat to promote tourism but the approach road was not built even after seven years have passed. (Z. Ahmad, Introduction to Performance Audit 1993)

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