(A)

ISSAI 300 Performance Audit Principles describes a performance audit as ‘an independent, objective and reliable examination of whether government undertakings, systems, operations, programmes, activities or organisations are operating in accordance with the principles of economy, efficiency and effectiveness and whether there is room for improvement.’

The subject matter of an audit of the financial statements is always the financial statements which are prepared under a financial reporting framework, such as IFRS. A performance audit is, by its nature, much broader in its remit and therefore the subject matter being audited can be quite varied and is not limited to a set of financial statements. Auditors carrying out a performance audit can choose the subject matter rather than this being prescribed to them. In contrast to an audit of financial statements, the focus of a performance audit might not be financial or even numerical. For example, a performance audit might investigate the effectiveness of a summer camp that aims to improve children’s literacy skills.

A performance audit will not usually result in a formal opinion. A report will be prepared for the intended user which might be the government, legislature or the public. An audit of financial statements will always result in an audit opinion and the auditor’s report on the financial statements is addressed to the shareholders of the business.

Auditors of financial statements follow the ISAs when carrying out their work. Methods employed tend to be similar from audit to audit. The auditors carrying out a performance audit will follow ISSAI. The methods used by performance auditors will vary much more than those used in an audit of financial statements and involve less prescribed procedures.

Performance audits tend to be non-recurring whereas audits of financial statements will occur on an annual basis.                                                                                                                                                                                                                                                                            (B)

The principle of economy means minimising the costs of resources. The resources used should be available in due time, in and of appropriate quantity and quality and at the best price.

The principle of efficiency means getting the most from the available resources. It is concerned with the relationship between resources employed and outputs delivered in terms of quantity, quality and timing.

The principle of effectiveness concerns meeting the objectives set and achieving the intended results.                                                                                                                                                                                                                                                                                                    (C)

Audit objectives
Examples of suitable audit objectives include the following.

Economy
Has the CES followed the prescribed procurement policies and purchased ambulances for the best possible price available at the time?

Efficiency
Would the purchase of fewer ambulances have resulted in a similar average ambulance call out time?

Effectiveness
Assessing whether the purchase of additional ambulances is effective by assessing if the average ambulance call out time has decreased since the purchase of the additional ambulances.