Performance Audit India

FOR INTERNAL USE IN INDIAN AUDIT AND ACCOUNTS DEPARTMENT ONLY
MANUAL OF
PERFORMANCE AUDIT
(Revised Edition, 2009)
Issued by
Principal Accountant General (Civil & Commercial Audit), Kerala.
PDF created with pdfFactory Pro trial version www.pdffactory.com
P R E F AC E
With the revision of Auditing standards in 2002 and the issue of

Performance Auditing Guidelines by the Comptroller & Auditor General of
India (May 2004), the existing Manual of Efficiency cum Performance Audit
(1998) needed revision. The Guidelines contain comprehensive implementation
standards in relation to performance audit. This Manual, includes salient features
of The Guidelines, consisting of, inter-alia, strategic planning in pursuit of
realisation of goals and objectives, risk based planning and selection of subjects
and attainment of the ultimate objective of value addition to the public sector
programmes.
It also contains orders/instructions issued by the Headquarters
Office and this office for the guidance of staff engaged in performance audit.
Nothing in this Manual shall be quoted as authority in correspondence
with outside authorities.
Suggestions for the improvement in the form and content of this Manual
are welcome. The Manual of Performance Audit will be maintained and updated
from time to time by the EPA(HQ) Section.
Thiruvananthapuram
Dated: 3.11.2009
S.NAGALSAMY
Principal Accountant General (C&CA),Kerala,
Thiruvananthapuram
CONTENTS
Chapter
Subject
Page
General
1-10
II
Procedure for Performance Audit
11-33
III
Nature and drafting of Performance Audit Report
34 - 41
IV
Miscellaneous
42 - 49
Annexures
Annexure I
50
Annexure II
52
Annexure III
54
Annexure IV
68
Annexure V
70
CHAPTER 1
GENERAL
1.1
Introductory
SAI India has been carrying out performance audits, hitherto termed as
review, or efficiency-cum-performance audit, or value for money audit, over

the past 40 years relating to the receipts and expenditure of the Union and State
Governments, Government supported autonomous bodies and other public sector
undertakings on a variety of subjects.
1.2
Efficiency-cum-Performance Audit Section (EPA) was formed with effect
from 1
st
January 1964, reorganizing the erstwhile Higher Audit Section. The
purpose of the reorganization was to enable the section to devote more attention to
Efficiency cum Performance audit of development schemes (Comptroller &
Auditor Generals letter No.2806-Admn 1/8 codes 61 Vol.II dated 18.11.1963 and
O.O.H.A/2-1.60-64/796 dated 1.1.1964).
1.3
The existing guidelines for performance auditing have been fine tuned in
the context by the ASOSAI performance Auditing Guidelines and INTOSAI

Exposure Draft Implementation Guidelines for performance Auditing Standards
and contemporary best practices. Performance Auditing Guidelines-SAI
India(May 2004) replace, en-block, section III, Chapter 8 of the Manual of
Standing Orders (Audit), in the context of performance auditing in SAI India. The
Salient features of these guidelines consists, inter-alia, of strategic planning in
pursuit of realization of strategic goals and objectives, risk based planning and
selection of subjects and attainment of the ultimate objective of value addition to
the public sector programmes. The guidelines also provide for a very high degree
of interaction with the auditees. Close interaction with auditees is essential for
realising value addition to the public sector programmes through performance
audits.
The instructions contained in Chapter 7 of Regulations on Audit and
Accounts issued by Comptroller and Auditor General in January 2008 may also be
referred to while doing Performance Audits.
1
Performance Auditing:
Definition
1.4
Performance audit is concerned with the audit of economy, efficiency and
effectiveness and embraces:

(a) Audit of the economy of administrative activities in accordance with
sound administrative principles and practices and management
policies.
(b) Audit of the efficiency of utilisation of human, financial and other
resources, including examination of information systems, performance
measures and monitoring arrangements and procedures followed by
audited entities for remedying identified deficiencies; and
(c) Audit of the effectiveness of performance in relation to the
achievement of the objectives of the audited entity and audit of the
actual impact of activities compared with the intended impact.
Performance auditing is an independent assessment or examination of the
extent to which an entity, programme or organization operates efficiently and
effectively, with due regard to economy.
(Performance Audit Guidelines-SAI India Para 1.8 and 1.9)
Objectives
1.5
Performance auditing has the objective of improving public sector
administration and accountability by adding value through an effective

programme of performance audits. One of the main objectives of performance
auditing is to assist the peoples representatives in exercising effective legislative
control and oversight over the policy objectives and their implementation. The
performance Audit teams should examine and report on:
the quality of information and advice available to government for the

formulation of policy;
the existence and effectiveness of administrative machinery to inform

the government whether programme objectives and targets have been
determined with a view to fulfilling policy objectives;
whether and to what extent, stated programme objectives have been

met;
2
the economy, efficiency, effectiveness, equity and ethics of the means

used to implement a programme/ activity.
The intended and unintended, direct and indirect impacts of

programmes/ activities; for example, the environmental impact of
government activity etc, and
Compliance to applicable laws and regulations in the context of the

performance audit objectives.
Performance audit should not confine the objectives to what has been
done but also examine what has not been done to meet policy objectives.
Appendix-C of Performance Auditing Guidelines contains illustrative list of issues
in performance audit of public sector programmes.
Given the size, complexity and diversity of entity operations, it is
generally not practicable to attempt assessment of the overall performance of
departments or entities. Consequently, performance audits are usually directed
towards specific functions, activities, programmes or operations of the entity.
Performance audit findings are not a random assortment of various financial and
regularity audit findings but an assessment of either the whole or part of the
programme/subject/function/system.
(Paragraphs 1.30,1.31 and 1.32 - Performance Auditing Guidelines-SAI India)
The Process
1.6
The first stage in performance auditing is strategic planning for
performance audits, which requires the development and maintenance of

information on the entity that will assist in identifying potential areas for
performance audit. Potential topics can then be analysed to form audit strategy
documents. The EPA (HQ) section should formulate the annual operational plans
in tune with the strategic plan.
Once a subject has been selected, performance audit is initiated by
developing a plan with the details for the conduct of the audit.
The
implementation stage of the performance audit involves:
Development and execution of an audit programme
Collection and documentation of sufficient, relevant and reliable

evidence, including quantitative and qualitative analysis;
3
Development of audit findings, conclusions and recommendations

and ;
Development of discussion papers/draft field audit reports and

confirmation of audit findings at exit conference.
Every performance audit culminates in the development of a draft

performance audit report containing audit findings and recommendations,
confirmation, acceptance and comments, if any, by the entity and approval of the
report within the SAI and presentation to Parliament/Legislature.
Throughout each stage of performance audit, the objective should be on
the production of a final report that is balanced and has value added impact. The
report writing process should be viewed as a continuous one of formulating,
testing and revising conclusions, if necessary.
Therefore issues such as the
expected impact and value of the audit, the likely improvements, better value for
money and quality of expenditure resulting from the audit should be considered
throughout the audit.
(Paragraphs 1.50, 1.51, 1.52, 1.53 and1.54 - Performance Auditing Guidelines SAI India).
Mandate for Performance Audit
1.7
The mandate of SAI India for audit is derived from the constitution of
India, as established under the Comptroller & Auditor Generals (DPC) Act 1971.
The mandate of Comptroller & Auditor General of India for performance audit is
governed under Sections 13, 14, 15, 16, 17, 19 and 20 as the case may be, read
with Section 23 of this Act.
Annexure I contains instructions of the Government of India and Annexure
II
contains
instructions
by
Government
of
Kerala
issued
to
all
Department/Autonomous Bodies/ PSUs to facilitate the conduct of performance

audit by Comptroller & Auditor General.
Duties and functions
1.8
The Performance Audit Wing comprises EPA HQ section and EPA parties
entrusted with the performance audits. The EPA parties each under the control of
an Audit Officer/Senior Audit Officer and the HQ section headed by an Audit
4
Officer/Senior Audit Officer are under the charge of a Group Officer who is the
designated supervisory officer.
Supervision of performance audit involves ensuring that:
the members of the audit team have a clear and consistent

understanding of the audit plan;
the audit is carried out in accordance with the auditing standards and
practices of the SAI;
the audit plan and action steps specified in the plan are followed unless
a variation is authorised;
working
papers
contain
evidence,
adequately
supporting
all
conclusions recommendation and opinions;
the auditor achieves the stated audit objectives; and
the audit report includes the audit conclusions and recommendations as

appropriate.
1.9
Performance audit being more open to judgment and interpretations
requires close and careful supervision. Supervision procedures and system of

monitoring compliance for each assignment should be documented and got
approved by the Prl Accountant General as part of the detailed operational
guidelines.
(Paragraphs 7.3 to 7.4 Performance Auditing Guidelines-SAI India)
Structure of Supervision
1.10
Supervision to be exercised at various levels is as detailed under:
by the group supervisory officer and the Prl Accountant General,

during planning of individual performance audits;
by the audit officer, during the course of field audit, further supervised
by group supervisory officer; and
by the Prl Accountant General during review of periodic reports,

monitoring and interim appraisals at the close of the audit of
particular phase or unit.

1.11
The key supervisory role for the performance audit planning,
implementation of the audit and reporting rests with the group supervisory officer,
who should be involved with all key elements of the performance audit process.
5
The performance audit and the process documentation should demonstrate the
discharge of his/her supervisory role at each stage.
1.12
All audit staff and officers are individually and collectively responsible for
the quality of the audit reports. It is, however, imperative that the audit personnel
understand the most important role that they have to play. The Audit team is
primarily responsible for data collection.
The Audit Officer and the Group
Supervisory Officer are responsible for data analysis. Audit findings, conclusions
and recommendations should be arrived at with the prior approval of the Prl
Accountant General.
(Paragraphs 7.5, 7.6 and 7.7.-Performance Auditing Guidelines-SAI India)
Responsibility of the Supervisory Officer
1.13
Some of the more important responsibilities of the supervisory officers in
relation to performance audit are to ensure:
that the work plan is executed with integrity and care in relation to the
auditing standards;
that the implementation of audit is carried out in accordance with the

operational audit plan and all significant deviations, where necessary,
are made with prior authorisation of the Prl Accountant General.
adherence to the best practice contained in the performance Audit

Guidelines-SAI India.
documentation-both the performance audit documentation(working

papers) as well as the performance audit process documentation, which
demonstrate various actions and options considered and decided in the
course of implementation; and
the confidentiality and integrity of information obtained from the

entity, persons and other sources are maintained and that the factual
basis of information, description, analysis and recommendations are
accurate and they are fair, balanced and well founded, that they are
correctly communicated to the entity and the audit team is provided
oral and written guidance in conduct of the audit.
6
Supervision by the Audit Officer of field audit party.

1.14
The day to day supervision and control of the performance audit
particularly the filed audit rest with the Audit Officer. Some of the more important
supervisory responsibilities of the audit officers are:
ensuring that the audit work is carried out in harmony with audit plan,
more particularly in tune with the audit objectives;
Identification of important issues in course of audit.
Ensuring that no significant matters in the context of the audit

objectives and evidence required, therefore, remain unresolved;
Evidence collected fulfils the criteria prescribed in the Auditing

standards;
the work performed and the results including the process of audit are
separately documented, first in support of audit findings, conclusions
and recommendations and the second in support of due diligence
exercised by the audit team; and above all
Ensuring that the objectives of audit are fully met.
Progress reporting
1.15
The Audit Officer and Group Supervisory Officer will be responsible for
reporting the progress of audit to the Prl Accountant General, at intervals as may
be provided in the detailed audit implementation plan or as ordered by the Prl
Accountant General. The progress report should contain all important information
relating to the progress of audit, extent of data collection, sources of data
collection, analysis of evidence, time spent in audit against the time allotted,
dialogue with entity, problems encountered in the course of audit and modification
applied to the audit plan, if any.
The Group Supervisory Officer and the Audit Officer should also furnish
assurance Memo, as prescribed by the Prl Accountant General, on completion of
audit of each unit or stage in the performance audits.
(Paragraphs 7.8 to 7.11 of performance Auditing Guidelines-SAI India)
1.16
The Group Supervisory Officer and the Audit Officer should discuss with
the Prl Accountant General the progress of performance audit periodically and get
his guidance.
7
Headquarters Section
1.17. EPA Wing comprises EPA (HQ) section and EPA Parties entrusted with
performance audit of selected topics. EPA Parties each under the control of an
Audit Officer and the HQrs section headed by an Audit Officer are under the
change of Sr. Deputy Accountant General (Commercial).
The following are the main items of work assigned to the EPA(HQ)
section:
(i)
Collection of various basic data, essential for performance audit,

such as budget documents, plan reviews, study and evaluation
reports, copies of important rules and orders and other publications.
(ii)
Selection of topics for performance audit and their allotment

among EPA parties.
(iii)
Arrangement of preliminary studies of the schemes selected for

performance audit and collection of details called for by the
officers of the CAG/DGACR, PD(ESM) etc. relating to
performance audits.
(iv)
Communication of various instructions and guidelines on

performance audit to the field parties from time to time.
(v)
Coordination of the work by various EPA parties, monitoring the

progress of performance audit and tracing its pace to ensure
finalization of reports by the due dates fixed by the Prl Accountant
General/Audit implementation plan
(vi)
Finalisation of performance audit reports submitted by EPA

parties, submission of the reports for approval by the Prl
Accountant General with such details as are required and
forwarding copies of the reports to the officers concerned
(vii)
Furnishing copies of performance audit reports and such additional

details, as are required by Report(Civil) section to finalise draft
paragraphs based on the performance audit and supplying
performance audit files to Report(Civil)for reference when called
for.
(viii)
Review of audit reports of the Union Government and other

States/UTs with a view to seeking guidance for selection and
conduct of performance audit.
8
(ix)
Maintenance of prescribed registers/records.
(x)
Submission of tour programmes of EPA parties for the approval of

the Group Supervisory Officer.
(xi)
Checking TA claims of field parties with approved tour

programmes, tour diaries, leave account, etc.
1.18. In order to watch the progress of work connected with performance audit
EPA(HQ) section should maintain a register showing the names of schemes
selected for performance audit, details of allotment among various parties, the
stage of work from time to time, details of performance audits finalised, details of
issue of copies of performance audit reports etc. This register should be submitted
to the Prl Accountant General on the 15th of every month.
The responsibility for keeping this Manual up-to-date rests with
EPA(HQ)/Section.
1.19. The general instructions in the Manual of the Outside Audit Department
applicable to OA(HQ) and OA Parties will apply mutatis mutandis to EPA(HQ)
and EPA parties.
Leakage of information
1.20. Performance audit of a scheme may often involve probing into policies of
governments. It may happen that the facts brought to light may be such as will not
be in public interest to be divulged to any but officers competent to deal with them
finally. Leakage of information on such points will not only cause considerable
embarrassment to the Government but also result in possible damage to the
prestige of this office. It has therefore, to be ensured that cases dealt with by the
EPA wing are processed with utmost secrecy and tact notwithstanding the fact that
they may be eventually brought to the notice of the Legislature/Parliament
through the report of the C&AG. The instructions laid down for dealing with
secret documents should be observed by all the members of the staff in dealing
with such cases.
Data collected by Audit
1.21. Data collected by Auditor either directly or through consultants or through
other sources engaged to carry out surveys etc. in connection with Performance
Audits should not be made available to any other individual or organisation.
(Headquarters Office order No.391-Rep(C)/141-2006 dated 15 November 2006)
9
CHAPTER II
PROCEDURE FOR PERFORMANCE AUDIT
2.1
With the attainment of independence, the role of Government as just a
law and order and revenue collections agency has enlarged and the activities
of the Government embrace multifarious functions and developmental
programmes covering almost all sectors of the State economy.
This has
necessitated a reorientation of the approach of audit. Regularity and propriety

audits generally applied to individual transactions are not adequate for
assessments of the performance of a plan, project, programme, scheme or
organization in terms of its goals and objectives. The approach of audit has
therefore been reoriented. Comprehensive performance audit of the ongoing
projects, schemes, etc. in terms of their goals, objectives and programmes is
conducted to see how far the expected results have been achieved using the
available resources of men, material and money. Performance audit assesses and
evaluates the economy, efficiency and effectiveness of development schemes,
projects or organizations.
2.2
Performance audit is directed to examining the systems, procedures,
planning, implementation and operational performance of programmes, activities

etc. bringing out among other things, weaknesses and deficiencies as also lapses
of various types including those relating to individual transactions for appropriate
action. The audit envisages a comprehensive review of the project/scheme/activity
to ascertain:
(i)
how far the physical and financial targets have been achieved.
(ii)
how far the social and economic objectives have been realized.
(iii)
whether the operations are conducted economically
(iv)
whether there are any cases of overpayment, loss, extravagance,

avoidable excess or infructous expenditure due to improper
planning, delay in completion of projects, overstaffing, overcapitalization, unsound pricing policy, idling of assets etc. and
(v)
Whether the utilization of the resources is in accordance with the

projected outlays and if not, the reasons therefor.
10
2.3
It is neither practicable nor desirable to conduct performance audit on pre-
determined lines as schemes differ in their concepts, techniques of performance,

nature of objectives etc. Information available for analysis may also differ.
Selection of subjects
2.4
The selection of the projects/schemes for performance audit should be
done with utmost care after making a preliminary study and taking into account
the various factors apart from the financial outlay involved. It is desirable that
schemes which are going on for atleast two to three years are taken up for
performance audit.
2.5
EPA(HQ)section should carryout an indepth exercise for performance
audit strategic planning. After setting the strategic goals and objectives, the data
on entity contained in budget papers, programme papers, plan documents, annual
reports, parliamentary debates and reports, media concerns, research and reports
of international agencies, follow up and leads from past audits etc. should be
analysed on the parameters of risk, materiality, significance, visibility, coverage
etc. to select subject for performance audits to be carried out over the strategic
plan period.
2.6
It is not always necessary to conduct performance audits of the entity or
the programme as a whole. EPA(HQ) section should select a mix of performance

audit subjects covering either the programme or activities of the entity
comprehensively and the subjects for which the scope and audit objectives are
confined only to significant aspects of the programmes or activities. The selection
of the components or parts of the programme may be guided by the materiality
and risk profiles. This will enable Audit to increase the coverage to large number
of relatively more important and contemporary issues, which may be expected to
enhance the perceived and actual value addition through performance audits. One
of the options could be to conduct performance audits of various components of a
large programme or entity in the form of series, covering a few aspects every year.
2.7
The subjects of performance audit may also be selected cutting across
various departments or entities. This will provide a platform for performance

audit on a theme or thrust area over a cross-section of entities, who are entrusted
with the responsibility for the programme, activity etc.
11
2.8
While the amount of expenditure or revenue associated with a programme
or function is a significant consideration for selection of a subject, we may also

select topics for which there is either no budget or these are insignificant, or
whose materiality cannot be determined with reference to expenditure, receipts or
assets and liabilities only. Yet, the subject or the deficient performance could
affect a large or vulnerable section in a significant manner. Most of these issues
may relate to governance or good governance (examples: system of ensuring
quality control and assurance of quality of drugs, prevention of adulteration of
food and beverages, quality of information, communication and delivery of social
service benefits etc.) Selection of such subject will demonstrate the sensitivity of
audit to the governance issues and people-centric issues.
2.9
While performance audit is mainly a posteriori exercise, there is no bar to
conduct performance audit of programmes, concurrently or at the initial stages of

the implementation of the programmes, in cases where the risk and materiality are
perceived as being significant. Concurrent performance audit of long-term ongoing schemes should be undertaken at appropriate intervals.
2.10
Active co-operation of the concerned departments and their proper
appreciation of the performance audit undertaken is essential for a meaningful

performance audit. As such pre-performance audit enquiries may be held with the
departmental authorities soliciting suggestions regarding areas and aspects to be
taken up for study and assistance in making available the records and data. The
suggestions regarding schemes to be taken up for performance audit may be
collected from Group Officers/Branch Officers of various sections also.
2.11
The following documents should also be referred to at the time of selection
of topics for performance audit.

(i)
Performance Audit suggested by the Comptroller & Auditor

General, DGACR etc.
(ii)
Portfolios
maintained
by
Central
Audit
Sections
and
EPA(HQ)Section.
(iii)
Performance Audit, if any, suggested by the State Government/

P.A.C
(iv)
Press cuttings
(v)
Performance Audit Reports of other states.

12
(vi)
2.12
Review Files on Administration reports of Departments
All the performance audits suggested by the CAG should be taken up and
number of other subjects may be suitably decided based on human resources

available.
(HQs Letter No.D3-R(s)/1988 No.REP(S)/183-86 dated 7.3.1988).
2.13
The list should include:

(a) Performance Audits suggested by the Comptroller & Auditor
General/DGACR etc.
(b) Performance Audits already approved by the Comptroller &
Auditor General but could not be completed and performance
audit already approved in advance and proposed for the current
year.
(c) Additional performance audits proposed for the year.
2.14. Performance Audit Topics proposed for inclusion in State Audit Report
have to be sent to CAGs Office by such dates as intimated by HQrs. For this
purpose the process of selection of topics has to be started sufficiently early. For
getting suggestions from State Government, letters are issued by EPA Hqrs to
Government Secretaries of important departments like Finance and Planning and
Economic Affairs in September/October each year. Suggestions are also invited
from all Group Officers. Topics suitable for Performance audits are also identified
by EPA Hqrs from budget documents, administrative reports, plan documents etc.
From the list of topics available eight to ten topics are short listed for further
examination. While selecting these topics the following factors may also be
considered.
Topics which have been reviewed during the last five years may not be
considered
Schemes/Projects which are nearing completion may not be considered
Schemes/Projects the implementation of which is the responsibility of

Local Self Government Institutions may not be considered.
Priority should be given to schemes where performance audit can have

significant impact.
13
Preliminary study of the short listed topics is to be conducted by deputing

EPA Parties. The Party may make an assessment of the topic by visiting a few
offices implementing the Project or Scheme and
submit a report containing
information on the funding, organizational set-up, components of the scheme,

schedule of implementation, progress so far etc. and submit a Report, explaining
the suitably of the topics for performance audit.
From these topics so studied three or four topics are to be selected. The
number of topics would depend on the instructions received from HQrs. The final
selection would be made based on factors like financial materiality, significance,
visibility, past performance audits as well as regularity audits, estimated impact,
coverage, stage of programme development etc. The topics selected would be
submitted for approval of Prl. Accountant General and forwarded to CAGs office
within the prescribed time.
On receipt of approval of HQrs letters would be sent to the Secretaries of
the Administrative Departments of Government which are responsible for
implementation of the scheme/ project intimating the decision to undertake the
performance audit. The Secretary would be requested to issue necessary directions
to the subordinate offices as contemplated in Government circulars No
52/2006/Fin dated 13.November 2006. An entry meeting is to be held with the
Secretary of the implementing department to discuss the audit plan and
programme. Minutes of the meeting signed by Prl. Accountant General and the
Secretary should be kept for record
Pilot study/preliminary survey
2.15. It is a good practice, particularly for relatively larger programmes, to
conduct a pilot study in one or two representative units of the entity to assist the
performance auditor in refining the risk analysis, audit objectives, audit criteria,
audit approach and audit test programme. In some cases, the result of pilot study
may necessitate more intense field audit and in others, the result may lead to either
defer the audit or abandon it for one or more reasons. Some illustrative findings
of the preliminary study could be: special skills and more time required for
finalization of the guidelines, higher risk perception, the subject being difficult
14
from the auditability angle, sensitive subject from one or other points of view,
very low risk or materiality and negligible perceived impact of audit. The topics
proposed for Performance Audit are assigned to EPA Parties for pilot study. The
pilot study should be completed within one month. The Party may visit offices
connected with the implementation of the scheme/project,
collect necessary
documents, hold discussion with the implementing officers
so that an overall
idea on the scheme is obtained for preparation of detailed guidelines.

The objective of the Pilot study is to have a comprehensive insight into the
broad picture obtained at the time of initial selection to locate areas requiring indepth examination. The following list illustrates some of the documents which
will facilitate study of a scheme.
(1)
Plan outline, Annual Plan budget and accounts of plan expenditure.
(2)
Annual Budget documents
(3)
Accounts
(4)
Economic Review
(5)
Administrative Reports of Departments implementing the scheme
(6)
Project Reports
(7)
Acts, Rules, Departmental Manuals, Reports and Brochures
(8)
Any special published document pertaining to the scheme (issued

by Research Cells of University, Department etc.)
(9)
Evaluation Reports by the Planning Board.
(10)
Reviews of plan schemes published by the planning Board.
(11)
Review by the R.B.I
(12)
News paper cutting
(13)
Important reported judicial decisions.
(14)
Audit Reports of other states(to see whether similar
scheme has
been covered)
(15)
Audit Reports (Civil) of Kerala State for earlier years and Audit
Reports for Revenue Receipts/commercial undertakings.
(to see whether the scheme has been reviewed already in whole or
part)
(16)
Reports of the Public Accounts Committee.
(17)
Reports of the Committee on Public Undertakings
15
(18)
Inspection Reports of the
Departments
implementing
the
programmes.
2.16
(19)
Portfolios required to be maintained in Central Audit.
(20)
Secretariat files
(21)
Departmental files
While conducting performance audit of a programme, it is necessary to
understand the nature of the programme right from the stage it was conceived.
During the pilot study, it should be seen :
(i) Whether adequate survey was made before launching the project
(ii)
Whether proper feasibility report was prepared
(iii) Whether there exists a detailed project report and details of

deviations, if any, available.
(vi) Whether the specification and performance of the various items of
equipments were properly matched
(vii) Whether there were proper procedures for inventory control and
material management, ie. whether an effective system of material
management existed
(viii) Whether contract systems have been laid down
(ix) Whether there were any operational problem and if so, how it was
got over
(x)
Whether the project was functioning as it should be
(xi) What were the areas where it was being implemented and who were
the implementing agencies.
2.17
The results of the pilot study should be submitted to the Prl Accountant
General within the time allowed and his instructions obtained for the conduct of
detailed performance audit.
Performance Audit -Implementation
2.18
The approach of audit should be systematic, methodical, logical and
rational. The Performance Auditing Guidelines (Comptroller and Auditor

General of India-May 2004) contain a frame work for the entire process of
performance auditing. They provide the best practices that the SAI must follow in
planning, implementation, reporting, follow up processes and quality assurance in
16
all performance audits. They outline consistent principles, objectives, approach,

methodology, techniques and procedures for performance audits.
2.19
The phases of performance audit can be categorized as:

(i)
Strategic planning for performance audit (Chapter 2 of the Guide

lines)
2.20
(ii)
Initiating performance audit (Chapter 3)
(iii)
Implementation (Chapter 4 & 5)
(iv)
Reporting Process (Chapter 6)
(v)
Supervision, review and quality control (Chapter7)
(vi)
Follow up procedures (Chapter 8)
(vii)
Quality assurance in performance audit (Chapter 9)
While all steps and actions in performance audit process consisting of
planning, implementation, reporting and follow-up are important and must be

negotiated deftly, the most critical among them are outlined below with the
objective of at a glance recapturation (critical issues in performance audit-Chapter
10 The Guidelines). The crucial issues are presented in two sections. The first
section contains the important considerations in the context of management of
performance audit and consists of steps that must be traversed and documented to
provide assurance of consistent high quality of audit. The second section consists
of the most crucial issues in relation to techniques and documentation that should
be applied to performance audits. It should be noted that the list is not exhaustive
and must be understood in the context of the detailed expositions in Chapters 2 to
9 of the Guidelines. The list of issues will assist the group supervisory officer, the
audit officer and the audit team to ensure the quality of audit, monitor and review
the crucial procedures in management and implementation of performance audits.
Section I: Audit Management Issues
2.21
Mandate for performance audit
Mandate under the Constitution of India and Comptroller & Auditor

Generals (DPC) Act 1971
Section of the Act under which a particular audit is covered, read with
Section 23 of the Act; and
17
Mandate strengthened through convention-performance audits carried

out over the past 40 plus years on a variety of subjects, the reports on all
of them having been presented to the parliament and state legislature.
2.22
Strategic planning for performance audit.
Strategic planning for performance audit is not the same as the strategic
planning of SAI India, but should be consistent with it.
Set strategic goals and strategic objectives to be achieved through

performance audits;
Prepare performance audit strategic plan to fulfill the strategic goals and
objectives and document how the selected performance audits will
accomplish them.
Prepare comprehensive directory of data sources, collect and update all

possible data that assist the strategic planning:
Ensure that the strategic goals and objectives are set in the context of
perceived risks and materiality of issues of financial, non financial or
governance nature;
Be alive to the major policy shifts affecting the governance and large
sections of public and select cutting-edge and sunrise subjects for
performance audit;
Prescience of the policy shifts and anticipation of the risks associated

with the policy shifts and emerging national or internal environment
demonstrate the cerebral capability of the institution; and
Plan performance audits in time to ensure value addition to the

management of the programmes.
2.23
Annual operation plan
Consists of the performance audits of the subjects, including the subjects

brought forward from the previous years that are to be implemented
during the year;
Provides an opportunity to review the plan in the light of new

developments and risk assessment since the approval of strategic plan;
and
Provides a basis for assessment of the performance of the Audit Offices

on annual basis and affords an opportunity to assess and re-assess the
18
skill and knowledge required and those available in-house which forms a
basis for training programmes, engagement of consultants/experts and
outsourcing.
2.24
Performance audit implementation of plan
Gather all relevant data and documents to understand the entity and the
programme;
Intimate the entity about the intent to carry out the performance audit.
Facilitate/persuade formal presentation by the entity to explain the

various aspects of the programme;
Invite representatives of other departments/agencies which have a stake

in the programme by way of provision of funds, evaluation, etc;
State the reasons for conducting the performance audit by setting out
audit objectives and sub-audit objectives;
Set audit objectives in the form of complete statement of questions, the

answer to which will satisfy the reasons for conducting the performance
audit;
Set audit objectives under distinct themes and sub-themes with reference
to programme objectives, further developed in the context of audit
concerns;
Specify the audit concerns of economy, efficiency and effectiveness that

the audit objectives and sub-audit objectives address individually or
severally as also the equity and ethics aspects, in so far as they affect one
or more of the primary concerns of economy, efficiency and
effectiveness;
Set quantitative and qualitative audit criteria against which the

performance will be tested to develop audit findings;
Set one or more criteria for each audit objective or sub-objective;
Identify tentatively the evidence/data required to be collected for testing

each criteria;
Identify sources of data and determine the methods of data collection;
Plan for procurement of expert advice or the services of consultant;
Assign duties and responsibilities; and
19
Make a formal presentation to the entity of the audit plan, including the
audit objectives, criteria, evidence required and tentative location of
audits and invite the representatives of other concerned departments also.
2.25
Use of expert, consultant and outsourcing
Document transparently the assessment of knowledge and skill required

for each performance audit;
Examine and document how the required skill can be fully met in-house;
without compromising audit quality; and
Follow the procedure in vogue within the SAI in the matter of procedure
for procurement of services of expert/consultants.
2.26
Entity consultation, cooperation and response
Entity cooperation and response being the hallmark for the success of
performance audits, Prl Accountant General will be called upon to adopt
a persuasive approach to attain goal-matching;
Rather than quitting in the face of inadequate response, the objective will
be to continue making efforts with a view to making such cooperation a
routine in time to come;
The methods of persuading the entity for full cooperation is left to the
judgment of Prl Accountant General;
The cooperation of the entity is not to be confused with agreement on all

issues.
Recognition of possibility of difference in opinion and its
resolution is inherent in cooperation;
Entity cooperation and response should be obtained throughout the

performance audit process-from the intimation of the intent to the
recommendation
and
finally
to
the
implementation
of
the
recommendations and
Entity cooperation is to be secured through a series of transparent

measures:
Sharing of the subject selected for performance audit in the
strategic plan with the Secretary;
Intimation to the Secretary when the subject is taken up for
performance audit;
Presentation by the entity for understanding the subject;
20
Presentation by the Prl Accountant General on audit

implementation plan containing audit objectives and audit
criteria
Request for agreement with the criteria;
Entry and exit conference;
Discussion papers and audit observations;
Formal presentation of audit findings, conclusions and
recommendations, and
Follow-up procedures involving
implementation of the
recommendations.
2.27
Supervision and review

Supervisory responsibilities should be delineated in the audit plan
Supervision trail, as far as possible, must be maintained for subsequent
review; and
The performance audit work and documentation should be reviewed as per
the plan as well as at random intervals.
2.28 Monitoring progress and periodic reports.
The frequency of monitoring by various levels of officers should be built

into the audit plan;
Progress report on various stages of performance audit cycle should be

built into the plan and should be submitted with appropriate explanatory
note.
2.29 Quality assurance and quality control
The members of audit team and supervisory officer will be made aware
of the quality control system within the offices of Prl Accountants
General and in SAI headquarters;
All audit personnel ought to be aware of the quality assurance system

established in SAI India and ensure compliance to the quality standards;
Assurance memo in the prescribed format will be enclosed with draft

performance audit report;
SAI may draw up a quality assurance programme for each office; and
21
A summary of the results of quality assurance reviews should be

published highlighting good practices for emulating and deficient
practices and procedures to be addressed for improvement.
2.30 Duties, responsibilities and accountability
The duties and responsibility of each member of the audit team, audit
officer and supervisory officer shall be stated clearly with reference to
compliance to the prescribed procedures, professional conduct, field
audit, evidence/data gathering, quality of data and documents,
documentation, dialogue with entity, audit test, audit findings,
recommendations, guidance to the team members,
monitoring,
supervision, reporting and preparation of reports etc.
A review may be made during the course of audit and upon conclusion
of the performance audit on the quality of fulfillment of the
responsibility by the performance audit team members and supervisors;
Assessment of the quality of audit and the performance of audit

personnel
for
each
procedure,
data
collection,
data
analysis,
documentation and output during the performance audit cycle enhance

the quality of performance audit.
2.31 Process documentation
Process documentation of all management actions and judgments may be

retained throughout the audit to provide a trail for review of management
actions;
The process document should contain all considerations that do not form
part of the working papers for the performance audits in support of the
audit findings, conclusions and recommendations; and
The more important among the process documentation, which

demonstrates management actions, should be sent to SAI top
management with the draft performance audit report along with the
assurance memo in the format prescribed by SAI top management.
2.32
Impact evolution of performance audits
All performance audits will be conducted keeping the expected impact

on the programme in mind. The expected value addition- qualitatively
22
and quantitatively - will be estimated before taking up the performance

audits;
Impact evaluation against the expected impact of each performance audit

and collectively for all performance audits conducted by the Prl
Accountant General shall be carried out annually; and
The impact evaluation will be carried out with reference to the

recommendations accepted and implemented.
Section II: Critical technical issues in performance audits

2.33
Fundamental principles
Performance audit is an assessment of efficiency and effectiveness of the

programmes, with due regard to economy;
Addresses the issues of inputs, processes, outputs (products) and

outcomes (impact);
Apart from the question whether the things are being done the right way,
it also addresses the question of whether the right things are being done,
in other words, it also focuses on what is not being done rather than only
on what is being done;
Performance audits also address the issues of equity and ethics, which
impacts one or more of the core concerns of economy, efficiency and
effectiveness and include, apart from other, integrity in preparation of
performance reports;
Distinction between regularity and performance audit should always be

kept in mind;
Performance audits are undertaken with the objective of improving

performance of public sector programmes and, therefore, in assessment
of the expected impact-qualitative and quantitative-on the programme
must be made before undertaking the audit;
The subjects selected for performance audits could be a programme,

segments of a programme-including the processes, procedures and
systems, an entity itself or parts of an entity. etc.;
The subjects of performance audits could be financial, non-financial or

public interest and governance issues.
23
The subjects selected for performance audits should include cutting edge
issues that form the core of governance and sunrise issues in the light of
policy shifts;
Prescience of the risks to programmes or public interest demonstrates the

competence of the institutions;
Performance audits can be carried out posteriori or concurrently;
Performance audits use many techniques used in programme evaluation;
While the performance audit may and should assess the implementation
of the policy through one or more programmes, the scope of audit should
be limited to assessing the impact of the implementation of policy and
the policy per se should not be questioned;
Performance audit conducted in time, when there is scope for remedial

measures is encouraged; and
Performance audits being
knowledge-based
exercise,
in which
conclusions emerge from interpretations, call for special skill,

knowledge and competence of the audit personnel.
2.34
Audit Plan and programme - detailed guidelines for conduct of audit
The detailed audit implementation guidelines will consist of all relevant

information and document required for complete understanding of the
entity, besides the audit objective, criteria, types and sources of evidence
to be gathered, audit test programme, delineation of duties and
responsibilities among team members and supervisors, progress reports
etc.;
The implementation guidelines should be such as to address all issues

designed in the prescribed structure; and
Unless authorised by general or special order, the performance audit

guidelines will be approved by SAI top management.
Each topic approved for Performance Audit would be assigned to one or
more EPA Parties. Usually the Party which did the pilot study would be assigned
the topic. Based on the Pilot study the Party is required to prepare detailed audit
implementation guidelines.
The guidelines should inter alia
specify the
manpower requirement, time frame of completion, coverage, sample selection
24
method, size of sample, audit objectives, audit criteria etc. The time frame in the
guidelines should be such that the Report is finalized within the overall time
limit prescribed by CAGs office for submission of Performance Audit Reports.
The guidelines approved by Prl AG are forwarded to CAGs Office for approval.
Changes suggested on comments of HQrs on the guidelines should also be
considered while conducting performance audit.
For All India Performance Audits the detailed guidelines are received from
DGACR, PD(ESM), PD(SD) etc. and the audit is to be carried out strictly as per
the guidelines and adhering to the prescribed time schedule.
2.35
Audit objectives
Audit objectives will be the focus of field audit and data collection;
All audit objectives and sub-objectives will address one or more of the
core audit concerns of economy, efficiency and effectiveness and the
concerns addressed by each audit objective and sub-objective will be
identified against each of them;
The evidence testing will also revolve around the audit objectives; and
Audit objectives need not be limited to testing of the programme

objectives.
The audit objectives go much beyond the programme
objectives to test the programme for economy, efficiency and

effectiveness. (Annexure III)
2.36 Audit criteria
Audit criteria are performance measures against which the evidence is

tested for arriving at the audit findings and conclusions;
For each audit objective or sub-objective there must be at least one

criterion and testing on more than one criteria against the same audit
objective enhances the acceptability of audit findings and makes them
convincing;
Audit criteria should be acceptable to the entity;
In the event of disagreement in a few cases, it may be a good practice to

request the entity to suggest alternative criteria;
All possible sources of criteria should be consulted to arrive at the best

fit;
25
Criteria developed by or in consultation with the experts of repute

assume enhanced credibility and are easily acceptable;
Institutional consultancy for criteria and for other consultancy or advice

in the performance audits have better credibility and acceptance;
Performance criteria prescribed in the programme or later developed by

the entity should be tested for appropriateness and unless otherwise
established that they may hide underperformance or over-pitch the
performance, these should be adopted in performance audits;
Performance audits need not confine to the entity established criteria, but
should go beyond to establish more criteria to provide tests for all audit
objectives and sub-objectives; and
2.37
Audit evidence for testing against criteria
All data and evidence to be gathered will, as far as possible, be

predetermined with reference to each criterion, which are intrinsically
lined to each audit objective or the sub-objective;
The sources and location of data/audit evidence and method of gathering

them shall be determined in the audit implementation plan;
Evidence in support of each audit finding will be transparently tested on

the standards of relevance, competence and sufficiency (reasonableness)
in the working papers;
The secondary evidence viz. surveys, photographs, physical inspection,

etc. should be corroborative and should not form the only basis of audit
finding, unless accepted by the entity;
Prl Accountants General are encouraged to identify secondary/

corroborative sources of evidence and establish means for gathering
them with the approval of the SAI top management; and
They may also determine approach and methodology for physical

verification in programmes in which asset verification and beneficiary
survey are crucial inputs to establish the actual delivery of the output and
the quality of output/delivery.
While nothing prevents physical
verification by audit team, the question of credibility and acceptance

should also be taken into account, since physical verification by audit
team may, sometimes, be contested later as incorrect.
26
Some of the
methods that could be considered are joint physical inspection with

attestation from both sides, survey by reputed agencies etc.
2.38
Sampling
The audit findings should be based on objective sampling and the

sampling techniques used should be disclosed;
As far as possible, statistical sampling techniques should be used;
Assistance of statistical adviser in the SAI headquarters may be obtained

for statistical sampling and
Adequate sample size should be selected to be able to generalize the

audit findings and be able to meet the standards of sufficiency.
2.39
Audit findings
Audit findings should be developed on the basis of audit tests carried out
on the sample;
Audit findings should be in the context of the audit objectives and

criteria.
The causes of underperformance should be determined to be able to

recommend remedial measures; and
All evidence used for audit findings should be tested transparently or the
standards of relevance, competence and sufficiency and the basis on
which the satisfaction of fulfilling the standards is established, should be
documented in the working papers.
Audit findings should be discussed with the Secretary of the

implementing department of State Government during the exit meeting.
For this purpose a copy of the draft report will be forwarded to the
Secretary from EPA (HQ)rs. The minutes of the meeting signed by the
Prl. Accountant General and the Secretary should be kept for record.
2.40
Recommendations and follow-up procedure
All audit reports must contain recommendations arising out of audit

findings and the cause of audit findings;
As the performance audit revolves around the audit objectives, the

follow-up procedure is built around the recommendations and the impact
of performance audit is measured on the basis of implementation of the
recommendations; and
27
Follow up procedure is conducted with reference to the information on

the implementation of the recommendations and the quality of
implementation of recommendations through a more detailed follow up
audit.
2.41
Supplementary Guidelines and practice Guide Series

In addition to the performance Auditing Guidelines, HQ have issued
supplementary Guidelines on Evidence Gathering, Analysis and Evaluation

Techniques and five Practice Guides for guidance during performance audit.
Salient features are given below. For details refer to the respective publications.
A.
Supplementary Guideline I on Evidence Gathering, Analysis and

Evaluation Techniques
After audit objectives and criteria are finalised following steps are taken to
determine the appropriate data collection technique to be used.

a. Determining the data that will answer the audit objectives/questions
b. Identifying appropriate sources/types of data which are cost effective
and defensible
c. Deciding on suitable methods for collection of data
d. Analysis of data collected
Some methods other than those given in Appendix D of Performance
Auditing Guidelines commonly used for evidence gathering are given below.
a. Observation /photos
b. Searching the database of literature on the subjects
c. Programme/entity database and files
d. questionnaires
e.
expert opinion
f. using results of other studies and audits

Evidence evaluation and analysis
Evidence may be evaluated on the basis of its persuasiveness, meaning the
confidence it offers the auditors in reaching conclusions with respect to audit
objective.
Following provide a structure for measuring persuasiveness
i.
Relevance
28
ii.
Objectivity
iii.
Documentation
iv.
Externality
v.
Sample size
vi.
Sampling method
vii. Corroboration
viii. Timeliness
ix.
Authoritativeness
x.
Directness
xi.
Adequacy of controls
B.
Practice Guide Series I Audit of Procurement

Main points to be looked into while conducting performance audit of
procurement are:
Policy guidelines and documentation
Record management and documentation of purchase /procurement
Requirement /provisioning
Rate analysis/estimated rates
Inviting tenders, tender documents, correction/changes in tender

documents, receipt and opening of tenders, system transparency.
Post tender negotiations, advance payment, performance guarantee

etc.
contract management price variations, delivering, taxes and duties,

warranty, dispute reconciliation.
post contract management monitoring, inspection, user readiness,

dilution of contract terms
C.
Practice Guide Series 2 Audit of Poverty Alleviation Programmes

Important points to be examined during the performance audit of Poverty
Alleviation programmes (PAP) are:
Proper formulation of programme
Targeted beneficiaries correctly identified
Financial planning and funds management at various levels
Works - generation of employment and creation of durable assets

29
Execution of work economic, efficient and effective
Non exploitative and dignified working conditions
Utilization of funds earmarked for weaker sections
Payment of wages and supply of food grains
Generation of income through micro enterprise development
Identification of site for dwelling
Flow of credit and subsidy
Drinking water and sanitary schemes implementation
Monitoring at various levels
D.
Practice Guide Series 3 Audit of Contract Management

Following main points are to be covered during the performance audit of
Contract Management.
System for project appraisal
System of selection and classification of contractors
Tender procedures
System of review of conditions of contracts and tender documents
Periodical financial reporting covering work done, payments made etc.
System of on site control regulating valuations of work for interim

payment
E.
System for examining and controlling price fluctuations and variations.

Practice Guide Series 4 Planning Individual Performance audits
In addition to the guidelines issued in Performance Auditing Guidelines,
the practice guide discusses in detail various stage in planning individual

performance audits. Main points are:
Audit objective
Limit the number of audit objective to five at the maximum and sub
objective to five. A question should not be broken down into more than five sub
questions. Each question should address an independent area. Taken together all
the questions should satisfy the audit objective completely.
Audit criteria should be
specific
Measurable / quantitative
30
Agreed by entity
Free from auditors bias
Clear, understandable and comparable.
F.
Practice Guide Series 5 - Outsourcing : Use of consultants

Following sequences in the process of appointing consultants are
prescribed:
a) Determining the need for a consultant
b) Identifying and engaging the consultant
c) Monitoring the work of the consultant
d) Evaluation of final out put
Determining the need for a consultant
Services of consultants can be used for advice and guidance on a specific
issue before audit or for carrying out specified tasks on behalf of Audit.
Identifying and engaging consultants
GFR and Manual of Policies and Procedure of Employment of Consultants
issued by GOI in August 2006 are applicable which cover the use of Individual consultants
Consulting firms
Universities and research organizations
Government agencies and
Non Governmental organizations
Engagement of consultant is normally done in two stages:
a) by inviting expressions of interest and
b) by asking the short listed consultants to submit technical and financial
proposals.
Monitoring the work of consultants can be done by
a) Appointing a nodal officer
b) Through a work plan to be approved before commencing work
c) Consultants interaction with auditee
Evaluation of work done by the consultant
Final compliance by the consultant with contract engagement would be
carried out using commonly applicable bench marks of completeness of work,
availability of inputs when required, reliability, usability, accuracy, timeliness,
31
flexibility and responsiveness in reaching departmental requirements, maintenance

of confidentiality and overall satisfaction.
CHAPTER - III
NATURE AND DRAFTING OF PERFORMANCE AUDIT REPORT
3.1
Nature and drafting of Performance Audit Report

Chapter 6 of the Guidelines deals with the reporting process from
discussion papers to draft performance audit report, forwarding of the draft report
to the entity for confirmation, acceptance and comments, if any, procedure for
approval of performance audit report within the SAI and presentation to the
Parliament, Legislature etc. Thus the reporting process begins with discussion
papers, navigates through the stages of audit observation, field audit report and
ultimately to the draft performance audit report and the final report. While every
performance audit is to culminate in development of a report containing the audit
findings and recommendations, report writing is to be viewed by the performance
audit teams as a continuous process.
3.2
The performance audit teams should keep the following in mind during
audit as well as at the time of finalising the report.

Audit comments should be based directly on the information contained in
departmental records so that the department may not contest later. When it
is not directly evidenced, audit enquiries should be issued and the facts and
figures got accepted by the departmental officers.
The field officers
should take action to get timely replies to the audit enquires. In case the
replies are not received till the finalization, it should be mentioned in the
report that information called for by audit (period) has not been received
from the department till then (period). The data collected or obtained from
departmental offices and unit offices should be consolidated.
The emphasis should be on quality than on lengthy narration. More stress
should be on analysis of the strength and weakness of the organisation.
The performance audit should encompass economy, efficiency and
effectiveness of the project/scheme. The report should be so balanced that
among other things, points from financial audit as well as achievements of
social objectives/aspects of the scheme are highlighted.
32
There may be some plus points in favour of the project authority. The
positive aspects noticed in the performance audit shall also appropriately
be included. However, serious irregularities like non-realisation of social
and economic objectives, non-observance of time schedule and cost
estimates, over capitalisation, large overhead expenditure, over-staffing,
idle personnel, work backlogs, delay in construction of projects resulting
in cost overrun, absence of trained manpower, plants operating below rated
capacity, excessive inventories, absence of sound pricing policy,
unauthorized occupation of government lands, idle plant and equipment,
leakage of revenue, overpayments, loss due to pilferages or nonobservance of proper procedures, improper, avoidable or infructuous
expenditure etc. should be included in the Report.
For expenditure and receipts figures, the accounts figures should generally
be adopted. The departmental figures should also be mentioned, specifying
the reasons for the differences, if analysed or pointing out the nonreconciliation of the figures by the department. When figures are not
ascertainable from accounts and departmental figures are adopted, the fact
should be mentioned in the report.
In the case of centrally assisted schemes, the pattern of central assistance,
conditions attached, actual amount of central assistance received,
expenditure incurred and position of excess/shortfall in respect of central
assistance should also be mentioned. When a scheme is implemented in
more than one sector, such as under plan with central assistance and under
non-plan with state finance alone, the audit observations may be so
grouped that it is easy to identify, to which sector they relate.
Information regarding the number of units test checked and out of how
many, particular defects or weaknesses that have been noticed is to be
furnished so that the comment in the performance audit report is
appreciated by the PAC in its proper perspective.
The report should contain significant evidence of audit. As such leaning
heavily on departmental reports and just copying from them should be
avoided. Even when extracts from departmental records are quoted, it
33
should be done after analysis and audit observations on the inaccuracies in

the statement, if any, should be mentioned.
The audit team should make themselves conversant with the observations
of HQ office on performance audit reports in the past and draft the reports
on the performance audit conducted by them in such a way that similar
deficiencies do not occur in the report.
The presentation and language of the performance audit report should
abide by the style guide of SAI India. The essence of the style guide is
to adopt uniform format and language, render the report simple and reader
friendly as well, as interesting.
Accountability-centered, third person
active voice, narration by designation enhances the readability and interest

of the reader and induces objective response from the entity. It should be
followed uniformly. (Para 6.18 The Guidelines)
3.3
Characteristics of good report (Para 6.4 Guidelines)

The following points need to be emphasized in regard to performance
audit reports:
v The audit report should be complete i.e. all pertinent information
required to satisfy the audit objective, including the information relating
to the scope, criteria, evidence, conclusions and recommendations should
be available in the report;
v The obligation of the audit report to be accurate implies that the evidence
prescribed is true and the conclusions are correctly portrayed;
v The objectivity of audit report is convincing if the results of audit are
presented persuasively and the conclusions and recommendations
followed logically from the facts presented;
v The report should be clear, which signifies that it should be easy to read
and understand
v The report should be concise, which requires that the report should be of
optimum size, no longer than necessary to convey the audit opinion and
conclusions.
v Balanced reporting should be adopted in the presentation of reports.
Audit findings and conclusions should not only be based on relevant and
34
sufficient evidence, but also presented in an objective, fair and nonpartisan manner. For this,
o apart from deficiencies / short comings/ lapses, the positive
contribution of audited entities should also be mentioned in the
reports wherever possible.
o use of the terms tenable and irregular may be discontinued and
instead suitable expressions may be used such as
(i) the reply does not explain why.
Or
(ii) the reply is not in consonance with .
Or
(iii) the reply is contrary to .
Or
(iv) the reply does not correctly interpret etc.
The rebuttals should always be in the form of a reasoned argument.
v Consistency of the report is secured by ensuring that it does not contain
contradictory findings or conclusions in similar context or the
conclusions on the same segment in different sections or parts of the
report are not incompatible.
v The report is constructive if it manifests a remedial approach rather than
a critical approach and includes appropriate recommendations.
v The report adds value to the entity, if it is timely.
v The acquiescence to the report, including the audit conclusions and
recommendations grows with display of entity cooperation, entity
responses, audit methodology, audit criteria and evidence, etc. within the
performance audit reports.
3.4
Structure of the report (Para 6.29 The Guidelines)

The performance audit report should be presented as per the following
structure:
Title: the subject of the performance audit.
Highlights: major audit findings either in the sequence of their
materiality or in the same sequence as the audit objectives and sub
objectives;
35
Recommendations: While recommendations may be included at

various places in the report in different contexts, all major
recommendations should be presented together, immediately after the
highlights, preferably, in a box or highlighted print. Ideally all matters
of facts/figures/evidence, audit findings and conclusions included in
the report should have been accepted by the entity by the time the final
report is prepared.
Thus, in so far as the entity and the SAI are
concerned, the action would revolve around implementation of the

recommendations and follow-up respectively. It would, therefore, be
desirable to gather all recommendations together.
Introduction: consisting of a brief description of the subject of study,
information on programme/activity/institution, its objectives, inputs,
implementation structure, expected outputs and outcome etc.
The
introduction should be brief, yet sufficient to enable the reader

understand the context of the programme;
Scope of audit: Scope of performance audit in terms of the period of
the programme covered in audit and segments of the programme
audited should be set out precisely;
Audit objectives: are the pivots of the performance audit, which set out
the reason for undertaking the audit. The entire exercise of
performance audit is built around the audit objectives. These should,
therefore, be stated in simple and clear terms. It is useful to set out the
audit objectives and sub-objectives within each audit objective in the
form of complete statement/question;
Audit criteria: to arrive at the audit findings and conclusions with
reference to each audit objective and sub-objective which should be
stated with appropriate explanations;
Audit methodology: used for data collection/evidence gathering and
testing may be stated in brief. This adds to the acceptability of the
audit findings and forms a statement for transparency of the audit
procedure;
Audit findings: in respect of economy, efficiency and effectiveness
should be presented in a logical manner, preferably in the same order
36
as
the
statement
of
the
audit
objectives.
Conclusions,
recommendations and impact (outcome) analysis: with reference to

each audit objective should be stated, preferably immediately
following the audit findings. The completeness of the report enhances
if recommendation(s) with respect to each conclusion is/are kept
together with the conclusions.
Distinctiveness between the
conclusions and recommendations may be achieved through formatting

techniques;
Lessons learnt and sensitivity to error signals: under this caption
significant audit findings on sensitivity and effectiveness of the
internal control system to ensure that the management recognized
major causes of underperformance brought out in internal or external
studies/reports, including past audit reports and the remedial measures
may be included. Also the audit findings on the sensitivity of the
management to various error signals generated through internal
inspections, evaluations, media reports, complaints, study by interest
groups etc. and effectiveness of the action taken may also be included.
In both cases, the audit findings that could have been avoided with
effective lessons learnt and error signal response system may be
highlighted.
Acknowledgement:
The
co-operation,
acceptance
of
the
criteria/findings and recommendations by the entity may be

acknowledged briefly. In case the co-operation or response was not
forthcoming at any stage it may be indicated if it has resulted in any
limitation along with its implication and the special efforts made by the
Prl. Accountant General to seek co-operation or response. Care should
be taken to state them as a matter of fact rather than giving an
impression to convey any accusation;
Graph, charts, diagrams, photographs etc.: Prl. Accountants General
are encouraged to illustrate the audit findings with the use of graphs
and charts and improve the visibility of the analysis and findings.
Photographs can be used as evidence where they are able to
corroborate evidence.
37
Glossary of terms: explaining all technical and uncommon terms used

in the report that need to be explained.
References or bibliography: containing reference to all published
material utilized in developing the report.
A list of key documents should be attached to the report and the serial
number of the key documents in the list should be indicated against the relevant
observation in the report. Duplicate copies of key documents should be arranged
in serial order in a separate folder.
The report drafted by the audit officer of the EPA party should be
submitted to the group supervisory officer and after his/her approval, it should be
forwarded to the EPA(HQ) for submission to the Prl Accountant General through
Report (Civil) section.
The Reports, Questionnaires, Checklist and other materials relating to
Kerala and Union Territory of Lakshadweep intended for Union Audit Reports are
sent directly by EPA HQrs to the concerned audit wing at HQrs. Simultaneously
copies of the Reports are sent to the Secretary of the implementing State
Government Department (State Report) and the Administrative of the Union
Territory of Lakshadweep (UT Report).
3.5
Forwarding of the draft report (Check list at Annexure IV)

After the report is approved by the Prl Accountant General, it should be
sent to the Secretary to the Government department with a demi-official

forwarding letter and with a copy to the Secretary to Government, Finance
Department. It should contain the following:
o Subject of the performance audit and reference to previous dialogue;
o Gist of major audit findings and recommendations along with the risk
and materiality of the issues;
o Attention
to
the
orders
of
the
Government
issued
on
the
recommendation of the parliamentary/ legislature committee, setting

time limit for formal response.
o Invitation to formal discussion and presentation of the audit findings and
conclusions; and
o The expected value additions to the programme management, if the
recommendations are implemented.
38
Simultaneously, a copy of the draft performance audit report along with a

copy of forwarding letter to the secretary to the Government should be submitted
to the HQ office.
An assurance memo in the prescribed form should be appended to draft
review report.
While sending the draft reviews and long paragraph to headquarters,
matrix identity, money value and matrix value are to be indicated. Details
of instructions are given in Annexure V.
3.6
On receipt of the response of the entity and observations of the SAI top
management, we may incorporate the modifications, warranted by them and

forward the draft report along with a response sheet for further action at head
quarters.
3.7
Publication
Stand-alone volume for each performance audit report;
Deviation from this with authorization; and
Performance audit reports prepared and presented during all sessions of

Legislature round the year as per the pre-determined schedule.
39
CHAPTER- IV
MISCELLANEOUS
4.1
Period to be covered in reviews relating to autonomous bodies

The duties of audit department in respect of audit of accounts of
autonomous bodies are limited to the period of entrustment of audit. Therefore,

any performance audit attempted in respect of an autonomous body is to be
confined to this period and it would not be advisable to examine the transactions
or review the operations which fall outside this period.
However, such
clarifications and statistical information pertaining to past period as may be

necessary to take a proper view of the transactions and operations audited can be
obtained by audit and taken into account (Comptroller & Auditor General of
India's circular No.3 AuditII/6-87 No.63 Audit II/6-87 dated 28.1.1987-File
EPA/HQ/1/4-40/86-87).
4.2
Public Sector Programmes

The performance audit team should keep in view and cover the following
important issues in the performance audit of public sector programmes.

Mandate
Has the
management obtained the approval of the
competent
authority
(i.e.
Legislature)
for
the
programme
Objectives
Has the management developed clear objectives?
Have the programme objectives been appropriately

determined to fulfill the policy objectives?
Are the objectives specific enough to enable outcome

measurement?
Has the management set specific targets to accomplish

the programme objectives within the scheduled time
frame?
Has the management identified and evaluated the

nature and extent of the need for the programme out
puts.
Does the programme continue to make sense in the
40
light of the needs that it was originally set up to meet?
Implementation
Has the management given proper consideration to

alternative means of achieving the programme
objectives?
Are the design of the programme and its components,

and the level of effort expended, logical in the light of
the programmes objectives?
Direction
Is the implementation timely?
Does the agency have understandable objectives,

plans, targets for levels of service and organizational
arrangements?
In short, does every one understand what they are

meant to be doing? One indicator of direction is the
extent to which employees clearly understand the
service priorities and targets of the current year?
Economy and
Efficiency
Has the management used resources economically and

efficiently?
What is the relationship between costs inputs and

outputs?
Do
system
procedures
and
practices
promote
accountability of programme managers towards

economic and efficient use of resources?
Finances
Has the
management
monitored,
reported and
controlled its financial performance and position?
Are resources (budgets) commensurate with the targets

and how realistic are the budgetary assumptions?
Are the financial and physical performance reports

interlinked to enable an appreciation of the cost of
delivery against estimated cost as well as value for
money?
41
Effectiveness
To what extent has the agency achieved intended

objectives without any significant unintended or
intended,
adverse
or
beneficial
consequences
occurred?
Acceptance
Is the programme outcome meeting the identified need

of its clients or customers?
Has the management surveyed its clients to identify

client expectations and satisfaction?
Responsiveness
Does the agency have mechanisms, which enable it to

respond
appropriately
to
changing
technology,
completion, client demand and other environmental

characteristics?
Human resources
Is there an appropriate policy and practice for the

development of human resources?
Do human resource practices facilitate development,

initiate commitment, safety and job satisfaction?
Protection of
resources
Is there an appropriate policy for the protection of key

assets(ie)assets`` that are crucial to the success and
perhaps survival of the agency? Such assets might
include key people, sources of supply, intellectual
property and machinery.
Monitoring and
reporting
Are actual results monitored and reported against

objectives and targets?
Do reporting formats facilitate effective monitoring of

the programme management and delivery of outputs?
Are the performance reports accurate and free from

material misstatements?
Accountability
Relationship
Is action taken on the basis of the reports?
Does the programme frame work provide for clear

accountability relationship?
Is the system as programme management/delivery

framed to ensure good value for money? Are the
controls reliable?
42
Are the systems and procedures as well as the delivery

mechanisms transparent?
Does the programme planning, execution and delivery

fulfill the concept of good corporate governance?
Review
Has the management established an effective internal

audit unit, undertaken appropriate evaluation of
programmes (including an analysis of unintended
impacts) and established procedures for assuring that it
is
managing
with
economy,
efficiency
and
effectiveness?
Equity
Are outputs/services made available to intended

groups without discrimination? Does every one have
access to the benefits due to them?
Has the management
acted with fairness and
impartiality
Ethics
Has management established procedures to ensure that

public servants utilize public funds honestly?
Are the highest standards of integrity and devotion to

duty ensured through adequate management systems
including a system of review of propriety in
programme management?
Are public servants motivated to optimize the outputs

and subsequent outcomes, of the programme for the
beneficiaries?
Transparency
Are the systems and procedures used in the

management of public programmes transparent and
they promote the concept of accountability and good
governance?
(Appendix C- The Guidelines)
4.3
The impact
From the time a subject is selected, through the strategic planning and
throughout the pilot study and performance audit, the group supervisory officer,
EPA(HQ) section and the audit team must keep in mind that the performance
43
audit culminates in creating the following impact in the entity and adds value to
the programme management.
4.4
Economy
Reduction in costs through better contracting, bulk buying etc;
Reduction in costs through economies on usage of personnel or other

resources:
Introduction of charges where none were previously imposed or revision

of charges;
4.5
4.6
Nationalisation of facilities.
Efficiency
greater outputs from same inputs.
Remedying duplication of effort or lack of co-ordination.
Effectiveness
better identification/justification of need
clarifying objectives and policies
introducing better sub-objectives and targets
better achievement of objectives by changing the nature of outputs or

improved targeting
4.7
Improved quality of service
shorter waiting list
reduced response time
better access to information
wider range of services and greater choice
helping the public, clients, industry etc.
improved equity in access to programmes.
4.8
Improved planning, control and management
introduction/improvements to corporate planning
clear definitions of priorities and better defined targets
better control and management of human resources, assets, projects and

resources
tighter controls against fraud.
44
improved financial accounting system
better financial management information
better computer security
4.9
Improved accountability
improved visibility of procedures and outputs
improved accountability for expenditure to the legislature and to the

public sector
improved forms of accounts, including commercial formats.
Improved external control and monitoring by departments.
better and/or more accurate performance indicators
better comparison between similar agencies
greater information on sectoral performance; and
clear and more informative presentation of information.

(Appendix A-The Guidelines)
4.10
Internal control
One of the objectives of performance audit is study and evaluation of the
internal control that assist the conduct of the business of the entity in an economic,
efficient and effective manner, ensuring adherence to the management policies
and producing reliable and timely financial management and performance
information.
The study and evaluation of internal control depends on the
objectives of audit and the degree of reliance intended.

The performance audit teams will document the internal control system
significant to audit objectives and carry out tests to arrive at the findings on their
adequacy and actual performance. The documentation and tests will form part of
the working papers and the audit findings and conclusions will be included in the
report.
The instructions contained in Internal Control Evaluation Manual issued
by Comptroller and Auditor General in May 2009 may also be referred to while
evaluating internal control systems of auditee during performance audits.
(Paragraphs 4.37 and 4.38 The Guidelines)
45
4.11
Performance audit of IT systems

While performance audit of IT systems in SAI India is managed and
controlled by the specialized IT audit group, the performance auditors may come
across large number of cases wherein they will have to conduct audit where data
and information systems are entirely or largely maintained in an IT environment.
The performance auditors will, therefore, be called upon to develop detailed
guidelines for audit in IT environment and seek collaboration with the IT Audit
wing, where specialized skill and knowledge are required. Appendix B of The
Performance
Audit
Guidelines contains some of the
more
important
considerations to be kept in view while auditing in IT environment.

(Paragraph 1.47 The Guidelines)
4.12
Portfolios
Each IAU Section should send a control Register indicating the details of
portfolios opened by it to EPA section half yearly for review.

4.13
Review of Audit Reports of other states.

In order to watch the prompt receipt of Audit Reports of other states, a
register should be maintained by EPA(HQ) section. This register should be put up

to the Branch Officer once in two months with an analysis of number of reports
due to be received, number received, reviewed, balance due, etc. after counter
checking with the register in the Report (Civil) section that copies of all reports
which have been received by the Report Section are also available with EPA
(HQ). As and when an audit report is received in EPA(HQ), it should be reviewed
and the review report submitted to the Branch Officer (vide DAGs orders dated
6.3.1975). Another register should be maintained allotting separate pages, for
various departments and for various schemes under each department. On each
page, in respect of
audit observations relating to that scheme, reference to the
Audit Report of the state concerned, year, paragraph number, brief particulars, etc.
should be noted. This register should be referred to by the EPA parties when they
commence performance audit of any scheme.
Maintenance of Library books
4.14
All publications received in EPA(HQs) section, from the Headquarters
office, governments and departments should be assigned a number and necessary
46
entries should be made in the Register of books. The issue of the publications
should be noted in the sections issue register and necessary acknowledgements
obtained. The return of the documents should also be watched.
verification should be conducted at least once a
year
and
the
Physical
results
of
verification recorded in the register. Reference to action taken/ final disposal

should be noted.
47
ANNEXURE I
(Referred to in Para 1.7)
F.No. 6(5)-B(R)/99
Ministry of Finance
Department of Economic Affairs
Budget Division
New Delhi the 13th June, 2006.
Office Memorandum
Subject:- Performance Audit by Comptroller and Auditor General of

India.
Clarification has been sought whether Performance Audit falls within the
scope of audit by C&AG under Comptroller and Auditor Generals(Duties,
Powers and Conditions of Service) Act.1971.
2.
The Government has considered the matter. Under Section 23 of the DPC
Act, 1971, the Comptroller and Auditor General of India has the powers to make
regulations for carrying into effect the provisions of the Act in so far as they relate
to scope and extent of audit. In pursuance of these provisions C&AG has been
conducting performance audits in addition to financial audits and compliance
audits based on guidelines/principles/regulations framed for the purpose.
All
audit reports of the C&AG are placed before Parliament and State legislatures, as
the case may be, as constitutionally mandated.
3.
It is, therefore, clarified that performance audit, which is concerned with
the audit of economy, efficiency and effectiveness in the receipt and application of
public funds is deemed to be within the scope of audit by Comptroller and Auditor
General of India for which Performance Auditing Guidelines drawn up by the
Comptroller and Auditor General of India already exist.
4.
All the Ministers/departments are accordingly expected to facilitate the
conduct of audits including performance audits by providing access to all the

documents required by C&AG in connection with such audits. In this regard
attention of all the ministries is invited to O.M.F.No.1(43)-B/78 dated 23rd
48
September, 1978 issued from the Ministry of Finance, clarifying the procedure in
respect of submission of official documents for audit without any apprehension
and with due care with respect to custody and handling of classified files in
accordance with standing instructions.
5.
The respective subordinate officers and other entities that come under the
purview of the C&AG audit may be also advised accordingly.
(P.R.Devi Prasad)
Officer on Special Duty (FRBM)
49
ANNEXURE II
(Referred to in Para 1 .7)
GOVERNMENT OF KERALA
Finance (PAC) Department

CIRCULAR
Dated, Thiruvananthapuram,13th November, 2006
No.52/2006/Fin
Sub:- Performance Audit by Comptroller and Auditor General of India Regarding.

Ref:-1. Letter No.EPA(HQ)4-915/43 dated 7-8-2006 from the Principal
Accountant General, Kerala, Thiruvananthapuram.
2. OM F.No.6(5)-B(R)99 dated 13.6.2006 issued by the Ministry of
Finance, department of Economic Affairs, Budget Division.
In the OM F.No.6(5)-B(R)/99 dated 13.6.2006 Government of India

clarified that Performance Audit is deemed to be within the scope of Audit by
Comptroller
and
Auditor
General
of
India
and
all
Government
departments/Autonomous Bodies/Public Sector Undertakings are required to

facilitate the conduct of Audit including Performance Audit by providing all
documents required by audit. The Principal Accountant General has requested to
issue urgent instructions to all Government Departments, Autonomous Bodies,
Public Sector Undertakings in this matter.
In the circumstances Government are pleased to issue the following
instructions:
(i)
All the Departments/Autonomous Bodies/Public Sector Undertakings

are directed to facilitate the conduct of Audit including Performance
Audit by providing access to all the documents required by
Comptroller and Auditor General of India in connection with the audit.
(ii)
As and when intimation of selection of a topic for Performance Audit

by Prl Accountant General is received, the Secretary concerned shall
50
issue suitable instructions to all the concerned Officers/ Departments/

Institutions/ Bodies to provide necessary facility for the smooth
conduct of the Audit.
(ii)
A senior officer of the Departments/Autonomous Bodies/Public Sector

Undertakings shall be nominated as nodal officer for discussion and
supply of all the documents/information required by Audit for timely
completion of Audit.
(iv)
The replies to the audit enquires shall be furnished at the time of audit
itself so that the instances of dispute of facts and figures after
finalisation of the Reports do not arise.
(v)
Entry and exit conferences should be done in an effective way to

finalise the Audit.
K. Jose Cyriac
Principal Secretary (Finance)
ANNEXURE III
(Referred to in Para 2.35)
51
Checklist of Audit objectives, Issue Analysis and Criteria

A Audit objectives
Feature
Understanding
the subject
Key questions
1.
Have all documents relating to

the programme/ activity/entity
listed in paragraphs3.7 and 3.9
of the Performance Auditing
Guidelines, and beyond as
applicable, been collected,
studied and analysed?
Explanatory notes
Apart from collection of
documents and data,
their processing for the
desired objective is
equally important. The
processing is aimed at
comprehensive
understanding of the
subject.
Have attempts been made to

solicit
and
obtain
presentation/discussion with
the entity at the senior/top
level and obtain their concerns
relating to the programme/
subject of performance audit
and goal matching in line with
paragraph 3.10?
Has the performance audit

plan, in particular the audit
objectives, criteria for testing
on issues, sources and
methods
of
evidence
gathering, audit methodology,
scope and time-frame during
which audit will be conducted
communicated
to
top
management of the entity with
a request for issue of
appropriate direction to their
field offices?
Have
other
stake-holder Involvement of other
(Ministry
department
of
departments/agencies
Finance,
Planning
and taking note of their
Commission/ Board, other
concerns
on
connected
ministries/
performance strengthens
departments,
etc.
been
the procedure and the
associated in planning/ during
performance audit is
presentations etc.?
likely to attract greater
and wider support and
acceptance.
Has pilot study/preliminary
5.
52
6
Programme
flow chart and
risk assessment
field survey been carried out?

Has flow-chart(s) of the
inputs,
process,
outputs,
management information etc.
been
made
and
risk
assessment and risk grading
carried out?
Has the basis of the risk

assessment and risk grading
been documented in the form
of explanatory notes or in any
other form?
Thrust areas
Have audit thrust areas/audit

concerns relating to the
subject of performance audit
determined and prioritized
with reference to their
significance
(risk
and
materiality(impact of under
performance)?
Is the number of audit thrust
areas selected for performance
evaluation kept limited to a
focused audit?
53
Flow chart and risk

assessment on the basis
of various factors; viz.
past regularity and
performance
audits,
VLC data, indicators
provided by Central
audit,
media
and
legislature
interest,
other published studies
and most important
thorough understanding
of the subject and pilot
study, where required,
enable determination of
thrust areas objectively
and comprehensively.
Transparent
documentation of the
basis that goes into
determination of risk
assessment and risk
grading, as also in
relation to all other
similar
procedures/
steps in performance
audit
provide
an
assurance of the quality
and exhaustiveness of
the processes.
Prioritization of thrust
areas helps focus on
significant aspects of
the programme/entity
under
performance
audit.
Limiting the number of

thrust
areas
to
relatively
more
critical/significant
issues and resultantly
limited number of audit
objectives
precludes
wasting of resource on
insignificant issues.
Audit
objectives
10
Do the audit objectives, at the

outset, announce the reasons
for conducting the
performance audit (what is
intended to be
verified/assessed)?
11
Are the audit objectives stated

in complete statement form
and in affirmative manner
rather than being stated in
cryptic from like input
management
or
road
constructed
economically
etc.?
The statement of audit

objectives is framed
with the belief that the
performance should be
good and/or as per the
expectation.
The
approach should be one
of verification of good
performance. Cases of
under performance are
built up as exceptions
to
the
affirmative
hypotheses.
12
Are the audit objectives set in

assessment/verification mode
for which the answer cannot,
in most cases, be given in
straight yes or no?. This
would imply that audit
objectives will generally not
be set beginning with Was,
did, etc. but with To assess
if or To verify whether etc.
It is rare that an
assessment can be
made with straight
yes or no answer.
13

distinctly/separately for each
of the major audit thrust areas
and not stated in mixed-up
manner?
Each of the audit

objectives addressing
distinct
performance
concerns
facilitates
focused audit besides
clear communication of
results.
14
Are audit objectives stated in

specific
manner defining
economy,
efficiency
or
effectiveness in terms of the
contextual specific parameters
rather than being stated
ambiguously or in general
terms as whether the
programme
as
executed
economically, efficiently and
54
effectively?
15
Are the audit objectives

consistent with the audit thrust
area determined on the basis
of and risk and materiality
analysis?
16
Have the need for and

prioritisation of evaluation of
internal control that ensures
economic,
efficient
and
effective
programme
management been taken into
account while framing audit
objectives?
(ref-paragraphs
4.37 and 4.38)
Presented
in 17
order
of significance

in order of their significance
and a modular/hierarchical
fashion, wherein the lower
levels support the higher level
audit objectives, as far as
possible and applicable?
Statement
of
audit
objectives in order of their
significance will facilitate
communication
of
conclusion in the same
order.
Relate to one 18
or more of
economy,
efficiency and
effectiveness
Do the audit objectives

apparently convey that they
relate to one or more of the
economy,
efficiency
and
effectiveness
issues
of
performance?
Stating
obviously
the
concerns of economy,
efficiency
and
effectiveness(and
within
each of them of equity
and ethics) provides
assurance of adherence to
the
Principles
of
performance audit.
19
Have the self-test/reasons for

the affirmation that the audit
objectives address one or more
of the economy, efficiency
and effectiveness issues been
documented?
Documented self-test along

with
the
basis
of
distinguishing each of the
audit objectives under one
or more of the Es is an
effective
quality
management procedure.
20
Do audit objectives embrace

the issue of concordance of
policy/intent and programme,
where applicable, in the light
of the provision in paragraphs
1.22, 1.25 and 1.26 of
Performance
Auditing
Self test
55
Guidelines?
21
Are sustainable development

issues in the context of
paragraph 2.24 and any other
significant issues like gender,
human rights, special focus
groups etc. that are relevant,
high risk and material in
relation to the subject of
performance audit been taken
into account while framing
audit objectives? if yes, have
these concerns been built into
the audit objectives?
22
Do the audit objectives lay

emphasis on outcomes and/or
beneficiary/intended
or
affected target group?
23
Do the set audit objectives

provide confidence of
fulfilling the purpose stated in
paragraph 3.15 of the
Performance Auditing
Guidelines?
Value addition 24
orientation
25
Are the audit objectives

oriented towards expected
value
addition
to
the
programme/activity in general
and as many potential impacts
of performance audits as
applicable from out of the list
contained in Appendix A of
Performance
Auditing
Guidelines, in particular?
Are the audit objective
oriented towards securing the
aims consistent with the intent
56
It is important to relate
the audit objectives to
the
subject(target/beneficia
ry/affected public) to
turn
around
the
performance
audits
from management to
performance and from
government
to
governance
with
emphasis on results.
Affirmation
and
verifications of the
expected outcome of
the performance audits
ensures that these are
carried out with view to
adding value to public
sector programme.
of improving the public sector

administration
and
accountability as laid down in
paragraph 1.30 and 1.31 of the
Performance
Auditing
Guidelines?
Evaluation
techniques
26
Scope
27
B.
Have the possibility of use of

evaluation techniques been
examined in the context of
paragraph 1.33 and 1.34 of
Performance
Auditing
Guidelines transparently and
audit
objectives
framed
keeping them also in view?
Use
of
evaluative
techniques
in
performance
audit
renders
the
performance
audit
more incisive and is
consistent with the
contemporary
best
practices.
While scope is not an issue

within the fold of audit
objectives, it is important to
define the boundary of the
subject precisely in terms of
time frame of the programme,
which is the subject of audit,
and the thrust areas.
Issue analysis
Issue analysis is a structured approach that enables the performance
auditors make an assessment of the performance with the help of answers to as

many questions as possible relating to each audit objective. The objectives behind
issue analysis are to (i) convert the audit objectives, which address broad/major
issues for assessment of performance into smaller units of issues and subissues(questions)that must be answered with certain degree of confidence,(ii)
frame questions on audit objectives, the answers to which are easy to find and(iii)
break down the issues(questions)up to the leave, where as far as possible, a unique
criteria can be applied for audit testing. It is with these purposes in view that an
audit objective is divided into more than one issue and each issue may have to be
divided into several sub-issues. The answers to the issues and sub issues, which
are essentially developed from hypothesis about that issue with help of criteria
will generate evidence for providing or refuting the hypothesis.
Issue analysis is a field audit procedure and unlike the audit objectives,
need not necessarily shared with the entity. However, quite often it may be
unavoidable to share them with the entity in the context of securing their
57
agreement to the criteria used for audit test programme on various questions,
without having to share the entire study design with them.
It is important to note that the conclusions on performance cannot be
straightaway developed on the basis of numerical count of the answers to the
detailed issues for each objective. The findings(answers) of the lowest and their
higher level sub-issues ought to be weighed and evaluated critically with
reference to their relative values in providing appropriate answers to the next
higher level questions and finally assessment of the performance against the audit
objective to which the issues, sub issues and sub-sub issues relate.
Key questions
Explanatory notes
Feature
Issue
analysis
28
Are the issues developed/ designed

consistent
with
and
strictly
follow/support the audit objectives,
which is expanded in the form of lower
levels of questions, breaking of lower
levels of questions, breaking it into
finer and verifiable questions that are
amenable to testing?
29
Have the issues been developed in the

form of questions that makes it
possible to make an assessment against
the audit objectives and sub-objectives,
if sub-objectives have also been
developed with the audit objectives?
30
Are issues developed strictly in

compartments (distinctly) for each of
the audit objectives and that there is at
least one issue for each audit objective?
31
Is each issue broken into more than one

sub-issues and if necessary, to further
finer/lower
levels
of
relevant
questions(sub-sub-issue)to provide for
test on all significant parameters that
inspire confidence for an assessment on
the audit objective?
32
Is there consistency in framing issues

and sub-issues? Are the issues relevant
for the audit objective, sub-issues
relevant to the issue and sub-sub issues
58
It is important to keep
the issues within the
boundary of each
audit objectives to
enable an assessment
on the basis of the
answers to the issues
relevant to the sub-issue?

33
Are the maximum number of sub

issues kept limited to what can easily
be retained in memory, if necessary by
breaking down a sub-issue to further
lower level?
While it is not
intended
to
straightway apply the
rule of seven being
followed by NAO,
the ground rule that
may be followed is
the capacity of the
memory to retain the
connected issues at a
time/together.
34
Is the issue analysis designed in

complete question for, the answer to
which can be given as YES,NO,
YES but and NO but? This would
mean that all questions in the issue
analysis should generally begin with
Is/ Are, Has/ Have, Was/
Were, Do/ Does etc.
It is important to find
definite answers to
the
lowest
level
questions to level
questions to enable
convincing and clear
assessment
of
performance
35
Do the issues and sub issues relating to It is important to

each audit objective address only the
confine the issues for
significant question of performance so
testing only on those
that undue weightage is not given to
parameters
that
insignificant issues?
influence
the
performance in a
significant manner
36
Has it been ensured that the questions

at various levels are not overlapping?
37
Have the issues been identified as Clarity about the

distinctly addressing the performance
nature of the issue
measurement of the inputs, process,
that
a
particular
performance information, outputs and
enquiry
addresses
outcomes, consistent with the audit
will sharpen the audit
objectives which may combine one or
procedure.
more of them?
C. Study design
Study design is the methodology to find answers to the lowest levels of
questions developed as a result of issue analysis. The answers are found with help
of audit test programme consisting of the test of the hypothesis behind the
question with help of a comparison between the expectation/criteria (what should
59
be) with the observation (what is). For comparison against the norm one or more
criterion has to be adopted or determined for each test. The test is carried out
against the criteria with help of the observed data
1,
which implies that proper set
of data have been gathered to generate evidence in support or against the

hypothesis behind each question and finally in support of audit conclusions.
Feature
Key questions
Explanatory notes
Study
design
38
Have all lowest level

questions under each of
the issues from the issue
analysis been listed for
audit test?
Criteria
39
Have the criteria for each

question been determined
to
benchmark
the
observed data against
them?
Data/
Evidence
40
Have the data that will be

tested against the criteria
for building the evidence
for each question been
identified?
41
Have the sources from

where data will be
collected been clearly
identified and detailed in
the
supporting
explanatory note?
Have the methods of data
collection
been
identified?
Have the units and subunits from where data
will be collected been
identified on the basis of
appropriate
sampling
techniques and included
in the supplementary/
explanatory note?
42
43
44
Study design is framed to facilitate

audit tests back-to back against each
of the lowest level issues/subissues/sub sub issues with reference
to the criteria and observed data to
generate evidence
Prior determination of data enjoins

the following
- Identification of the type of data;
- Precise determination of the
sources(even
locations,
if
possible) from where the data
will be collected;
- Method(s) of data collections of
various types of data; and
- Number/quality of data to be
collected
Have the extent(number

in terms of samples sizes)
of the data(e.g vouchers,
data includes information
60
Feature
Key questions
Explanatory notes
beneficiaries, attendance
data, etc.) been identified
and details indicated in
the explanatory notes?
D:
45
While determining the

sample methodology and
sample size, has it been
kept in view that the
evidence generated will
have to fulfill the
standards of relevance,
competence and above
all sufficiency?
46
Have the data analysis

methods
been
predetermined against each
question and or each
data?
46
Have the expected nature

of outcome of the audit
tests been anticipated in
the form of what can be
said on the basis each
test?
The data will eventually turn into

evidence, which will have to meet
the standards of relevant, sufficient
and competent evidence to support
audit conclusions
Pre-determination of data analysis
methods ensures that data gathering
is tuned to the analysis.
Criteria
Criteria provide the basis of comparison between the expectation and
that, which actually exists. Without determining the expectation in advance there
can be no objective and unbiased assessment of performance. It may be noted that
criteria have relevance in the context of audit questions and audit tests against
them. Therefore, they are not always available readily, except where audit
questions are such that the entity set parameters, including national and
programme indicators can be straightaway applied for particular tests. In some
Prior determination of data, its gathering methods and analysis techniques should not be viewed
as being rigid. It does not preclude a review and revision as per the professional judgement of the
Prl Accountant General if it is warranted by circumstances as the performance audit proceeds. Yet
the measure of the robustness of audit implementation guidelines is in the minimal necessity of
revisions in them.
61
cases, good quality performance measurement/assessment against higher level

programme indicators may be possible only through measurements against lower
level indicators/criteria. Targets may form criteria in some cases, but not all
cases. Targets serve as criteria mostly in output related questions.
Criteria for various audit tests against issues and sub issues are to be
determined by auditors, all or some of which could be imported from those set by
entity/laws/rules. Where such applicable and relevant criteria are not readily
available to adopt for audit testing, performance auditors have no option but to
develop acceptable criteria for audit testing. It is almost never feasible to locate all
criteria required for audit tests in the entity set parameters or from other sources.
This is expected, since many audit concerns and more importantly issues for test
are unique to the methodology of performance audit.
Feature
Capacity
Assessment
Source
criteria
Key questions
48
Have the skill, knowledge and

capacity for framing the
criteria, keeping in view the
complexity of the subjects of
performance audits, been
assessed transparently. Have
appropriate action to fill the
knowledge/capacity
gap
within the Office/department
been taken?
Explanatory notes
Criteria being the most
crucial for convincing
and objective audit
test;
must
be
determined
as
perfectly as possible.
The limitation of skill
and
capacity
to
determine the most
appropriate
criteria
within the Department
must be overcome, if
necessary
through
subject specific expert
consultancy.
of 49. Have the possible source for

criteria as per paragraphs 3.323.36 of Performance Auditing
Guidelines been researched,
deliberated and documented?
50
Do the criteria set against each

of the lowest levels of
questions/issues represent a
unique
quantitative
or
qualitative standard, which are
measurable/assessable?
51
Do the criteria enable an

answer to the question in the
62
The requirement of an
answer in the form of
form of yes, no, etc as

stated earlier in this paper?
yes, no, yes but

etc. would warrant that
the criteria must be
able to fulfill this
objective
Have the criteria been tested

on the parameters contained in
paragraph
3.26
of
the
Performance
Auditing
Guidelines to conform to these
standards?
Have the criteria been
transparently tested to serve all
the
roles
contained
in
paragraph
3.27
of
the
Performance
Auditing
Guidelines?
Transparent
testing
and documentation is
an effective frame
work of quality control
and quality assurance.
54
Do the criteria prima facie

suggest that they refer to
inputs, process, outputs or
outcomes?
Identification of the
criteria with reference
to the issues that
address input, process,
outputs and outcomes
assist determination of
the most appropriate
criteria
55
Do the criteria for inputs,

outputs and outcomes, provide
for baselines, which are the
pre-programme
status
to
provide
for
incremental
efforts, outputs and outcomes,
as far as possible to arrive at
the finding attributable to the
programme/activity?
The
output
and
outcome attributed to
the programme can be
established only if
their status before the
programme or at the
beginning of the
period covered in
performance audit is
known.
56
Has it been possible to predetermine the standards of

good performance against each
of the questions/criteria on the
basis of the results of pilot
study/preliminary
survey,
Unless the level of

performance that can
be termed as good
can be determine prior
to
the
complete
testing,
the
52
53
Even during the period of the programme under audit, there could be other factors that may
contribute to the output and outcome. While it is recognized that it is difficult to segregate them
between what is attributable to the program in question and hose attributable to other factrs, an
attempt in this direction will add further quality to the performance audits.
63
57
entity set criteria, benchmarks

available within or outside the
entity etc.
conclusions may not

be objective, if the
level of performance
found
good
is
determined
later.
Sometimes
criteria
itself may be a
measure
of
good
performance.
However, quite often it
may not be so. For
example, enrolment in
primary schools or
retention etc. may be
the criteria but they do
not by themselves
suggest a level of good
performance.
The
degree of divergence
between the level
termed
good
performance and the
observed data will
enable a convincing
answer
on
performance
Have the criteria used for

various audit tests been shared
with the entity for obtaining
their acceptance of the criteria
to be used?
It is not intended to
obtain concurrence of
the entity to the audit
questions/tests, which
is the prerogative of
the audit, but only for
acceptance of criteria
for tests. Care will
have to be taken that
the transparency may
not lead to the
undesirable outcome
of either complete or
selective withholding
of information/data or
possible manipulation
of data by the entity.
Thus only what is
required to be tested
may be shared with the
entire issue analysis
and study design in
their original form.
64
58
59
60
Have they been asked to

suggest in time bound manner
alternative
criteria
with
explanatory note, in cases of
their disagreement with the
criteria?
In the above case, have their
suggestions been examined
and the criteria adopted on
merit?
In
case
of
specific
disagreement, have the reasons
for retaining a criteria for audit
test (i) despite an alternative
suggested by the entity, or (ii)
in the absence of an alternative
suggested by them been
communicated to the entity?
65
Annexure IV
(Referred to in para 3.5)
CHECK LIST FOR PERFORMANCE AUDITS REPORTS
Issues
A: General
Quality Features:
B: Audit
objectives
C: Evidence
D: Audit
conclusions/
Conclusions
/Highlights
Quality parameters
i Confirm that the structure of the report is consistent with
that prescribed in paragraph 6.29 of the Performance
Auditing Guidelines;
ii Confirm that the procedures prescribed in the
Performance Auditing Guidelines, in particular with
reference to the following have been adhered to and list out
the exceptions, if any
- Pilot /preliminary study;
- issue analysis and study design (including evidences and
audit criteria); and
- cooperation of the auditee.
iii
Confirm that testing of objectives (para 3.16 of PA
Guidelines), evidences (para 5.22 of PA guidelines) and
recommendations (para 4.43 of PA Guidelines) were
carried out; and
iv
list the expected value addition to the
programme/organization through the performance audit;
i State the total number of audit objectives set for the
performance audit;
ii Confirm that audit objectives are set out in order of their
significance and materiality;
iii Relate each audit objective to the issues of economy,
efficiency and effectiveness1; and
iv Relate each audit objective (only numbers) to the total
number of issues (and each issue to sub issues).2
i. State the method (s) of sampling used for evidence
gathering;
ii Confirm that the size of the sample used for forming the
basis of the conclusions is uniform throughout the report
(for each type/stage of data);and
iii Confirm that the reporting is balanced and the test results
on the entire sample, including positive achievements have
been analyzed for conclusions rather than reporting only the
cases of adverse finding of individual transactions.
i. Identify the paragraphs containing conclusions on
performance with conclusions/ each audit objective3.
ii Do the highlights consist of self- contained audit
conclusions on performance stated as complete sentences
and are arranged in order of their importance?
Example: Audit objective I-Efficiency and Effectiveness; Audit objective 2-Efficiency

Viz: Audit objective 1=(say)6 issues and a total of (say) 21 sub issues:3
Examples: Audit objective 1-Conclusions in paragraphs (say) 3.3.5.
2
66
iii
Do the self-contained highlights and the paragraphs
dealing with each audit objective contain:
The conclusions;
Impact and /or future risk of underperformance;
The causes of under performance; and
Factors leading to satisfactory or good performance
E:
i. State the number of recommendations and correlate them
Recommendations
to the audit conclusions4; and
ii. Relate each recommendation to the causes of
underperformance
and
factors
for
satisfactory
5
performance .
F:
Language
i Confirm adherence to style guide; and
and
ii Attest that all technical/special/uncommon terms or
presentation
processes
have
been
explained
by
way of
footnote/glossary/box for the convenience of a common
reader.
G: Entity
i
Confirm that the status of auditee responses
response/
(acceptance,/ disagreement or non response with reference
Acknowledgement to the audit finding & conclusions and recommendations)
are included at appropriate places within the report;
ii State the number of each of them (audit findings,
conclusions and recommendations) not accepted6.
iii Indicate the dates and the level at which meetings were
held with the auditee on (i) presentations by the entity on
the subject (ii) presentation of audit plan (entry conference
at the apex level) and meeting to discuss criteria, if held
separately (iii) meeting to discuss the recommendations, if
held separately from exit conference and (iv) meeting to
discuss the draft performance audit report (exit conference
at the apex level).
Example: conclusion in paragraph number 3.3.5 linked to recommendations in paragraphs

number 3.3.8...
5
Viz Recommendation 1 in paragraph 3.3.8 addressing the causes/factors in paragraph say
3.3.7.
6
Example: Conclusions: 2 out of 7 not accepted. Recommendations: 1 out of 6 not accepted.
67
Annexure V
(Reference to Para 3.5)
No.718 Rep(S)/252-2003
OFFICE OF THE COMPTROLLER AND
AUDITOR GENERAL OF INDIA
Date: 16.6.2005
To
All Principal Accountants General (Audit)
All Accountants General (Audit)
(with ADAI-RS)
Sub: Measuring effectiveness of Audit revision of Desirability
Acceptability Matrix (weighted money value) for the transaction
audit paras and the review and long paras (in respect of Civil Audit
Reports)
Sir / Madam,
Please refer to the Hqrs circular letter No. 985 Rep(S)/252-2003 dated 17
September 2004 inviting your comments on the proposed matrix parameters and
matrix value for both transaction audit paras and the reviews and long paras. The
matrices have now been revised after through examination and consultation with
the concerned Wings of Hqrs.
The agreed matrices separately for the transaction audit paras and the
reviews and long paras(for Civil Audit Reports) are enclosed. These may please
be adopted in the Audit Report (Civil) 2004-05.
Kindly indicate matrix identity, money value and matrix value against
each draft paragraph, draft review and long paragraph, while sending the Draft
Audit Report and the Bond copy of audit Report to the Hqrs. A statement
indicating matrix identity, money value and matrix value in respect of all the
transaction paras, long paras and reviews should also be sent while forwarding the
Bond copy to the Hqrs.
Encl: as above
Yours faithfully,
(Rita Mitra)
Principal Director(RS)
68
Parameters and weights for measuring effectiveness of various categories of

Audit Paragraphs in State Civil Audit Report
Nature of audit
observations
i).
Fraud/misappropriat
ion/
embezzlement/losse
s detected in audit;
overpayment
accepted by
department
(recovered or not)
that is indicative of
fraud
misappropriation
etc.
ii). Excess payment
wasteful/
infructuous
expenditure
iii). Violation of
contractual
obligations, undue
favour to
contractors,
avoidable,
expenditure
iv). Idle
investments/ idle
establishment/blocki
ng of funds, delays
in commissioning
equipment;
diversion/
misutilisation of
funds
v). Regularity issues
and Others
Violation of
procedure/
system/
guidelines
identified
Reasons for
If
Responsi
Irregularities/ bilities located/ modern
lapses/
recovery made technique
mistakes/
of
errors
gathering
analysed
evidences
adopted
@
0.35
0.30
0.10
0.10
Government Maximu
responses m score
included with
rebuttal/
Audit
observations
accepted by
the
Government/
Department
0.15
1.00
Matrix
Identity
0.35
0.20
0.10
0.10
0.15
0.90
0.25
0.20
0.10
0.10
0.15
0.80
0.20
0.15
0.10
0.05
0.10
0.60
0.20
0.10
0.05
0.05
0.10
0.50
@ Include photograph, interview, beneficiary survey, joint physical verification (by Audit and Auditee unit)
duty authenticated by the and unit
Note: Matrix value of an audit Paragraph will be the money of the paragraph multiplied by matrix weight for
the para,
69
Parameters and weights for measuring effectiveness of various categories of

Audit reviews/long paras in State Civil Audit Report
Objectives/ Compregoals/ targets/ hensiveAims
ness of the
attain-ments coverage
analysed
of the
subject
Scheme/
Program
Review and
integrated
Audit
Audit of
implementtation of Acts
and Rules/
Regulatory
functions
0.25
0.25
Violation
of
acts/
Rules
analysed
and
Prosecution
/Conviction
analysed
0.30
Administrat
ive of legal
difficulties
in
implementtation
0.20
Presentation If modern Government

If Money
Maximu Weighted
and
value is
m score
(matrix)
technique
responses
readability/
included with more than
(X)
money
of
conclusions/ gathering
rebuttal/
10% of
value
Recommen- evidences
Audit
audited
dations
adopted@ observations expenditure
accepted by
the
Government/
Department
0.20
0.10
0.10
0.10
1.00
X multiplied by
accrual
money
value
Presentation If modern
If money
Government
and
techniques
value is
responses
readability/
of
included with more than
Highlights/
gathering rebuttal /Audit
5% of
conclusions / evidence
observations
audited
recommen- adopted@
accepted by expenditure
dations
the
government/
Department
0.20
0.10
0.10
0.10
Maximum Weighted
score
(matrix)
money
value
1.00
X multiplied by
actual
money
value
@ Include photograph interview, beneficiary survey, joint physical verification (by Audit and Auditee Unit) duly
authenticated by the Auditee unit
Note: Matrix value of an Audit review/long paragraph will be the money value multiplied by matrix weight for the
review / long para
70
Rakesh Jain
Principal Director (RS)
DO No. 1207 Rep(S)/271-2007

OFFICE OF THE COMPTROLER &
AUDITOR
GENERAL OF INDIA
10 - BAHADUR SHAH ZAFAR MARG
New Delhi 110 002

Date 16 November 2007
Dear Sir/Madam,
193Rep(S)/2402006 dt.
22.2.2007
435Rep(S)/1202006 dt.
7.4.2006
248Rep(S)/2522003 dt.
1.3.2006
ADAI(RS)s
DO letters
following the
finalization of
ARs(Civil)
for 2005-06
addressed
between
March and
April 2007
While finalizing the Bond copy of Audit Report (Civil), it was observed
that adequate caution was not taken for adherence to the instructions issued from
headquarters office for preparation of the bond copy. Some of the headquarters
office circular letters on the matter issued in the past are mentioned in the margin
for your ready reference. This apart, adequate care should be taken while
attributing money value to paragraphs and sub-paragraphs of reviews included in
Audit Report, in view of CAGs observations at the time f approval of Bond copy.
No money value shall be attributed in the following cases:
(i)
Diversion of funds
(ii)
Excess/savings/surrenders
(iii)
Pendency in receipt of utilization certificates
(iv)
Time over-run and cost over rum
(v)
Unspent funds/funds lying in Civil Deposits/Banks
(vi)
Curtailment of Central assistance
(vii) Unrealised revenue/Outstanding loans
(viii) Events noticed by the Department
(ix)
Statistical information used in support of audit comment
(x)
Any other areas where no audit effort is involved
To ensure this, you are requested to get the money value vetted at Group Officer
level before the material is sent to headquarters. Regarding the score mark for
calculation of Matrix value, this office circular No. 718-Report (S)/252-2003
dated 16 June 2005 may be strictly adhered to. While drafting the Audit Report,
the contents of the Style Guide may also be kept in view.
I would also request you to kindly enforce all the instructions contained in
headquarters letter forwarding the approved Bond copy of the Audit Report for
printing in order to prevent any inaccuracies, errors or inconsistencies in the
contents of the Audit Report before adoption for printing.
Yours sincerely,
To
All Principal Accountants General(Audit
(General Category States)
71
No. 248 Rep(S)/252-2003

OFFICE OF THE COMPTROLER &
AUDITOR GENERAL OF INDIA
10 - BAHADUR SHAH ZAFAR MARG
New Delhi 110 002

DATE 01.03.2006
To
All Principal Accountants General (Audit)
(As per mailing list)
Sub: Mention of money value, matrix value of the paragraphs and

reviews proposed for inclusion in the Audit Report (Civil)
Sir/Madam,
I am to invite a reference to this office circular letter No. 718-Rep(S)/2522003 dated 16 June 2005 on the above subject and to state that while sending the
batch material for the ensuing Audit Report, the matrix identity, money value and
weighted money value of the draft paragraphs may be indicated in a marginal box
along side. In case of reviews/long paragraph as a whole may be indicated in a
box in the beginning while money value of the individual sub-paragraphs may be
mentioned along side each sub-paragraph of the review/ long paragraph.
Please acknowledge the receipt of this letter.

Yours faithfully,
Dhiren Mathur
Director (RS)
72

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FOR INTERNAL USE IN INDIAN AUDIT AND ACCOUNTS DEPARTMENT ONLY

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With the revision of Auditing standards in 2002 and the issue of

It also contains orders/instructions issued by the Headquarters

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Procedure for Performance Audit

Nature and drafting of Performance Audit Report

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review, or efficiency-cum-performance audit, or value for money audit, over

Efficiency-cum-Performance Audit Section (EPA) was formed with effect

January 1964, reorganizing the erstwhile Higher Audit Section. The

the context by the ASOSAI performance Auditing Guidelines and INTOSAI

Performance audit is concerned with the audit of economy, efficiency and

effectiveness and embraces:

Performance auditing has the objective of improving public sector

administration and accountability by adding value through an effective

the quality of information and advice available to government for the

the existence and effectiveness of administrative machinery to inform

whether and to what extent, stated programme objectives have been

the economy, efficiency, effectiveness, equity and ethics of the means

The intended and unintended, direct and indirect impacts of

Compliance to applicable laws and regulations in the context of the

The first stage in performance auditing is strategic planning for

performance audits, which requires the development and maintenance of

implementation stage of the performance audit involves:

Development and execution of an audit programme

Collection and documentation of sufficient, relevant and reliable

Development of audit findings, conclusions and recommendations

Development of discussion papers/draft field audit reports and

Every performance audit culminates in the development of a draft

Therefore issues such as the

Department/Autonomous Bodies/ PSUs to facilitate the conduct of performance

the members of the audit team have a clear and consistent

conclusions recommendation and opinions;

the auditor achieves the stated audit objectives; and

the audit report includes the audit conclusions and recommendations as

Performance audit being more open to judgment and interpretations

requires close and careful supervision. Supervision procedures and system of

Supervision to be exercised at various levels is as detailed under:

by the group supervisory officer and the Prl Accountant General,

by the Prl Accountant General during review of periodic reports,

particular phase or unit.

The key supervisory role for the performance audit planning,

The Audit Officer and the Group

Some of the more important responsibilities of the supervisory officers in

relation to performance audit are to ensure:

that the implementation of audit is carried out in accordance with the

adherence to the best practice contained in the performance Audit

documentation-both the performance audit documentation(working

the confidentiality and integrity of information obtained from the

Supervision by the Audit Officer of field audit party.

The day to day supervision and control of the performance audit

Identification of important issues in course of audit.

Ensuring that no significant matters in the context of the audit

Evidence collected fulfils the criteria prescribed in the Auditing

Ensuring that the objectives of audit are fully met.

Collection of various basic data, essential for performance audit,

Selection of topics for performance audit and their allotment

Arrangement of preliminary studies of the schemes selected for