What is a Performance Audit
A performance audit is an examination of a program, usually in government. The term also refers to audits of investment results.
BREAKING DOWN Performance Audit
In government, a performance audit is designed to examine efficiency and effectiveness of a program, with the goal of implementing improvements. In Generally Accepted Government Auditing Standards (GAGAS), the term "program" can include government entities, activities, organizations, programs and functions. The goal is to provide objective data that may be used by managers to reduce costs and make other improvements.
Performance Audit Questions
In an audit that is intended to evaluate the effectiveness, economy and efficiency of a program, the auditor might seek to answer questions such as:
- Has the program achieved the goals specified by legislation, regulation or the organization itself?
- Does the program duplicate other programs or conflict with them?
- Do the benefits of this program justify its costs?
Performance audits, which are also known as "value for money" audits, have become increasingly common in the public sector over the past few decades. The private sector has also begun to implement performance audits as well.
In the investment world, a performance audit may be conducted on an asset manager by an outside accounting firm to verify that the performance figures shown to the public represent actual results. The CFA Institute has established performance presentation guidelines, called global investment performance standards (GIPS), that must be followed by asset managers.