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Unit 11: Introduction to Special and Efficiency Audit

Measurable operations have many features in common with difficult-to-measure operations. Notes
For example, both types of operations have to be planned, budgeted, operated, monitored, and
controlled. Usually, all operations have clients who receive a service or product. The main
difference is in the difficulty of measuring and assessing efficiency based on output/input
ratios.
The manager’s obligation to be prudent in the use of resources is pertinent to all operations,
including those where efficiency is difficult to measure. All audit-worthy operations, regardless
of the difficulty of measuring their efficiency, should be examined to determine whether
management has demonstrated due regard to efficiency.

Where the efficiency of an operation is difficult to measure, auditors are expected to verify
whether the controls, operational processes, and work methods are appropriate for minimizing
resource inputs in the delivery of required goods and services or maximizing output with given
resources. The following are a few examples of activities that auditors can consider as evidence
of management’s due regard to efficiency:
 Carrying out periodic reviews to eliminate redundant operations and intermediate or
internal outputs that do not contribute to the organization’s final outputs (e.g.,
administrative and overhead functions, useless reports).
 Using project management information covering milestones reached versus those planned,
actual dates versus target dates, and resources used versus those budgeted.
 Comparing the total and component costs of operations (including overhead) with costs
in other similar organizations.

 Reducing layers of control, speeding up decision making, and creating more shared
services.

 Rationalizing products and services to better serve the needs of internal and external
clients, and discontinuing outputs that are no longer needed.
 Reducing operational costs by contracting out work, when justified.

 Improving the quality and level of service to satisfy user demand without increasing
costs.
 Developing better systems and work methods, including appropriate use of technology.

 Improving staff productivity through such things as better equipment, training and
development, improved working conditions, incentives, and recognition of good
performance.

 Identifying new opportunities to apply best practices based on appropriate comparisons
with other departments, other jurisdictions, or the private sector.

11.2.4 Measuring Efficiency

Efficiency information is necessary for management to determine whether the level of efficiency
achieved meets an acceptable standard. It is also necessary for comparing efficiency levels
before and after corrective action.

Efficiency and associated factors usually can be measured and monitored best using a family of
indicators focusing, for example, on various aspects of quantity, quality, and level of service.
The purpose of using a family of indicators is to understand how related operational factors
influence the efficiency of an operation. The related factors can then be controlled to improve
efficiency.

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