Knowledge and Insights

Performance Auditing – A Step Towards Improving Your Business

Presenting Strategy

Although most everyone is familiar with the term audit, a lesser-recognized type of service provided through examination of records is known as a performance audit. These can be described as audits that provide findings or results based on an evaluation or sufficient evidence against stated criteria. While performance auditing is historically thought of in relation to the governmental sector, where operational audits were conducted to analyze the relationship between resources and accountability for outcomes, performance audits are now practical for government agencies, authorities and municipalities, as well as non-profit and for-profit entities.

The purpose of a performance audit is to provide an independent analysis over a specific process, program, function, operation or system in order to assist management and those charged with governance. A performance audit can provide information that is helpful for management to:

  • Evaluate program performance;
  • Reduce costs;
  • Aid in decision making;
  • Facilitate corrective action; and
  • Improve transparency for accountability to oversight agencies and to the public.

While there are multiple standards for performance audits, the most common standard for government performance audits is Government Auditing Standards(GAS), issued by the Comptroller General of the United States and the U.S. Government Accountability Office (GAO). GAS provides a framework for conducting audits with independence, competence, integrity, and objectivity, while also providing specific standards for fieldwork and reporting.

The central focus of a performance audit is to provide an objective, third-party inspection over an area in which management is looking to improve. Performance audits generally include multiple objectives within the audit, including:

  • Assessment of program effectiveness and efficiency;
  • Ensuring compliance with laws, regulations, contracts or grant agreements;
  • Evaluating how legislative, regulatory or organizational measures have been met; or
  • Analyzing costs of a process, department, business segment, program or operation.

Performance auditing can include financial or nonfinancial information – it is a process that is driven by management’s needs.

Mercadien has extensive experience conducting performance audits under GAS, and can help your organization understand the process and potential benefits of a performance audit. For more information, contact Emily Hoffman at (609) 689-9700 or ehoffman@mercadien.com.