AUI3703 ASSIGNMENT 2 SOLUTIONS 2022
QUESTIONS 1
1.1 Justify to the production manager how a performance audit can be carried out
without duplicating the work that was conducted by the external auditors. (5)
The general aims of performance auditing are set out below.
a. Performance appraisal
, Performance auditing involves an appraisal of the performance of the organisation/activity that
is being investigated. A performance appraisal involves a comparison of the way in which an
organisation performs its activities with
the goals set by management or the persons who requested the audit, for example
organisational policy, standards, objectives and targets
other relevant criteria
b. Identification of opportunities to make improvements
Most improvements fall into the broad categories of improved economy, efficiency and
effectiveness. Opportunities for improvement can be identified by means such as conducting
interviews with people inside and outside the organisation, observing operational activities,
examining reports and transactions, and drawing comparisons with industry standards.
Professional judgment and previous experience play a very important role here.
c. Recommendations on the improvement of existing procedures and future action
The nature and scope of recommendations that arise from performance audit projects vary
considerably from one project to the next. In some cases, the auditor may be able to make
specific recommendations, but in others, further research may be required before appropriate
improvements and a future course of action can be recommended.
Whereas external auditing focuses more on Inspecting financial statements to catch errors,
misstatements and fraud.
1.2 Indicate for each of the observations made in above scenario 1 to 10, (10) whether it relates
to a lack of economy, efficiency, or effectiveness
1. economy
2. economy
3. efficiency
4. effectiveness
5. economy
6. efficiency
QUESTIONS 1
1.1 Justify to the production manager how a performance audit can be carried out
without duplicating the work that was conducted by the external auditors. (5)
The general aims of performance auditing are set out below.
a. Performance appraisal
, Performance auditing involves an appraisal of the performance of the organisation/activity that
is being investigated. A performance appraisal involves a comparison of the way in which an
organisation performs its activities with
the goals set by management or the persons who requested the audit, for example
organisational policy, standards, objectives and targets
other relevant criteria
b. Identification of opportunities to make improvements
Most improvements fall into the broad categories of improved economy, efficiency and
effectiveness. Opportunities for improvement can be identified by means such as conducting
interviews with people inside and outside the organisation, observing operational activities,
examining reports and transactions, and drawing comparisons with industry standards.
Professional judgment and previous experience play a very important role here.
c. Recommendations on the improvement of existing procedures and future action
The nature and scope of recommendations that arise from performance audit projects vary
considerably from one project to the next. In some cases, the auditor may be able to make
specific recommendations, but in others, further research may be required before appropriate
improvements and a future course of action can be recommended.
Whereas external auditing focuses more on Inspecting financial statements to catch errors,
misstatements and fraud.
1.2 Indicate for each of the observations made in above scenario 1 to 10, (10) whether it relates
to a lack of economy, efficiency, or effectiveness
1. economy
2. economy
3. efficiency
4. effectiveness
5. economy
6. efficiency
