The audit of performance information (pre-determined objectives) in the public sector: formula sheet

Key formulas

Three Es of value for money

Economy = inputs at lowest suitable cost; Efficiency = outputs ÷ inputs; Effectiveness = outcomes achieved against objectives

Useful for describing what performance audits look at. Do not present them as a calculation unless the question gives data.

Qualities of good performance information

Useful (relevant, understandable, consistent with plan) + Reliable (valid, accurate, complete)

Use as a checklist when evaluating reported indicators. Different regimes word these criteria slightly differently, so say what you are applying.

SMART test for objectives and indicators

Specific, Measurable, Achievable, Relevant, Time-bound

A quick way to judge whether an objective or target is well defined.

Chain of results

Inputs → Activities → Outputs → Outcomes → Impact

Helps you separate what the body spends or does from what it actually achieves.

Suitable criteria characteristics

Relevance, completeness, reliability, neutrality, understandability

These are the ISAE 3000 characteristics. Use them to test whether objectives and indicators can be audited. Many public sector frameworks add that indicators should be specific, measurable and time-bound.

Engagement risk

Assurance engagement risk = risk of material misstatement × detection risk

A conceptual relationship, not a calculation. Higher assessed risk means more or better evidence. This model applies to the engagement as a whole.

Materiality basis

Materiality = judgement of what would influence users, in amount and in nature

There is no fixed percentage for performance information. Often the benchmark is a tolerable error rate in reported results, or a qualitative test such as whether a target is met or missed.

Key engagement terms

Scope + criteria + responsibilities + access + reporting + timetable

Agree these in writing before starting. Management is responsible for the information and for suitable criteria and controls.

SMART test for objectives

Specific + Measurable + Achievable + Relevant + Time-bound

Use it on each objective. Some sources use 'Realistic' instead of 'Relevant'. State your meaning in the answer.

Suitable criteria characteristics

Relevant, complete, reliable, neutral, understandable

These are the general characteristics of suitable criteria in the assurance framework. Apply them to the indicators as a group.

Indicator definition check

Indicator = clear definition + formula + data source + unit + period + owner

If any element is missing, the indicator is hard to measure and verify consistently.

Consistency check

Reported indicator = indicator in approved plan = prior-year basis

Differences need disclosure and explanation. Unexplained changes reduce comparability.

Data quality attributes

Validity + Accuracy + Completeness (+ Timeliness, Consistency)

Use these as headings to structure procedures. Validity covers occurrence and relevance, accuracy covers calculation and measurement, completeness covers omissions.

Evidence quality

Sufficient (quantity) + Appropriate (relevance and reliability)

Quantity depends on assessed risk and the quality of evidence. Better quality evidence reduces the quantity needed, but does not remove the need for it.

Recalculation check

Reported result = Numerator ÷ Denominator

Re-derive both parts from source records and confirm the definition used matches the published criteria.

Test of completeness direction

Source population → Reported figure

Select from the underlying records and trace to the report to find omissions. Selecting from the report tests validity instead.

Test of validity direction

Reported figure → Supporting source records

Select from the reported items and trace back to evidence that the event happened.

Economy

Economy = cost of inputs compared with the lowest reasonable cost for the right quality

Inputs and spending. Cheapest is not the aim if quality falls short.

Efficiency

Efficiency = outputs ÷ inputs

Compare with a benchmark, earlier period or target. Higher output for the same input is better.

Effectiveness

Effectiveness = outcomes achieved compared with intended outcomes or objectives

Looks at results and impact, not just activity.

Modification rule

Material but not pervasive → qualified; material and pervasive → adverse (misstatement) or disclaimer (no evidence)

The same logic as ISA 705, applied to the conclusion.

Assurance wording

Reasonable = positive conclusion; Limited = negative-form conclusion

Limited assurance involves fewer procedures and gives less comfort.

Quick revision

• Pre-determined objectives are set in advance and results are reported against them.
• Performance information is mostly non-financial, so evidence often comes from systems and records, not ledgers.
• Good criteria are clear, relevant and capable of consistent measurement.
• Indicators should link directly to the stated objectives.
• Targets need a defined measure, a baseline and a time frame.
• Plan using risk: unreliable data, complex measures and weak controls raise risk.
• Test the data collection system as well as the reported number.
• Use recalculation, inspection and inquiry, and corroborate management's answers.
• Economy, efficiency and effectiveness are the usual value for money lenses.
• Reports must state the criteria used and the basis for the conclusion.
• Unsupported or misleading indicators can lead to a modified conclusion.
• Always apply points to the scenario and show professional skills.

Common mistakes

• Treating performance information as financial information. Fix: Remember that performance information measures service delivery against objectives. Use indicators and targets, not profit, in your answer.
• Saying financial audit and performance audit are the same thing. Fix: State the purpose of each. Financial audit: opinion on fair presentation. Performance information audit: reliability and usefulness of reported results against plan. Performance audit: economy, efficiency and effectiveness.
• Applying financial statement materiality such as a percentage of revenue. Fix: Explain that materiality here depends on user decisions. Consider the size of error in reported results and whether a target is met or missed.
• Writing generic risks such as 'fraud' or 'poor controls' with no link to the scenario. Fix: Use the pattern fact, risk, assertion, response. Tie each risk to a detail given, such as manual data collection at rural offices.
• Listing SMART words without applying them to the scenario. Fix: Take each indicator, quote the fact, and say which characteristic fails and why.
• Confusing suitability of criteria with testing the reported results. Fix: Suitability is judged before evidence work. It asks if the yardstick is good, not if the number is right.
• Listing generic financial audit tests such as inventory counts or bank confirmations. Fix: Name the indicator in each procedure and say what you will inspect, for example call logs for response time.
• Testing only the reported number and ignoring the system that produces it. Fix: Always add procedures on how data is captured, aggregated and controlled, including spreadsheets and IT access.
• Treating limited assurance as no assurance, or giving a positive opinion in a limited engagement. Fix: Reasonable gives a positive conclusion. Limited gives a negative-form conclusion. State the level first.
• Mixing up economy, efficiency and effectiveness. Fix: Think inputs (economy), inputs to outputs (efficiency), outputs to outcomes (effectiveness). Tie each to a scenario fact.

Exam tips

• Always define pre-determined objectives, indicators and targets in a sentence before applying them. It shows you understand the building blocks.
• Distinguish three things clearly when asked: financial audit, audit of performance information, and value for money audit. Examiners reward precision here.
• Use the scenario's own objectives and figures. A generic answer on public accountability earns little.
• Match your recommendation to the user in the requirement, such as a parliamentary committee or the board, and write in the format asked for to earn professional skills marks.
• Do not state jurisdiction-specific legal duties as fact unless the scenario gives them. Refer to the auditor's mandate instead.
• Always link each risk to a fact in the scenario. A generic list earns few marks, while fact, risk and response earns most.
• Say clearly whether the criteria are suitable. Many students skip this, and it is the point that separates performance information from a financial audit.
• Use the words 'by nature' when discussing materiality. Small errors that flip a target from missed to met are the classic example.