Audit and Assurance · The scope of the internal audit function, outsourcing and internal audit assignments

Internal Audit Assignments: Value for Money and Other Reviews

Updated 11 October 2026 · Fact-checked

Internal audit assignments are the specific reviews an internal audit function carries out for management. Main types are operational, value for money, financial, IT, compliance and fraud investigations. Value for money looks at economy, efficiency and effectiveness. To answer exam questions, name the type, state the objective, describe the work and recommend improvements.

Understand Internal Audit Assignments: Value for Money and Other Reviews

Internal audit is an activity set up by the entity itself. Its scope is decided by management or those charged with governance. Unlike the external audit, it is not limited to financial statements. It can review almost any part of the business. Each piece of work is called an assignment.

The main types of assignment are:

Operational audit: reviews the operations of a department or process. It asks whether activities are carried out well and whether controls work.
Value for money (VFM) audit: reviews whether resources are used with economy, efficiency and effectiveness.
Financial audit: reviews financial information and the controls over it, to check it is reliable and that assets are safeguarded.
IT audit: reviews IT systems, general and application controls, security, and whether systems meet business needs.
Compliance audit: checks adherence to laws, regulations, policies and procedures.
Fraud investigation: looks into suspected or actual fraud, identifies how it happened, who was involved and what was lost. It also covers fixing the control weakness.

The three Es of VFM are: economy (buying inputs of the right quality at the lowest cost), efficiency (getting the most output from the inputs used) and effectiveness (achieving the objectives set). A cheap purchase that does not do the job is economical but not effective. A department can be efficient but still not meet its goals.

The approach is similar across most assignments. Internal audit plans the work, gathers information, evaluates and tests, documents findings, reports to management and the audit committee, then follows up. Recommendations should be specific, practical and linked to the cause of the problem. VFM work is common in not-for-profit and public sector bodies, but applies to any business.

In the exam, you are usually given a scenario and asked to describe the type of assignment, the work you would do or the recommendations you would make. Tie each point to the facts given.

Key rules to remember

Three Es of value for money: VFM = Economy + Efficiency + Effectiveness; Economy = lowest cost for the right quality of inputs. Efficiency = best output from inputs. Effectiveness = objectives achieved.
Efficiency (general idea): Efficiency = Output ÷ Input; Compare with a target or a past period. A rise means more output per unit of input.
Assignment answer structure: Type → Objective → Work to perform → Findings → Recommendation; Use this order to keep a written answer clear and complete.
Assignment types to remember: Operational, VFM, Financial, IT, Compliance, Fraud investigation; Be ready to match each type to a scenario.

How to solve Internal Audit Assignments: Value for Money and Other Reviews questions

Use this method for any question on internal audit assignments, whether objective test or written.

1Read the requirement. Decide whether it asks for the type of assignment, work to be done, findings or recommendations.
2Identify the assignment type from the scenario. Look for clues: costs and waste suggest VFM, laws and policies suggest compliance, systems suggest IT, a missing sum suggests fraud.
3State the objective of the review in one sentence, linked to the scenario.
4List specific procedures: review documents, interview staff, observe processes, test controls, analyse data, compare with benchmarks.
5If VFM, split points under economy, efficiency and effectiveness so none is missed.
6Give recommendations that are practical and linked to the problem found, with who should act if useful.
7Mention reporting and follow-up to management or the audit committee.
8Check each point uses the facts given and is not generic.

Quickest way: Clue-and-3Es method

When to use it: Use for objective test questions and for planning a written answer in the first minute.

Underline the clue words in the scenario: cost, waste, law, system, loss, controls.
Match the clue to the assignment type.
For VFM, tag each fact as E1 (economy), E2 (efficiency) or E3 (effectiveness).
In objective questions, remove options that describe a different type or that confuse the 3Es.
Write one point per mark available, each with a fact from the scenario.

Common mistakes in Internal Audit Assignments: Value for Money and Other Reviews

Mixing up economy, efficiency and effectiveness.
The three words sound alike and students learn them as one lump.
Fix: Link each to a question: economy asks 'what did inputs cost?', efficiency asks 'how much output per input?', effectiveness asks 'were objectives met?'.
Treating internal audit like external audit and talking about giving an opinion on the financial statements.
Both are called audit and students carry over statutory audit ideas.
Fix: Remember internal audit work is set by management and covers any area. Its reports go to management and the audit committee, not to shareholders as an opinion.
Giving generic recommendations such as 'improve controls'.
Students run short of time and do not link advice to the facts.
Fix: State what to change, why it fixes the problem and who is responsible, using details from the scenario.
Choosing the wrong assignment type, for example calling a policy breach review an operational audit.
Types overlap and clue words are missed.
Fix: Ask what the main aim is. Rules and laws mean compliance. Process performance means operational. Resource use means VFM.
Assuming the cheapest option is always best in a VFM review.
Economy is the easiest E to spot.
Fix: Check that quality and objectives are still met. Cheap but unfit inputs fail effectiveness.
Forgetting follow-up and reporting in the audit approach.
Students stop at the testing stage.
Fix: End each answer with reporting to management or the audit committee and checking later that recommendations were implemented.

Worked examples

Example 1

A charity's internal auditor reviews its fundraising department. The department bought premium printing for leaflets at a high price, though cheaper printing of similar quality was available. Staff hours per donation raised rose over the year. Donations raised fell short of the target. Identify the type of assignment and explain the findings under the 3Es. (6 marks)

Show the solution

Type: this is a value for money assignment, because it looks at how resources are used.
Economy: the premium printing cost more than similar quality alternatives. The inputs were not bought at the lowest cost for the right quality.
Efficiency: staff hours per donation raised rose. More input is being used for each unit of output, so efficiency has worsened.
Effectiveness: donations fell short of the target, so the department did not achieve its objective.
Recommendation: set a purchasing policy requiring quotes from several suppliers, track hours per donation against a target, and review fundraising methods against the target.

Answer: This is a VFM assignment. Economy is weak because printing cost more than similar quality alternatives. Efficiency is weak because staff hours per donation rose. Effectiveness is weak because donations missed the target. Recommend competitive quotes, efficiency targets and a review of fundraising methods.

Example 2

A retailer's internal audit team is asked to review whether its stores follow the company's cash handling policy and whether they comply with data protection law when storing customer details. State the type of assignment and describe four procedures the team could perform. (5 marks)

Show the solution

Type: this is a compliance assignment, because the aim is to check adherence to policies and laws.
Procedure 1: obtain the cash handling policy and the relevant data protection requirements to set the criteria for testing.
Procedure 2: visit a sample of stores and observe cash handling, such as counting, banking and who has access to tills.
Procedure 3: inspect cash records and bank reconciliations for a sample of days and compare to policy.
Procedure 4: review how customer data is stored and who can access it, and interview staff on their training.
Finish by reporting breaches and recommendations to management and the audit committee, then following up.

Answer: This is a compliance assignment. Procedures: obtain the policy and legal requirements; observe cash handling in sampled stores; test cash records and bank reconciliations against policy; review customer data storage and access and interview staff. Report breaches with recommendations and follow up.

Exam tips

Match the assignment type to the scenario before you write. A wrong type often loses all the marks for that part.
For VFM questions, use the three Es as sub-headings so each point scores clearly.
Always link procedures and recommendations to facts in the scenario. Generic answers score low.
In objective tests, watch for options that swap the meaning of economy and efficiency, or that describe external audit duties.
Use the last line of a written answer for reporting to the audit committee and follow-up.

Internal Audit Assignments: Value for Money and Other Reviews in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Internal Audit Assignments: Value for Money and Other Reviews: frequently asked questions

What are the main types of internal audit assignments for ACCA AA?

They are operational, value for money, financial, IT, compliance and fraud investigations. Each has a different objective, so you need to match the type to the scenario. Examiners often give a short case and ask which type applies.

What is the difference between economy, efficiency and effectiveness?

Economy is buying inputs of the right quality at the lowest cost. Efficiency is getting the most output from the inputs used. Effectiveness is achieving the objectives set.

What is the difference between an operational audit and a financial audit?

An operational audit reviews how a process or department works and whether controls are effective. A financial audit reviews financial information and the controls over it, to check it is reliable and assets are safeguarded. Operational work is wider and not limited to the accounts.

How should I write internal audit recommendations in the exam?

Make each recommendation specific and tied to the problem in the scenario. Say what should change and how it fixes the weakness. Where useful, say who should act.