Advanced Audit and Assurance (International) · The audit of performance information (pre-determined objectives) in the public sector

Reporting on Performance Information and Value for Money

Updated 11 October 2026 · Fact-checked

Reporting on performance information means forming a conclusion on whether reported results against pre-determined objectives are reliable, useful and prepared against suitable criteria, then reporting it clearly. Value for money (VFM) work asks whether resources were used with economy, efficiency and effectiveness. Conclusions can be unmodified or modified.

Understand Reporting on Performance Information and Value for Money

Public sector bodies set objectives in advance, such as vaccinating a number of children or building a set number of homes. They then report results against those objectives. This is performance information. Users rely on it to judge whether public money achieved what was promised.

The auditor's job is to gain enough evidence to give a conclusion on that information. The conclusion is measured against criteria, such as the entity's own targets and indicators and the rules for how they must be measured and reported. If the criteria are not suitable, the conclusion will not be useful. Typical areas of focus are whether the information is relevant, reliable, complete, consistent and presented in a way users can understand, and whether it agrees with the plans the entity approved.

The level of assurance matters. In a reasonable assurance engagement, the auditor gives a positive conclusion, such as 'in our opinion, the performance information is prepared in all material respects in accordance with the criteria'. In a limited assurance engagement, less work is done and the conclusion is negative in form, such as 'nothing has come to our attention that causes us to believe the information is materially misstated'. Limited assurance gives a lower level of comfort, not zero comfort.

Value for money links to the three Es. Economy is acquiring resources of the right quality at the lowest reasonable cost. Efficiency is getting the most output from the inputs used. Effectiveness is whether outputs achieve the intended outcomes and objectives. Some jurisdictions add equity or ethics, but the three Es are the core. A VFM review is often broader than a conclusion on reported indicators. It may examine how well the body managed its resources.

If the auditor finds problems, the conclusion must be modified. A qualified conclusion is used when misstatement or a limitation is material but not pervasive. An adverse conclusion is used when misstatement is material and pervasive. A disclaimer (or inability to conclude) is used when the auditor cannot get enough evidence and the effect could be material and pervasive. The report should describe the matter and its basis clearly.

Key rules to remember

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.

How to solve Reporting on Performance Information and Value for Money questions

Use this order for any question on reporting conclusions or VFM. It keeps you on the requirement and earns professional skills marks.

1Read the requirement and note the verb: explain, evaluate, recommend or draft. Note who the report is for.
2Identify the engagement type and assurance level: reasonable or limited, and whether it covers indicators, VFM or both.
3Pick out the criteria in the scenario. Ask whether they are suitable, for example relevant, measurable and agreed in advance.
4List each issue in the scenario. For each, state what is wrong, its effect on users, and whether it is material.
5Decide the effect on the conclusion. Is it material, is it pervasive, or is it a lack of evidence? Name the conclusion type and justify it.
6Link issues to economy, efficiency or effectiveness where the scenario is about VFM, and say which E is affected.
7Say what the report should contain or what action to take, such as the basis paragraph, communication with those charged with governance, or further evidence.
8Write in the form requested, with clear short points and a firm recommendation.

Quickest way: Issue, Materiality, Pervasiveness, Conclusion

When to use it: Use it when you have limited time and need a quick conclusion on a scenario with several issues.

Underline each issue in the scenario in one pass.
Label each: criteria problem, evidence limitation, misstatement, or 3E weakness.
Ask: material? If no, no modification. If yes, ask: pervasive?
Write one line per issue: issue → effect → conclusion type.
Close with the overall conclusion and one recommendation.

Common mistakes in Reporting on Performance Information and Value for Money

Treating limited assurance as no assurance, or giving a positive opinion in a limited engagement.
Students mix up the wording of the two levels.
Fix: Reasonable gives a positive conclusion. Limited gives a negative-form conclusion. State the level first.
Mixing up economy, efficiency and effectiveness.
The terms sound alike and many students memorise them loosely.
Fix: Think inputs (economy), inputs to outputs (efficiency), outputs to outcomes (effectiveness). Tie each to a scenario fact.
Choosing a qualified conclusion when the issue is pervasive, or an adverse one when evidence is missing.
Students skip the test of nature of the issue and pervasiveness.
Fix: Ask first whether it is a misstatement or a lack of evidence, then whether it is pervasive.
Ignoring whether the criteria are suitable.
Students jump straight to testing results.
Fix: Comment on relevance, measurability and agreement of the criteria. Unsuitable criteria weaken any conclusion.
Giving generic audit report points with no link to the scenario.
Students recall the ISA 700 layout and write it out.
Fix: Apply each point to named facts, such as a specific indicator or programme, to score application and professional skills marks.
Criticising management's policy choices in a VFM review.
Students confuse VFM with a judgement on policy.
Fix: Comment on how well resources were used to deliver policy, not on whether the policy itself was right.

Worked examples

Example 1

A health agency reports that 92% of target clinics met a waiting-time objective. The auditor's work shows that for one region, which supplies about one tenth of the clinics, records were destroyed in a flood, and no alternative evidence exists. The auditor is giving reasonable assurance. What conclusion should be given and why?

Show the solution

Identify the issue: a limitation on evidence for one region, not a known misstatement.
Assess materiality: one tenth of clinics could affect the 92% figure and users' decisions, so it is potentially material.
Assess pervasiveness: the limitation affects one region only, so it is not pervasive across the information.
Apply the rule: material but not pervasive limitation leads to a qualified conclusion, 'except for'.
Say what the report must include: a basis for conclusion paragraph describing the flood and the missing evidence.

Answer: Give a qualified conclusion ('except for the possible effects of the matter') because the limitation is material but not pervasive. Describe the limitation in the basis paragraph.

Example 2

A government road agency reports the cost per kilometre of resurfacing as ₹40,00,000 against a target of ₹35,00,000. It laid 120 km in the year, but a review shows 30 km had to be redone within a year because poor materials were bought from the lowest bidder. Explain the VFM concerns in terms of the three Es.

Show the solution

Economy: the lowest bidder was chosen, so the cost of inputs was low, but quality was not suitable. Low price did not mean economy since the right quality was not obtained.
Efficiency: 30 km of 120 km had to be redone, so 25% of output was wasted (30 ÷ 120 = 0.25). Cost per usable kilometre is higher than reported. Cost per km was already ₹5,00,000 above target.
Effectiveness: roads that fail within a year do not meet the objective of durable, safe roads, so intended outcomes were not achieved.
Recommend: review the procurement criteria to include quality, test materials before use, and report cost per durable kilometre.

Answer: Economy was poorly applied because price was put ahead of quality. Efficiency was weak because 25% of the output had to be redone and cost was above target. Effectiveness was weak because the roads did not last. Procurement and reporting should be changed.

Exam tips

State the assurance level early. Many answers lose marks by never saying whether the work is reasonable or limited.
In VFM questions, name the E and tie it to a fact in the scenario. A list of definitions alone scores little.
Use ISA 705 logic for modified conclusions: nature of the matter, then pervasiveness. Justify your choice in a sentence.
Write for the reader named in the requirement, such as the audit committee or the legislature, and end with a clear recommendation to earn professional skills marks.
Check that the criteria are suitable before commenting on results. Examiners often plant weak or unmeasurable indicators.

Practice questions from The audit of performance information (pre-determined objectives) in the public sector

Reporting on Performance Information and Value for Money: frequently asked questions

What is the difference between reasonable and limited assurance on performance information?

Reasonable assurance involves more extensive work and gives a positive conclusion. Limited assurance involves fewer procedures and gives a negative-form conclusion. Both are real assurance, but the level of comfort is lower in limited engagements.

What are economy, efficiency and effectiveness?

Economy is obtaining resources of the right quality at the lowest reasonable cost. Efficiency is the relationship between outputs and inputs. Effectiveness is whether outputs achieve the intended outcomes.

When is a performance information conclusion modified?

It is modified when the information is materially misstated, or when the auditor cannot get enough evidence. The type depends on whether the matter is material only or material and pervasive, and whether it is a misstatement or a limitation.

Is a VFM audit the same as an audit of performance information?

Not exactly. Performance information work concludes on reported results against pre-determined objectives. VFM work looks at how well resources were used. They often overlap in practice, and exam questions may combine them.