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CA Final · Advanced Auditing, Assurance and Professional Ethics · Overview of Audit of Public Sector Undertakings

In a performance audit of a public sector undertaking, the audit team of CA Rajiv is asked to evaluate whether a power project has been run economically, efficiently and effectively. Which approach best matches the nature of this audit?

Performance audit assesses economy, efficiency and effectiveness: whether resources were obtained at minimum cost, used to give optimum output, and whether the project achieved its objectives. Verifying financial statements, Companies Act compliance or voucher authorisation belongs to financial or compliance audit, not performance audit.

  1. AVerify only that the financial statements agree with the books of account
  2. BAssess whether resources were acquired at minimum cost, used with optimum output and whether objectives were achievedCorrect
  3. CConfirm only compliance with the provisions of the Companies Act
  4. DCheck only that vouchers are properly authorised and recorded

Explanation

Performance (efficiency-cum-propriety) audit looks at the three Es: economy (minimum cost of resources), efficiency (optimum output from inputs) and effectiveness (achievement of objectives). Checking agreement with books or voucher authorisation is financial or compliance audit, which does not answer the question posed.

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