There are several types of audits, one of which is the Performance Audit. Audit is part of monitoring and checking in financial institutions. Audits are conducted periodically to ascertain whether the reported financial statements match the reality on the ground.
The following is a definition of a performance audit along with examples of its implementation in accordance with established standards, as well as how it differs from other types of audits.
Definition of Performance Audit
Performance audit is a type of audit or check on the implementation of tasks, work performance, and functions of a division body that exists in agencies or institutions both government and private, but is generally carried out by government agencies, especially in the bureaucracy and administration division.
Performance audit assesses economy, efficiency, and effectiveness in achieving objectives and compliance with rules and policies. It also compares performance against criteria and informs interested parties of the results.
In general, performance audits consist of several aspects, which are usually known as the 3E aspects. This aspect consists of three things, namely Economic Aspects, Work Efficiency Aspects, and Work Effectiveness Aspects.
These three aspects aim to provide an assessment of an achievement, target, or achievement of the audited division in an agency.
In a special performance audit of government agencies, has been regulated by Government regulation (PP) number 60 of 2008 on government internal control system which grants authority to all Government Internal Control Apparatus, commonly abbreviated APIP, to carry out any type of audit, prioritizing strengthening and areas being improved, or Area of Improvement to later be raised to level 3 or fall into the category of integrated.
It is hoped that through this audit process, the APIP division will be able to plan and carry out audits in the PKPT or Inspectorate Annual Supervision Work Program at government institutions in the Republic of Indonesia.
Purpose of a Performance Audit
In brief, a performance audit aims to:
- Assess the 3E aspects — ensuring a program or activity is carried out economically (cost-efficiently), efficiently (optimal input-output ratio), and effectively (achieving the set targets).
- Assessing compliance program implementation against applicable regulations, policies, and procedures.
- Detect irregularities or inefficiencies as early as possible, especially in programs that are newly running or prone to fraud.
- Provide improvement recommendations that can be followed up by management or the relevant agency to improve performance in the next period.
- Support public accountability — especially at government agencies, by reporting performance assessment results to stakeholders.
Performance Audit Implementation
In conducting an audit, there are several objects that are targeted. In general, these objects are divided into two large groups, namely objects or divisions with large budgets and objects or divisions with small budgets.
In the implementation of performance audits in government agencies, this object is called OPD where the audited OPD is an OPD with a large budget scale and mandatory and essential functions and implementation in the continuity of bureaucracy and government administration.
As well as several divisions offering optional services. Implementation must also be coordinated with local authorities such as city councils, district councils and provincial governments.
The government will provide direction to the Inspectorate and APIP to develop a plan, which will be reported by the Inspectorate to the local government and given permission.
After the approval of the plan by the local government, a performance audit is conducted. In government institutions of the Republic of Indonesia, the audit process will focus on the concept of key performance indicators or KPIs, with the basis for testing is to make comparisons between predetermined targets and achievements achieved in a period and data in the field.
In addition, this technique generally uses other means such as public service surveys, benchmarkingThe process of mapping the activities that occur over a period of time.
Example of a Performance Audit of a Government Agency
Audit implementation is also based on the organization's risk assessment or is detected from the results of previous audits, driven by the interests of stakeholders, the organization, or other parties for certain reasons.
The performance audit will also be carried out if fraud or misappropriation of a program or other activity is detected, especially activities or programs that are still running or will be implemented. The implementation is designed in several specific stages, namely:
A. Introduction
To find out the picture of the auditee towards a program to be audited.
B. Conclusion Generation
The implementation of a detailed and structured audit to obtain an overview and framework of the performance of the audited OPD, generally uses five aspects in the form of planning, budgeting, implementation, administration and bureaucratic systems, and public services.
There are some government agencies that are only audited through the stages of bureaucracy and public services. These are generally at the sub-district and village levels.
Procedure for Performance Audit Implementation
The procedure for conducting performance audits (AK) in government agencies in the Republic of Indonesia generally includes many stages. The following are the stages and procedures related to audits conducted by APIP and Inspectorate.
- Initial conversation with auditor and collection of general information about the audited activity, discovering management elements or areas that require additional examination to refine conclusions.
- Then conduct management control testing regarding the implementation of Good Corporate Governance (GCG) by audit management and its organization. This is done in order to provide sufficient confidence in the success of the operation, compliance with applicable regulations and laws.
After that, substantive testing priorities are selected and arranged, and the TAO (Tentative Audit Objectives) is turned into the Firm Audit Objectives (FAO). The purpose is to obtain more evidence through the substantive testing and objective-development stage. - What APIP does next is measure and evaluate the IKK (Activity Performance Indicator) by comparing the achievement of performance indicators against the objectives that were set, and analyzing to identify the contributing factors.
- An operational assessment of procedures and methods of procedures, organizations, and programs with the aim of evaluating the achievement of an objective or target using the 3E method, which is conducted against some or all objectives.
- The last is the creation KKA or Audit Working Paper.
Difference between Performance Audit and Financial Audit
Here's the difference between financial audit with the performance audit is as follows.
- A performance audit assesses whether or not the audit has achieved the targeted performance objectives and outcomes.
- Performance audits focus on a program and work achievements in an organization, especially government organizations or agencies.
- The academic basis of a performance audit is to cover Economic, Social, Political and Community aspects. In contrast to financial audits that have more structured and neat standards.
- The assessment criteria for performance audits are more subjective depending on the reason for the audit.
- The methods used in performance audits are more varied and the structure and content of reports are more diverse and unstructured, and publication is more secretive and not periodic or regular. ad hoc.
FAQ About Performance Audits
What is a performance audit?
A performance audit is a check on the execution of duties, work performance, and functions of a division in an agency or institution — generally performed by government bodies on bureaucratic and administrative divisions. It assesses economy, efficiency, and effectiveness in achieving goals as well as compliance with regulations and policies.
What is the purpose of a performance audit?
Assessing the 3E aspects (economy, efficiency, effectiveness) of a program, assessing compliance with applicable regulations, detecting irregularities or inefficiencies as early as possible, providing recommendations to improve performance, and supporting public accountability by reporting assessment results to stakeholders.
What is the 3E aspect in performance audits?
The 3E aspects consist of economy, work efficiency, and work effectiveness. All three are used to assess the achievements, targets, or accomplishments of the audited division within an agency.
What is the legal basis for performance audits in government agencies?
Government Regulation (PP) Number 60 of 2008 on the government internal control system, which grants authority to the Government Internal Supervisory Apparatus (APIP) to conduct various types of audits — prioritized on areas being improved or Area of Improvement.
Who conducts performance audits and what is the flow?
They are conducted by APIP and the Inspectorate, coordinated with the local government — city, regency, or province. The Inspectorate prepares the plan, reports it to the local government for approval, and only then is the performance audit carried out.
What is the procedure for conducting a performance audit?
It begins with initial discussions and gathering general information about the audited activity, followed by testing management controls over the implementation of Good Corporate Governance, measuring and evaluating performance indicators against the set objectives, operational assessment using the 3E method, then concluding with the preparation of Audit Working Papers (KKA).
What is the difference between a performance audit and a financial audit?
Performance audits focus on an organization's programs and work achievements — especially government agencies — with an academic basis covering economic, social, political, and societal aspects. The assessment criteria are more subjective, following the reason the audit is conducted, the methods are more varied, and the reports are less structured and published ad hoc. Financial audits, by contrast, have more structured and orderly standards.
Those are some detailed insights into the definition and procedures of a performance audit, along with how it differs from a financial audit.
A performance audit is an arrangement and implementation of an audit that is used to check and evaluate and assess the feasibility of performance and function in an agency that is generally specialized by government agencies.
Performance audits are usually conducted by the government through several official institutions that collaborate with local governments through APIP and Inspectorate.
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