What is a Performance Audit?

A performance audit is used to examine how well a process or activity is performed. This examination can address such factors as the amount of time incurred to complete an activity, the cost-effectiveness or speed of a process, the transaction error rate, the effectiveness of internal controls, and how well it supports the objectives of the business. Such an audit can also compare the budgeted cost of a program or process to its actual cost. Performance audits are useful for locating ways to improve the efficiency and effectiveness of an organization's operations. They are most commonly employed within government organizations, in order to maximize the return on limited taxpayer funding.

Who Conducts a Performance Audit?

The people who conduct performance audits need to identify problem areas and suggest best practice improvements. To do so, they typically need to have particular expertise in the targeted audit area. Given the level of specialization needed, these auditors may specialize in quite narrow areas of expertise, conducting them repetitively across many clients and departments within those clients. By doing so, they can obtain the necessary level of expertise needed to provide value to their clients. This also means that an organization committing to a series of performance audits may need to employ a large group of auditors to ensure that each target area is examined with the appropriate level of expertise.