APLLYING PRINCIPLES AND PRACTICES OF PROGRAM

AUDITING

- Since the various government entities provide about 40% of the gross national
product, there appears little question that all types of auditors will eventually
become involved in program analysis of one kind or another.
- Sufficient literature is available on accounting for program analysis for profit-
objective entities.
- In government, P-auditing has a counterpart in the fields of military procurement.
- P-auditing is concerned with the evaluation of, and the reporting on, an entitys
effective use of its resources in accomplishing its intended results.
- P-auditing must focus on the independence of the auditor.
- The program auditor, however, must focus on all three elements of the objective-
the criteria, causes, effects- in order to determine whether the results intended
have been effectively accomplished.
- The auditor must often go through the process, as he often must in M-auditing of
determining the most appropriate goal or objective for the entity in order to have
measurable audit criteria.
BASIC PRINCIPLES OF P-AUDITING
- In a P-audit, the auditor places primary emphasis on program where opportunities
for improvement exist.
- The principles of P-auditing have been condensed into three :
1. The definition of auditing
2. Evidence and audit objectives
3. The phase of a program audit.
- Definition of P-auditing
P-auditing is the planning for the obtaining of and the evaluating sufficient
relevant, material, and competent evidence by an independent auditor on the
objective of whether an entitys managemnt, employees, or delegated agents
have or have not accpeted and caried out appropriate standards for effectively
achieving the results desired by the programss higher level authority.
These definition brings out three general attributes of a P-audit that do not
necessarily apply to other types of program analysis :
1. The auditor must be independent. Each auditor must be independent of the
entity he audits.
2. The auditor must have standards to measure from, based on a statement of
the end results or objectives of the program.
To the extent feasible, statements of objectives should :

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 a. Capture a complete understanding of the intended benefits, including
the expected level of attainment.
b. Identify recipents of unavoidable adverse consequences or unintended
benefits.
c. Include important qualitative aspects, even though measuring degrees
of attainment may be exceedingly difficult.
d. Take account of multiple objectives that may be complementary or
conflicting.

The importance of taking such a comprehensive view of objectives cannot

be overstated. Oversimplified statements :

a. Will not capture all essential aspects of the effects intended

b. May contain implied cnflicting consequences for groups other than the
intended beneficiary.
3. The auditor must report to a third party.
He three related functions pertaining to auditing :
a. The audit function
b. The accountability function
c. The reporting function
- Evidence and Audit Objectives
Audit evidence is the facts and information used to come to a conclusion on
the audit objectives.
The audit objective for P-audit is a statement or question proposing the answer
to an audit inquiry as ti effectiveness of the outputs of the program fulfilling
the programs desired results.
The audit objective is always composed of three essential elements :
1. The criteria. The standards, which if carried out, would result in the
effective accomplishment of the results desired by the higher level
authority that autorhized the program.
2. The causes . The actions of management, employees, or their delegated
agents who are being audited who either did or did not accept to carry out
the proper standards for effectively accomplishing the desired results.
3. The effects. He amount measurement, or results of the actual actions of
management, its employees, or their delegated agents when compared with
the criteria for masuring the effectiveness of the program.
- The Phases of P-Audits
Each P-audit has four identifiable phases :
1. The preliminary survey. The auditor gathers background and general
information on the program, its organizations, its activities, and its
objectives.

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2. The review and testing of management control. The auditor gathers
relevant and material evidence on all three elements of the audit objective
by reviewing the management control of the program to determine whether
the criteria are acceptable.
3. The detailed examination. The auditor gathers sufficient relevant material,
and competent evidence on the audit objective of whether the program
participants, including the entity responsible for the program, have carried
out the program in such a manner that the results expected to be achieved
by the program are achieved; or if not, why not.
4. Report Development. The auditor, based upon this detailed examination,
prepares a report and communicstes his conclosion to a third party along
with sufficient evidence to support the conclusion.