Project Auditing

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PROJECT APPRAISAL MANAGEMENT
Topic: Project Auditing

Submitted to: Madam Mehwish
Submitted by: Hina Mukhtar (58)
Anam Wahid (59)













Project Auditing

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Project:
A project is a sequence of unique, complex, and connected activities having one goal or purpose
and that must be completed by a specific time, within budget, and according to specification.
Auditing
Independent review and examination of records and activities to assess the adequacy of system
controls, to ensure compliance with established policies and operational procedures, and to
recommend necessary changes in controls, policies, or procedures.
Project Auditing
The project auditing is a thorough examination of the management of a project, its methodology
and procedures, its records, its properties, its budgets and expenditures and its degree of
completion. Or
A project audit provides an opportunity to uncover the issues, concerns and challenges
encountered in the execution of a project. It affords the project manager, project sponsor and
project team an interim view of what has gone well and what needs to be improved with the project
to successfully complete it. If done at the close of a project, a project audit can be used to develop success
criteria for future projects by providing a forensic review. This review will provide an opportunity to
learn what elements of the project were successfully managed and which ones presented some challenges.
This will help the organization identify what it needs to do so that mistakes are not repeated on future
projects.
Types of Auditors
There are two types of auditors:
Internal Auditor-
Are employees of a company who assess and evaluate its system of internal control. To maintain
independence, they present their reports directly to the Board of Directors or to Top Management. They
provide functional operation to the concern.

Project Auditing

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External Auditor:
Are independent staffs assigned to assess and evaluate an organizations system of internal control or to
perform other agreed upon evaluation? They are called upon from the outside of the company
TYPES OF Audits
Informal
New project manager
No indication that project is in trouble
Need to take stock of where the project really is as opposed to where it is reported to be
Can apply same criteria as formal audit but likely no need for depth and breadth or a
formal report
Formal
Project is in trouble
Sponsor agrees that an audit is needed
Sensitivities are high
Need to be able to prove conclusions via substantiated evidence
In Process Project Audits:
Allow for corrective changes if conditions have changed and for concentration on project
progress and performance.
Post-Project audits:
Take a broader and longer-term view of the projects role in the organization and emphasize
improving the management of future projects.
Financial Audit:
Financial audit involves evaluating & reviewing the project records and reports in order to
determine that the financial transactions are properly recorded in the project financial accounting
and reporting system.
Project Auditing

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Follow-up-audit:
Design to determine whether previous audit recommendations have been implemented. These
audits may be schedule b/w 90 to 180 days after issuance of the final report depending on the
significance of the findings.
Compliance Audit:
This type of audit involves verification of whether or not a project is in compliance with
established guidelines (policies, procedures, laws, regulations)
Timing of the Audit
Early audits tend to focus on technical issues, and tend to benefit the project
Later audits lean toward cost and schedule, and tend to benefit the parent organization
Transfer of lessons learned to other projects
Purpose of a Project Audit
Determine if project is on-track or not
If off track, determine why and offer specific advice on how to get it back on track OR
whether the project ought to be cancelled
Determine whether what caused the issues are systemic and how to avoid them in the
future.
Possible reasons:
Revalidate the business feasibility of the project
Reassure top management
Confirm readiness to move to next phase of project
Investigate specific problems

Project Auditing

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Some specific Benefits of a Well-done project audit
Identify problems earlier
Clarify performance/cost/schedule relationships
Improve project performance
Identify future opportunities
Evaluate performance of project team
Reduce costs
Inform client of project status/prospects
Reconfirm feasibility of/commitment to project

Focus on Project Auditing Scopes:

General Audit (overview) Detailed (administrative) Audit Technical Audit
What
General overview
prescribed in
contractual
arrangements.
Includes the general
overview, focuses and
elaborates on
administrative issues in
greater depth.
A focused and detailed
investigation into
technical issues that
present learning
opportunities or
problems
When After Milestones
After Milestones, on
demand, according to
need.
Usually early in project
development, or in post-
mortem evaluations
Who
Internal Auditing
Department
Internal auditing
department, external
consultants
Technically qualified
personnel, external
experts.
How
Under schedule and cost
constrains
In context of the project
ecosystem
So that they provide
technical knowledge for
the future.
Project Auditing

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Phases of project Auditing:
1. Initiation
2. Planning
3. Execution
4. Reporting and Release
5. Finishing up the project audit
Phase 1: Initiation
It includes Setting of the Pursued Goals
Formal Determination of Audit Scope: length, formality, the recipient list and the
parameters of the project
Tasks Involved in initiation are:
Determination of the goals of the audit
Expert Team Formation.
Establishing the Purpose and the Scope of the Audit.
Notification of the Project Team
Phase 2: Planning
Three Major Work Elements includes in planning phase:
Determine the cost, time and technical constraints that do or will govern the
auditing effort
Determine the means and methods to be used in the audit
Agreeing on a performance baseline
This Step Includes:
building the questionnaires , the checklists and the data gathering forms
Project Auditing

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planning an interview schedule
Phase 3: Audit Execution
In execution the Investigation Starts With Data Collection. Investigation Follows with Data
Analysis and Investigation,
Focusing On:
Assessment of the Project Organization, Management, Methods and Controls
Statement of both Current and Former Status
Preliminary Statement of Forecasted Project Status
Working Quality Assessment
Delivered Quality Assessment
Lessons Learned Action Plan
Phase 4: Report Preparation and Release
Audit Report should conform to the audit requirements and needs
Report should be released according to the distribution plan
Importance of planning the logistics of report preparation and release
The policies for conducting and distributing the report includes:
- balancing political correctness
- ease of assimilation of the lessons
- Truthfulness
- Brevity.
Phase 5: Finishing up the Project Audit
It includes Three Essential Steps:
Audit Database and Document Filing by audit service management division
Project Auditing

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Post-Audit Consulting: the last chance for the project team to discuss with and learn from
the auditors
Audit Program Evaluation. The effectiveness, quality, sophistication and depth of the
audit are examined.
The problems the audit team encountered during their job are also listed.
Project Audit Report
Project audit report is a formal document presenting all the work done and the conclusions
reached.
Table of Contents for a Typical Audit Report:
The auditor can modify the report content as required. The audit report should include at least the
following:
1. Introduction
Identification of audit, audit client, audit subject, target, information about the auditor, audited
subject and project, audit extent.
2. Information about the audit progress
Realization process, date, verified documents and resources, audit method, description of audit
works.
3. Found shortcomings
List of discovered shortcomings according to individual areas stated in the audit subject.
4. Recommended measures to improve the discovered shortcomings
Recommended measures to be implemented into processes and internal documents of the audited
organization.
5. Annexes of the audit report.
Project Auditing

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Costs of Project Audits
While audits offer benefits, they arent free
Some costs are obvious, others less so
Salaries of auditors and staff
Distraction from project work
Before and during the audit
Anxiety and morale within the project
Cost of outside experts
Project Audits Summary
Use Project Audits to reveal the interactions between elements in the project ecosystem
and their effects on the project.
Also to investigate the project (or a part of it). In doing so, they must be honest and
objective. Only then will they be useful.
Plan audits carefully: Establish a baseline for comparison, but be open to in-depth
investigation if necessary. If the project is long or complex, plan the Audit as continuous
learning processes.
Make audits worthwhile: Introduce the auditing procedure as an integral part of the
product development process. Teach people to appreciate it and learn from it. It works for
them, not against them