The fourth E of performance auditing

Abstract

The vital requisite for performance auditing within the public sector is becoming progressively apparent. This is deemed an essential requirement towards enhancing the operation and functioning of the organisation and facilitating and ensuring accountability. Traditionally, performance auditing focused on economy, effectiveness and efficiency, termed as the ‘three Es’. Recent contentions have advocated that a fourth ‘E’ should be incorporated to expand the scope of performance auditing and to intensify its impact. The supreme audit institutions (SAIs) of a multitude of countries, in association with their public sector internal audit activities, have consolidated additional principles into their performance audit methodology. A literature review revealed that the most frequently incorporated additional principles constituted the environment, equity and ethics. However, it may be contended that an expansion is unnecessary or superfluous considering the principal intent, objective and outcome of performance auditing. This study intends to investigate the issue of whether the foundational principles of performance auditing is adequate or should they be expanded. In an endeavour to determine this, a survey was conducted utilising the expertise of a community of performance audit experts in South Africa. The investigation results revealed that 61.5% of the respondents consider the current principles satisfactory and adequate to address and include the required aspects of the performance audit. However, 46.2% of the surveyed participants deemed the environmental element an eligible element for inclusion as a foundational principle. Ultimately, despite certain SAIs and internal audit activities expanding their performance audit foundational principles, the results of this study revealed that the primary focus should remain on the traditional ‘three Es’, viz. economy, efficiency and effectiveness.