performance audit with enhancing effectiveness of collecting and spending toll fee

Introduction

1. The necessaries of the topic.

Performance audit is a type of audit which has been developed in the world

recently. The development was started in 1970s of the XX century in the public area

and then spread to the private sector. In the U.S., Canada and some European

countries such as Sweden, Germany ... members of parliaments in these countries

required to provide information on the effectiveness and efficiency of spending of

funds. They did not satisfy with the traditional audit- that only focused on the

compliance with the regulations on expenditures. They want to know if the "value for

money" has been implemented only for the funds. They also want the people who

have responsible for revenue, public expenditure management the public funds to

explain more for that.

The public request has created challenges to State auditors who must try to

respond by expanding the scope of their activities. Therefore, they started

implementing performance audit, then in that countries the audit law and other laws

related were issued, in which the state auditor and the internal auditor must consider

for the value of money when implement audit by themselves.

In Vietnam, the concept of "performance audit" is only known in the early years

of the 90 decade through documents from foreign countries. Until now, the number

of people who have good knowledge and have conditions to apply and practice

performance audit is limited as compared to the financial audit.

The State Audit was established to improve the effectiveness of macro￾management of the government in collecting and using resources of the country.

Until now, the State Audit has implemented many specific activities. In the past years

it has contributed to clean up the national finance, increased the national budget

income and reduced the national budget spending thousands billion dongs. Currently

in the implementation tasks process, audit activities mainly focus on financial audit

and compliance audit, but what happened to our country has shown the status of

public resources wasted in the using national budget. Following the general trend, we

started implementing performance audit to remove that situation. So far, Performance

audit has officially implemented in the "Audit of Collecting and spending toll fee".

Although it has good results, some weaknesses remain. Therefore, the research

“Performance audit with enhancing effectiveness of Collecting and spending toll

fee” is selected for in-depth study.

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2. Research purposes

Based on analyzing performance audit and practices of the "Audit of Collecting

and spending toll fee" of the State Audit of Vietnam, the thesis proposes

recommendations to enhance effectiveness of performance audit of Collecting and

spending toll fee.

3. Research objectives and scope

Performance audit is new from both theoretical and practical perspectives,

because it just has occurred in a short time. Therefore, we focus on main issues of

performance audit and audit process in our country now. The objectives of the

research are:

- To give an overview of performance audit and forming the scientific basis for

implementing performance Audit.

- To introduce requirements of "Collecting and spending toll fee audit" and

describing how State Audit of Vietnam did it

- To describe and analyze issues about performance audit in "Collecting and

spending toll fee audit”.

- To assess the practice described and suggest, solutions and petitions to

improve the performance audit with regard to collecting and spending toll fee.

- To suggest some recommendations to enhance performance audit in State

Audit of Vietnam.

4. Research methodology.

In order to meet research objectives, literature survey, interview and sending

questionnaires were used to collect information and data.

Secondary data: Secondary data have been collected from various sources

including.

Audit textbooks and curriculums, legal documents are available to take

information such as definition, the necessary, the objective of performance audit,

professional requirements for performance audit. These documents were promulgated

by Vietnamese authorities such as National Economic University, Finance Academy,

Vietnamese Government, State Audit of Vietnam, Ministry of Finance, Vietnamese

Association of Certified Public Accountant and Foreign authorities such as

INTOSAI, ASOSAI, EC project, GTZ project;

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Literature survey was used to collect information related to the State Audit of

Vietnam, Collecting and spending toll fee audit report, audit works, audit files, etc…

Primary data: Primary data were collected by using techniques of interviewing

and sending questionnaires.

Interview: This technique was done for collecting primary data. There are 7 in

depth interviews including interview the head of Major 2 department (State Audit of

Vietnam), team leader of Collecting and spending toll fee audit team, 3 auditors in

charge about audit works.

Questionnaires: this tool was used by sending question to leaders of audit

association, audit team leaders, auditors, leaders and staffs of audited bodies. The

questionnaire was originally made in Vietnamese and later was translated into

English. The questionnaires are included in appendix of this thesis. The quantitative

surveys were completed with 36 questionnaires sending to leaders of audit

association, audit team leaders, auditors, leaders and staffs of audited bodies.

5. Research Structure

This study consists of 3 chapters with brief bellows

Chapter I: The theoretical framework of performance audit

This chapter presents the picture of theoretical frameworks related to

performance audit with the basic concepts of performance audit, performance audit

criteria, process of performance audit and introduce about performance audit in other

countries.

Chapter II: Real situation of Collecting and spending toll fee audit

This chapter give an overview of performance audit and describes Collecting

and spending toll fee audit. Specifically, the chapter mentions requirements and the

score of the State audit in implement performance audit; describes real situation of

Collecting and spending toll fee audit and gives Audit findings.

Chapter III: Recommendations and Conclusion.

This chapter proposes numbers of recommendations to enhance effectiveness of

collecting and spending toll fee, then enhance performance audit and improving

decisions, regulations of the state-audit Law.

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Chapter 1: The theoretical framework of

performance audit

1.1The basic concepts of performance audit

1.1.1 Introduction of performance audit

Bringing audit into the world, internal or external audit is to serve for efficient

management of economy sources. The reality of economy sources management

shows that, there is so important to evaluate about honest and legality of unit’s

finance information but in the reality, it’s not enough to satisfy all the demand of

managers. There is a new type of audit appear in public. It is performance audit.

Performance audit is a type of auditing, which appears later than financial audit.

It arisen because of higher demand of efficient management of resources.

Performance audit is implemented primarily by State Audit and Internal audit.

Performance audit organized and implemented base on extending and

developing functions of finance report auditing. So took shape base on extending and

developing the professional methods, audit activities organizing, processing, etc… of

finance report auditing and develop an audit function of audit organizations.

Difference of tradition audit (financial audit), performance audit is a new audit

type, its objectives, contents are multiform; depend on quality, objective, operation

areas, economy manage developing of audit object. So performance audit is a

complicated audit field and being developed.

1.1.2 Definition of performance audit

The term “Audit” includes financial audit, compliance audit and performance

audit include definite of good textbook. It further adds that in pursuance of the

constitutional responsibility, The SAI is empowered to decide the nature, scope,

extent and quantum of audit to be conducted by it or on its behalf.

INTOSAI Audit standard 1.0.40 defines the performance audit as under:

“Performance audit is concerned with the audit of economy, efficiency and

effectiveness and includes:

Audit of the economy of the administrative activities in accordance with sound

administrative principles and management policies;

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Audit of the efficiency of utilization of human, financial and other resources,

including examination of information systems, performance measures and monitoring

arrangements and procedures followed by audited entities for remedying identified

deficiencies;

Audit of the effectiveness of performance in relation to the achievement of the

objectiveness of the audited entity and audit of the actual impact of activities

compared with the intended impact.”

Performance auditing is an independent assessment or examination of the extent

to which an entity, program or organization operates efficiently and effectively,

which due regard to economy.

In practice, there can be an overlap between compliance and performance

auditing and in such a cases, classification of a particular audit will depend on the

primary purpose of that audit. Compliance audit embraces attestation of financial

accountability involving expression of opinion on financial statements, audit of

financial systems and transactions, including an evaluation of compliance with

applicable statues and regulations, audit of internal control and internal audit

functions and audit of probity and propriety of administrative decisions taken within

the audited entity.

Public sector performance auditing is a way for taxpayers, financiers,

legislatures, executives, ordinary citizens and the media to obtain information about

the running and outcome of different government operations. Performance auditing

also provides answers to questions such as do citizens get value for money, or is it

possible to spend the money better or more wisely.

Public sector performance audit tends to be of two types:

Those where the State Audit Office examines how government ministries are

managing and evaluating their own operations to ensure that they achieve economy,

efficiency and effectiveness;

Those where the State Audit Office directly evaluates whether economy,

efficiency or effectiveness have been achieved by government ministries.

1.1.3 Features of performance audit

As stated in the Auditing Standards of INTOSAI, performance auditing is not

overly subject to specific requirements and expectations. While financial auditing

tends to apply relatively fixed standards, performance auditing is more flexible in its

choice of subjects, audit objects, methods, and opinions. Performance auditing is not

a regular audit with formalized opinions, and it does not have its roots in private

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auditing. It is an independent examination made on a nonrecurring basis. It is by

nature wide-ranging and open to judgments and interpretations. It must have at its

disposal a wide selection of investigative and evaluative methods and operate from a

quite different knowledge base to that of traditional auditing. It is not a checklist￾based form of auditing. The special feature of performance auditing is due to the

variety and complexity of questions relating to its work. Within its legal mandate,

performance auditing must be free to examine all government’s activities from

different perspectives.

The character of performance auditing must not, of course, be taken as an

argument for undermining collaboration between the two types of auditing.

1.1.4 Meaning of economy, effectiveness and efficiency in performance

audit

As stated above, performance auditing is mainly concerned with the

examination of economic, efficiency, and effectiveness. According to the Auditing

Standards (AS 1.0.40), an individual performance audit may have the objective of

examining one or more of these three aspects.

Figure 1.1: Meaning of economy, effectiveness and efficiency in performance

audit

(Source: Performance Audit Guide- EC project)

Economy

Economy Efficiency Effectiveness

Minimizing

Input costs

and keeping

right quality

Increasing output

for same input or

reducing input for

same output - at

right quality

Meeting or

exceeding

policy objectives and

delivering intended

impacts

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Economy is minimizing the cost of resources used for an activity, having regard

to the appropriate quality. Economy issues focus on the cost of the inputs and

processes. Economy occurs where equal- quality resources are acquired at lower

price, spending less.

Judging economy in itself implies forming an opinion on the resources

(human, financial and material) deployed. The central question is to assess whether￾given the context- resources have been acquired, upheld and used economically. The

question to be asked by a performance auditor is, do the means chosen represent the

most or at least a reasonable economical use of public funds?

Efficiency

Efficiency is relationship between the outputs, in terms of goods, services or

other results and the resources use to produce them. Efficiency is where the use of

any given set of resources inputs, or input is minimized for any given quantity and

quality of output, spending well.

The main question related to efficiency is whether the resources have been put

to an optimal or satisfactory use or whether the same or similar results in terms of

quality and turn- around time could have been achieved with fewer resources. The

question refers to the relationship between the quality and quantity of goods and

services yielded and the cost of resources used to product them, in order the results

achieved.

A finding on efficiency can be formulated by means of a comparison with

similar activities, with other period or with a standard, which the entity has explicitly

adopted, sometimes, standards such as best practices are applicable. Assessments on

efficiency might also be based on condition which related to specific standard, when

matters are so complex that are no standards. In such case, assessment must be based

on the best available information and arguments and in compliance with the analysis

carried out in the audit.

Effectiveness

Effectiveness is the extent to which objectives and achieved the relationship

between the intended impact and the actual impact of an activity. Effectiveness

addresses the issue of whether the program/ activity has achieved its objectives,

spending wisely. When focus on effectiveness, it is important to distinguish between

the immediate outputs or products and the ultimate impacts or outcomes.

Effectiveness is achieved, for instance, where there is improved achievement of a

program’s objectives. Outcomes are important to the effectiveness of program/

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