1. WAHID’S OPINION - NON-CONFORMITY AMONG THE PERFORMANCE AUDIT AND
FINANCIAL AUDIT ( PART 01,& 02)
Summary: This article Wahid’s opinion I have tried to express about the non-conformity
among performance audit and financial audit as angle of my view, the financial audit;
disbursements, receipts, and miscellaneous financial transactions. In performance audit
assessing the economy, efficiency and effectiveness in the use of human, financial and
The auditor must work within economic limits; the opinion, to be economically useful, must
be formed on selected tests rather than an attempt to verify all transactions. Because evidence
is examined on a test basis only, an audit provides only reasonable assurance, rather than
In general, the auditing function involves “a systematic examination of accounts or
programmatic activities, so as to ascertain their accuracy a means of verifying the detailed
transactions underlying any item in a record, a governing body connects audit professionals to
achieve an independent assessment of expenses and programmatic action to test the
placement between projected objectives and real actions.
The most important scope with the professionals who achieve the work and their managerial
connection to the entity being reviewed involve three primary fundamentals:
1) The external or third party role of auditors, serving between the principals who authorize
legislative action and the agents who carry it out;
2) The observance to proficient values at every stage of the procedure; and
3) The organization of its center, where the auditor is bound in his or her efforts to a
preliminary plan and a system for carrying the plan throughout.
I would like to explanation my view on the clarification about the performance audit and
financial audit significance parts. Earlier into describes the non-conformity among
performance audit and financial audit I have tried to create clear all the parts of
performance audit and financial audit for the reason. I think that the people who are related
with accounts, finance, audit and also the business owners will understand individually
overall about the performance audit and financial audit.
For sound understanding of the performance audit and financial audit tools can be mostly
helpful to WAHID THEORY & WAHID TECHNIQUES, both of the articles are a famous
for grateful to gain knowledge of the performance audit and financial audit, both theory of the
like MODEL for performance audit and financial audit, Wahid THEORY – for financial
audit, and WAHID TECHNIQUES- for performance audit, describe in details, learner can be
used the above articles as a references,
What are the responsibilities of auditors?
A self-determining auditor’s objective in an audit is to obtain enough capable evidential
matter to provide a logical base for forming an opinion on the financial statements. In doing
so, the auditor must work within economic limits; the opinion, to be economically useful,
must be shaped on selected tests rather than an effort to verify all communication. Because
evidence is examined on a test base only, an audit provides only logical assurance, quite than
2. absolute assurance, that financial statements are free of material misstatement. Thus, there is a
risk that audited financial statements may contain undiscovered matter errors or irregularities.
The survival of that risk is hidden in the express in the audit report, “in my opinion.”
Definition of Performance audit – an activity assessing the degree of economy, efficiency
and effectiveness in the use of human, financial and material resources at a level of
organization unit, organization, or certain actions. This type of internal audit examines
processes and systems of an audited in particular Performance audit and financial audit have
much in common. These two types of audit may involve the same kind of tasks, namely the
measuring and explanation of the performance of an audited. They also rely on similar data
collection methods. While performance auditors have their sights on efficiency, financial
auditors focus on the accuracy and correctness of accounts. However, there are some
differences between performance audit and financial audit as well
Performance indicator criteria: Performance indicators must be
I. Meaningful, considering who the audit results are meant for (organization, managers, users,
II. Well-defined, ensuring that they are easy to understand and explicitly (clearly) defined in
both what they measure and where the source data should come from. They must be
unambiguous to make it easier to interpret changes in measured values,
III. Comparable, i.e. allowing comparisons between the present and the past, or with other
organizations. In this case, standard definitions (indicators) may prove helpful, minimizing
change over time; if the definitions change, performance must be re-measured both before
and after change,
IV. Reliable, including statistically significant (estimates based on too small sample may be
exposed to dramatic changes in value) and independent evaluation of performance measuring
systems which allow verification and are sensitive to changes in performance,
Available: the indicators should be available and cost-efficient (data collection may
be expensive), striking the right balance between data collection costs and the need to
Assessment criteria should be:
I. Relevant – have an obvious relation to the achievement of a given performance goal;
II. Operative – specific enough for use in evaluation in practice;
III. Consistent – the criteria applied in an audit must be consistent both with one another and
with criteria applied in earlier similar performance audits, provided they are still valid.
In developing criteria, we may refer to multiple sources. Legislation, various directives and
regulations (including internal regulations of the organization), and current concept
documents are the basic and least controversial sources of criteria. It is also advisable to seek
the opinion of independent experts, and draw on information from professional literature and
relevant foreign experience.
Definition of some key terms used in performance audits:
1. Input – financial, human or material resources used to implement a public policy,
2. Objective – something an organization seeks to achieve,
3. 3. Effect – the outcome or consequence of an implemented public policy measure on a target
group and on others,
4. Output – the product achieved using allocated resources,
5. Economy – the state of achieving appropriate quality and quantity of inputs at the lowest
possible price (in order to minimize operating cost, while ensuring adequate quality),
6. Efficiency – the state of minimizing inputs where outputs are fixed, or maximizing outputs
where inputs are fixed (it is the relationship between inputs in goods, services or other
activities and resources used to produce them),
7. Effectiveness – the degree of accomplishment of planned goals. Goals may be defined as
outputs or effects (impacts), with results measured against objectives and resources spent to
achieve those objectives,
Components of a performance audit would usually include:
I. Interviewing the principal stakeholders, such as political parties,
II. Reviewed relevant, temporary staff or contractors engaged for the activities.;
Benefits of Performance Auditing
Performance Auditing provides Parliament with independent information, assurance and
advice about the economy, efficiency and effectiveness in the management of public revenues
and expenditures. It also helps the management of the audited entities to streamline their
processes and control for ensuring economy, efficiency and effectiveness in their operations.
This promotes public accountability on the performance of state and state-financed activities.
Upon consideration of these findings, Parliament might make a reassessment of priorities
which may even involve policy changes at the highest level
Performance Auditing contributes in:
•Drawing attention to obstacles to the effective and efficient use of public resources;
•Providing Parliament and Ministries with a basis for making policy and other decisions,
concerning improved effectiveness measures;
•Encouraging the public sector management to introduce processes for reporting on
performance to contribute to more accountability.
The function of Performance Auditing is:
“To balance financial auditing through ascertaining how carefully public operations were
undertaken - that is to say, to what scope intended results and effect have been achieved.” The
goal of Performance Auditing is “to promote effectiveness in the operation of public assets
based on three essentials: economy, efficiency and effectiveness
Why the need for Performance Auditing?
Performance audit is an improvement on the predictable financial and transactional audits that
were being conducted by auditors worldwide. Its objective is to engage more closely with the
auditee organization to found a formal process to use audit evidence to enable the public
auditor to form an opinion and thereby to communicate to the auditee the scope to which that
agency has utilized its resources in an economic, efficient and effective manner. In this
process of expressing an opinion, the auditor will report on the degree of compliance to
existing financial regulations. This necessitated the approval of Performance Auditing across
many governments the world over, in order to widely address these issues. This shortcoming
in the financial audit was compounded by the global trend of taxpayers and donors
demanding greater accountability and transparency in the utilization of their resources.
Therefore, governments became compelled to account for not only the use of these
4. possessions as planned but to also give assurance that they were utilized in the most
economic, efficient and effective manner
Definition of financial audit: Financial statements are to be “duly audited by a professional
accountant or by two skilled persons”. There are essentially two reasons for this necessity.
The first is to provide a second look at the financial information that is being accessible to the
worshippers at the annual meeting. It is corroboration that information being offered exactly
reflects the true financial picture of the corporation. In this sense the audit is of benefit to the
parish. The second reason for an audit is to provide treasurers with assurances that their work
is correctly represented in the financial statements. In this sense the audit is of benefit to the
Treasurer, as an officer of the corporation.
Audit is the examination of records and reports of a company, in order to check that what is
provided is relevant and accurate. That is to say, all assets and liabilities are properly recorded
in the balance sheet, and, all profits and losses are properly assessed. This assessment is done
through 2 methods, by assessing internal control procedures and by checking the consistency
The audit work is conducted in accordance with Generally Accepted Accounting Principles
(GAAP) and includes those reviews of internal controls, tests, and verification of data and
other activities deemed necessary by the auditor. Typically, annual financial statements are
subject to audit while interim statements are not.
the auditor finds audited transactions as being either "right" or "wrong", "legal" or
"unacceptable", etc.. These assessment criteria used by the auditor to arrive at a final opinion
(at the end of the audit) tend to be relatively closed and usually pre-defined, for example by
legislation. Performance audit differs from financial audit in many aspects, both in theory and
practice (objective, focus, academic basis, methods, criteria, valuations, final report).
The audit is not a “questioning” of the integrity of the treasurer, nor does it reflect a concern
over the veracity of the financial statements. It is simply a device to provide independent
opinion on the statements themselves. There are essentially three areas that the audit will
focus on; disbursements, receipts, and miscellaneous financial transactions. There is also a
degree to which an audit can look at the administrative operation of the community in general
although that may be beyond the scope of the audit envisioned in the Canon.
Directions of financial audit:
Moving out an audit does not involve doing the treasurer*s works over again. Nor does it
entail a check of every single business the treasurer has recorded. It is essential for the
auditors to do checks on random samples of business. This may mean choosing certain
months and doing an exhaustive check on business processed in those months. It may include
a detailed check of certain types of business such as all offering deposits and copy of same. It
may be that the auditors will divide the work with one doing disbursements, another doing
receipts. The significant point is that no matter what form or scope the audit takes it must be
more than a perfunctory effort. It must be detailed enough to be reliable and systematic
enough to provide the preferred level of assurances that are understood in the set.
Importance financial audit criteria:
5. I. Given the nature and the amount of the transaction, was approval to initiate it given by the
II Was the transaction entered into the financial system to commit the funds
III. Was the transaction initiated in connection with Project?
IV. Has a delegated authority declared that goods have been supplied, services have been
rendered, or work has been performed, and that the price and the proposed schedule of
payments are in accordance with the contract?
V. Was the invoice date-stamped when it was received by the Department?
VI. At the time of hiring, did the employee meet security, language and educational
VII. Was the staffing action approved by the appropriate delegated authority? (Financial
Type of financial audit:
An audit in general is a review. The audit process involves a careful examination for the
purpose of verification.
01. A financial audit is a review of company financial operation. A financial audit is usually
performed by a CPA firm's auditing division.
02. A tax audit is a review of tax information, for the purpose of verifying that taxes have
been paid correctly and in full. Tax audits are performed by a taxing entity, including the
Internal Revenue Service (IRS) for federal income taxes, state sales tax agencies, or other
03. Regulatory audits and investigations are performed by regulatory agencies, such as a state
wage and hour or state labor department, to verify that a business is complying with state
employment laws, such as those regarding minimum wages, payroll records, and payment of
Scope of financial audit:
Office of the Auditor General (OAGI) published the findings of a financial audit conducted
for 4 ADB; it was subsequently removed pending further investigation by the auditors.
Further work of the auditors included:
•Interviewing the complainant,
•Reassessing the initial audit findings based on the outcome of that interview and in the light
of new evidence received (if any), and
•Reissuing a revised audit report.
The revised audit report published here incorporates the results of the auditor's further work.
Major revisions and/or additions to initial audit findings include the following:
•There was non-compliance with respect to one of the projects wherein office space was
hired, when in fact the Executing Agency was to have provided the space.
•Required approvals for changes in the scope of the projects were only obtained and granted
after modified tasks were executed.
Objective of Financial audit
The primary objective of financial audit is to examine financial statements in terms of
preciseness, clarity and completeness of information of the reflected actions. This will serve
6. as a basis to give an accountable and independent opinion.. When financial audits were first
introduced, their aim was to verify whether or not the financial reports of agencies give an
adequate overview of their actual financial situation. For the first time this year, the Office
also provides an assessment of the legality of the transactions performed by agencies. The
audit objectives constitute the expected results after considering financial statements.
The objectives of the audit planning are:
• Meeting the SAI legal objectives and other audit priorities;
• Identification of the aim, objectives and expected results from the audit
• Obtaining and analyzing the audit evidence
• Identification of the requested resources, including the financial and time costs;
All Ministries are subject to annual auditing while their more important divisions, as well as
constitutional institutions, are audited selectively. The agencies subject to selective evaluation
are actually audited on a regular basis to guarantee that all the largest and most important
agencies are supervised. In addition to the above, the correctness of other reports (e.g. on
health insurance and pensions) used for providing an opinion on the consolidated annual
report of the state is verified.
The Objective of the preparation of an audit plan is to develop an audit approach that ensures
the collection of proper and sufficient evidence to support the audit conclusions. Although
every stage of the audit is documented, we must take account of the fact that they are
interrelated and planned to contribute to the overall planning objectives. The financial audit
covered area represents the audited areas with the aim of meeting the audit objectives.
Objectives of financial audit include:
• Lawfulness and Regularity, operations (transactions) are performed in accordance with the
laws and by-laws in place and within the envisaged budgetary limits;
• Completeness, operations (transactions) are properly recorded in account books in line with
the existing legislation;
• Truthfulness of operations, operations (transactions) recorded in financial statements are
done efficiently, relevant to the audited body and referring to the audit period;
• Evaluation all transactions are precisely evaluated and recorded, as well as being compliant
with the existing legislation.
• Acceptance and Reporting, transactions have been classified with reference to the structure
and definite reporting in line with the specialist regulatory authority directions.
“In universal terms, a matter may be judged material if information of it would be likely to
influence the user of the financial statements audit report”. In the light of financial audit, the
auditor’s aim is to assess the overall error rate, misstatements and whether it can by subject to
a judgment as material misstatement that attracts the notice to the users of these financial
Materiality can be defined as:
7. The auditor wants to make sure that the financial statements do not contain any errors or
misstatement. Errors or irregularities of financial statements can be considered as material if
the users of these statements could be affected.
1 Materiality by value, in monetary units;
2 Materiality by nature is significant by its very nature;
3 Materiality by context, although is irrelevant in terms of nature and value it brings about
deviations from the accounting definitions.
Need for financial audit:
Audit has some specificity throughout the world but has some mains components. One of the
main problems in audit is the conflict between the need to control a company and the business
relationship. On one hand, the audit company has to check thoroughly the books, the audit
work is conducted in accordance with Generally Accepted Accounting Principles (GAAP)
and includes those reviews of internal controls, tests, and verification of data and other
activities deemed necessary by the auditor. But on the other side, it has to keep its customer
that is its source of revenue. In practical terms, this means that the audit company will try to
protect itself by carrying out the minimum checks, but if it has a slight doubt,
Below discus the main three part of financial auditing necessity, if any one read this three part
he/she will be able to understand how much necessity of financial auditing in an organization,
Circularization : To make sure that the amount for each bank account specified in the trial
balance are right, auditors send a request to every bank of the business to get the current
balance at the closing date. Banks typically mention the debts incurred by the company,
current guarantees and people who have the power to transfer fund to and from the bank
Financial interests: The principle is to endorse the amount of financial interest charges and
revenues. Usually, auditors perform a global test by cunning the average interest rate and the
credit and debit balance during the year.
Debtors Circularization: Auditors choose a sample of the largest debtors (using statistical
sampling software) and send letters to those debtors requesting that they agree or disagree the
balance, with an explanation. Due to some customers being reluctant to respond to such
letters, especially where elements of balances are in dispute, this testing is usually combined
with a review of cash receipts after the balance sheet date - in order to provide more
substantive evidence that the balance sheet debtors figure is correct.
8. Wahid’s Opinion – (non-conformity among the performance audit and financial audit
Part - 02)
Auditing is a process involving the examination of data, statements, records, operations and
performance of an auditor for a stated purpose. Performance auditing goes beyond the
consideration of promptness. It aims to determine to what extent the audited has discharged
its financial or other responsibilities which imply assessment of the auditor’s operation in
terms of the economy in acquiring resources, efficiency in using resources and effectiveness
in achieving objectives.
In additional: Financial audits seek to express a sovereign opinion on the accuracy and sprite
of an organization’s financial accounts. They check compliance with appropriate accounting
principles. Performance audits do not observe an organization’s financial accounts. as an
alternative they seek to say an opinion on how economically, efficiently or effectively an
organization undertakes its functions. They intend to add worth and develop the performance
of an organization
The major non-conformity in the approach, scope and objectives among financial audits and
performance audits are few examples presented in the following table.
Through compare with financial audit performance audit involves, More opinion and analysis
more careful exposure criteria for assessment are not pre-defined verification tends to be at
best persuasive, rather than definite reports contain more discussion and reasoned argument
Also in this bases thy have some non-conformity :
a) Study selection stage
b) Study design Stage
c) Consulting the audited entity
d) Team work
Financial Auditing Performance Auditing:
• Financial Audit: Uses financial data to express an opinion on financial position and
compliance with existing rules and
• Performance Audit: Uses financial as well as non-financial data to assess economy,
efficiency and effectiveness in
Regulations and determines whether:
• Financial Audit: :the financial statements of the auditor fairly present the financial position,
reflect results of operations and cash flows or manifest changes in financial position in
accordance with generally accepted accounting principles;
• Performance Audit: the auditor has complied with laws and regulations for those
transactions that may have a material effect on financial statements. The management of
resources and determines whether:
• Financial Audit: to obtain sufficient, competent evidential matter to enable the auditor to
form and express an opinion on the auditor’s financial report;
• Performance Audit: to promote compliance with laws, regulations, agreements, directives,
policies and procedures as necessitated by statutory and/or auditor requirements;
9. Financial Audit: to encourage application of generally accepted accounting principles;
Performance Audit: to establish confidence in the reliability and integrity of the financial
management system and the reports generated by it.
Other objectives are:
• Financial Audit: provision of a basis for improvement of public sector management of all
• Performance Audit improvement of the quality of information on the results of public
sector management that is available to policy makers, legislators and the general community;
• Financial Audit: Aims to strengthen control environment to reduce noncompliance.
• Performance Audit: Aims to improve overall performance capability to encourage
better management of Resources.
• Financial Audit: promptness and respectability are major aspects.
• Performance Audit: Economy, efficiency and effectiveness are major aspects.
I want to make the all of reader student & auditors understand my imagination through the
Wahid opinion. I am sure that this opinion is the perfect to understand the non-conformity
among performance audit and financial audit of any companies & organization audit
When financial audits are first introduced, their aim was to verify whether or not the financial
reports of agencies give a satisfactory impression of their actual financial position. For the
first time this year, the Office also provides a measurement of the authenticity of the business
performed by agencies. The scale of financial auditing will be additional complete to assess
expenditure information, financial management, internal control systems and the correctness
of data provided by management information
A good performance audits we need to correspond more effectively with the people at large.
This can be done both while defining the scope of our audit as well as after completing the
audit. In a recent performance audit we invited inputs from the people by inserting
advertisements in newspapers. This creates awareness of the work being done by us, on the
one hand, and gives us new insights in to the issues that affect the people. We have also been
distributing basic, illustrated summaries of our performance audit reports to connect the
thought of readers who may not find the conventional form of our exposure exciting
About The Author:
10. Mohammad Wahid Abdullah Khan (MBA, CPFA, CPIA, CFC)
Home Page: http://wahidbd.page4.me
MOHAMMAD WAHID ABDULLAH KHAN Dhaka, Bangladesh, is a PhD Candidate in
"Criminal Psychology" as well he is “freelance Author, online columnists, Human
psychoanalyst, industrial psychotherapist, Certified Financial Consultant, & Certified
Forensic Accountant, too dynamic entrepreneur, utilize creativity leadership and
teamwork to design and execute solutions that creates customer value.
Moreover Mr. Khan is CEO & Certified Consultant of” Wahid & co, Wak Business
Solutions, Wak Business Support, “Wam Associates” & leader of the” Wahid Consulting
Group”; Prior to consultancy Mr. Wahid has fulfilled more than 14 (fourteen) years
working in various fields of Business like - Accounts, Finance, Auditing (Internal &
External Audit), Project budgeting and Project costing related positions in some of the
largest group & join venture companies in Bangladesh. Which experience encouraged him
to work as a “professional consultant” from a few years,
Mr. Khan is realistic and implements his assignment within the bounds, objectives and
capabilities of the organization. His extraordinary quick understanding of strategic
options helps find direction and supports management in decision making. He has a “doer”
attitude and gets things done on the technical and functional side. As a “Consultant” Mr.
Wahid believe that his study & physiological motivation is very strong, as well my
confident level is high & my quantitative skills are well-built also he is crystal clear about
my every single goal which helped me to be a very tough contestant “Consultant” in the
business consultant arena
• Associate Member – Institute of Management Consultants Bangladesh (IMCB)
•Member- Association of Proposal Management Professionals® (APMP®)
• Member – The Next level Purchasing Association.
•Member- The Chartered Institute of Personnel and Development (CIPD)
• Member - The Professional Risk manager’s international Association (PRMIA)
• Affiliate Member- Global Association of Risk Professional (GARP)
• Member - The International Association of Risk and Compliance Professionals (IARCP)
• Lifetime Member - Dragon fire martial arts association “International” (DFMAA)
• Individual Member: License Logic LLC
• Associate Membership - The American Psychological Association (APA)
• Member - The Global Community of Information Professionals