Question Tag: Value for Money Audit

Search 500 + past questions and counting.
Professional Bodies Filter
Program Filters
Subject Filters
More
Tags Filter
More
Check Box – Levels
Series Filter
More
Topics Filter
More
  • 10 Marks

AA – July 2023 – L2 – Q4b – Internal Audit and Its Relationship with External Audit, Public Sector Auditing

Short notes on value for money audit and best value audit in public sector auditing.

b) Modern approach to Internal Auditing has broadened the scope of the function of the Internal Audit. The focus has shifted from pure financial audit to cover other important areas of operation. These include performance audit, Value for Money audit, and performance information audit.

Required:
Write short notes on the following:
i) Value for money audit. (5 marks)
ii) Best value audit. (5 marks)

i) Value for Money Audit (VFM):
Value for Money audit is a financial management tool used primarily in public sector organizations. It assesses financial performance where profit is not the primary measure. VFM audits evaluate whether resources are used efficiently, effectively, and economically, often referred to as the “3 Es”:

  • Economy: Spending no more than necessary for required resources (e.g., purchasing at the best price).
  • Efficiency: Achieving the highest possible output from the resources used (e.g., productivity improvements).
  • Effectiveness: Ensuring that objectives are met with the resources utilized. A VFM audit focuses on whether the organization achieves its goals in the most cost-effective way possible.

ii) Best Value Audit:
Best Value Audit ensures good governance and effective management of resources in the public sector with an emphasis on continuous improvement and delivering the best possible outcomes for the public. Best Value goes beyond the “3 Es” of VFM by focusing on service delivery to meet public needs and priorities. The audit includes principles like:

  • Challenge: Reviewing whether services are necessary or can be improved.
  • Compare: Benchmarking service costs and quality against others.
  • Consult: Engaging service users to ensure their needs are met.
  • Compete: Encouraging fair competition to improve service delivery. Best Value Audit ensures that public sector organizations are using resources in the most advantageous combination to deliver public services.
  • 4 Marks

AA – May 2016 – L2 – Q5a – Audit and Assurance Evidence

This question explains the purpose and objectives of a value for money (VFM) audit.

(a) Explain the purpose of value for money audit. (4 marks)

The purpose of a value for money (VFM) audit is to assess whether an entity is obtaining the best possible combination of services for the lowest level of resources used. VFM audits focus on the 3 Es:

  1. Economy:
    • Ensuring that resources (such as labor, materials, and equipment) are acquired at the lowest possible cost without compromising quality.
  2. Efficiency:
    • Evaluating the relationship between the resources used (inputs) and the outputs achieved. An efficient operation is one that maximizes outputs while minimizing the resources used.
  3. Effectiveness:
    • Determining whether the intended goals and objectives of the entity are being achieved. This involves assessing whether the activities of the entity are producing the desired outcomes.

In summary, a VFM audit aims to ensure that an organization is managing its resources in a way that delivers the highest value for money, balancing cost, productivity, and outcomes.

  • 5 Marks

AA – May 2021 – L2 – Q1a – Types of Audit and Assurance Engagements

Explain the differences between value for money audit and best value audit.

An Internal Auditor is part of the management Internal Control System. However, it is possible to list the other work that internal auditors might do under the following broad heading:
• Value for money audit
• Best value Audit
Required:
Explain the differences between Value for money audit and Best value audit.
(5 marks)

Value for Money Audit
Value for Money Audit is the type of audit to assess performance in terms of getting good value from the money that an entity spends. Value for money is obtained by accessing the 3Es (i.e., economy, efficiency, effectiveness). (2.5 marks)

Best Value Audit
The fundamental concept of best value is continuous improvement. There is some evidence that some private sector organisations now use the concept of best value to measure improvement. This occurs where organisations attempt to achieve continuous improvement by focusing on the 4Cs (i.e., challenge, compare, consult, and compete). (2.5 marks)

Take control of your business data with insight and in-depth understanding by taking this course. 

Services

Contact Info

  • +233203701923
    +233543919232
  • info@noohrabusiness.com

Get In Touch

Follow us on our social media and get daily updates.

Facebook-f Twitter Linkedin-in Envelope