Learn how audit findings are structured in governmental performance audits and how traditional and impact findings support clear, evidence-based reporting.
This lesson is a preview from Graduate School USA's Basic Governmental Auditing Course.
What is an Audit Finding?
Auditors present their audit results in the form of findings, with conclusions and recommendations as appropriate, in written and oral reports.
They support their findings with evidence recorded in audit documentation (working papers).
But just what is a “finding?”
Finding Definition: Audit findings are determinations about performance (favorable or unfavorable) that meet the standards of evidence and satisfy assignment objectives. They are the basis for conclusions and any recommendations. The supporting evidence is grouped into structural components called elements. The elements needed for a finding are related to the objectives of the audit. Thus, a finding or set of findings is complete to the extent that the audit objectives are addressed and the report clearly relates those objectives to the elements of a finding.
Traditional and Impact Findings
Performance auditors primarily develop two types of findings: traditional findings and impact findings. What they develop depends on the question they are asked to answer.
- In answering criteria-referenced questions about the adequacy of performance, they develop a “traditional finding.”
- In answering cause and effect questions about the results (impact) attributable to a program or intervention, they develop an “impact finding.”
As we will point out, each finding has its own unique structure of elements. We discuss impact findings later in this module.
Traditional Audit Findings
Currently, and in the past, performance auditors have directed the majority of their audit work to developing what are called traditional audit findings.
The elements of a traditional finding are shown below.
Criteria: Ideal used to assess the adequacy of performance, such as what is required, desired, or achievable.
Condition: The situation that exists; the extent to which the criteria are met.
Effect: A measure of the actual or potential consequences that result from the condition (be it positive or negative).
Cause: The cause identifies the reason or explanation for the condition or the factor or factors responsible for the difference between the situation that exists (condition) and the required, desired, or achievable state (criteria). It may serve as a basis for recommendations for corrective actions.
Recommendation: The auditor’s explanation of actions needed to correct performance shortfalls.
Structural Variations of Traditional Audit Findings
The classic traditional finding with four elements may be considered the most useful kind of finding for auditing performance. But findings with a more limited range of elements might be useful under some circumstances. What elements are needed depends entirely on the objectives of the audit.
There are two variations of the traditional finding:
- Descriptive: These findings include only the condition element. Such findings show circumstances without references to criteria.
- Normative: These findings contain the criteria and condition elements, plus effect in some instances. Such findings assess whether the criterion is being met in practice.
Impact Findings
Answers to “cause and effect” audit questions call for an alternative to the traditional audit finding. Such an alternative is the impact finding. This kind of finding essentially measures whether an intervention (a new program, policy, procedure, investment, or some other innovation) has produced any difference, usually the difference it was intended to produce.
Impact findings compare the “condition with”—actual performance with the intervention— to the “condition without”—performance that would likely exist without the intervention. The intervention is considered the cause, and the effect is the impact, or difference attributable to the intervention.
No “criterion” comparable to that used in a traditional audit finding is employed. Rather, the condition is based on a straight comparison of two sets of circumstances.
Elements of Impact Findings
Condition With: The level of performance achieved with the intervention or initiative.
Condition Without: The level of performance that would exist without the intervention or initiative (an estimate).
Effect: The difference between the condition with the intervention and the estimate of the condition without the intervention.
Cause: The intervention is defined as the cause.
Audit Designs for Evaluating Impact
Auditors can readily use three designs in evaluating impact:
- Before and After
- Interrupted Time Series
- Post-Comparison Groups
Auditors can use an Evaluation Synthesis approach in situations where evaluations by others have been made. Auditors analyze those evaluations to reach a conclusion about the outcomes attributable to a program.
Overall, auditors present their results in the form of findings. For traditional audits, the elements of criteria, condition, effect, and cause provide a conceptual framework for planning work and reporting results. Clearly identifying effect is essential for explaining the significance of the issues and justifying any corrective actions needed, while identifying cause is essential for developing recommendations that can correct underlying deficiencies. For impact audits, the elements of condition with the intervention, condition without the intervention, cause, and effect provide a similar framework for evaluating program outcomes. Ultimately, the types of findings developed and the elements used depend on the objectives of the audit.