Chapter 12 Project Auditing Copyright 2012 John Wiley

Chapter 12 Project Auditing Copyright 2012 John Wiley & Sons, Inc.

Project Audit A formal review of any aspect of a project l Audits focus on whatever matters senior management desires l – Another type of audit is an ethics audit Evaluate means to set the value of or appraise l Project evaluation appraises progress and performance against standard l 12 -2

Purpose of Evaluation—Goals of the System l l Efficiency in meeting both the budget and the schedule Customer impact/satisfaction Business/direct success Future potential 12 -3

The Project Audit The main purpose of an audit is to help achieve the goals of the project l All facets of the project are studied l A project audit is equivalent to the application of TQM to project management l 12 -4

Approach to Project Audit All facets of the project are studied l The strengths and weaknesses are identified l Recommendations are prepared to help current and future projects l 12 -5

Project Audit Recommendations Identify problems earlier l Clarify scope, cost, and time relationships l Improve performance l Locate technological advances l Evaluate quality l Reduce costs l Improve risk identification l Many more… l 12 -6

Direct and Ancillary Project Objectives l Direct goals are stated project objectives – l Direct goals ignore many costs and benefits to: – – – l Including customer satisfaction The project Its team members The parent organization Unstated objectives are called ancillary goals 12 -7

Examples of Recommendations Concerning Ancillary Goals Improve understanding the value of the project l Improve process for organizing and managing projects l Provide information for entering new markets l Provide a congenial environment l Identify organizational strengths and weaknesses l 12 -8

Examples of Recommendations Concerning Ancillary Goals Continued Improve response to risk factors l Allow access to policy decisions by external stakeholders l Improve the way projects contribute to the professional growth l Identify high potential personnel l 12 -9

Ancillary Goals l l Identification of ancillary goals is difficult Finding them requires deductive reasoning Ancillary goals affect decisions made on projects Ancillary goals add several additional dimensions to project evaluation 12 -10

Problems With Indirect Goals l l Difficult to hold people accountable for unstated goals Difficult to separate indirect goals from personal goals Lack of trust Different ideas about the indirect goals 12 -11

The Project Audit l l l Current status of the project Expected status of the project Status of critical tasks An assessment of potential risks What lessons can be applied to other projects? What are the limitations of the audit? 12 -12

Depth of the Audit Time and money limit the depth of an audit l Audits are distracting to those working on the project l A poor audit result will lower morale on the project l 12 -13

Types of Audits l l l General Audit Detailed Audit Technical Audit 12 -14

Timing of the Audit All significant projects should be audited l Larger projects may be audited several times l An audit may also be conducted after the project is over (post-project audits) l 12 -15

Format and Use of the Audit Report 1. 2. 3. 4. It should facilitate the comparison of actual versus predicted results Significant deviations should be highlighted Reasons for significant deviations should be given Plans for resolving negative deviations should be discussed 12 -16

Audit Information 1. 2. 3. 4. 5. 6. Introduction Current status Future project status Critical management issues Risk management Caveats, limitations, and assumptions 12 -17

Responsibilities of the Project Auditor Be honest and ethical l Be independent l Tell the whole truth l Seek help for technical issues l 12 -18

The Project Audit Life Cycle l l l Project audit initiation Project baseline definition Establishing an audit database Preliminary analysis of the project Audit report preparation Project audit termination 12 -19

Some Essentials of an Audit/Evaluation Need to select an audit team with experience and expertise l Auditors need access to top management l Auditors need access to project personnel and others l Auditors need access to all records l 12 -20

Measurement Many aspects are easy to measure l Performance against budget and schedule are usually straightforward l Measurement on projects that include a profit component is more difficult l 12 -21