PROJECT

AUDIT

Introduction
Evaluation of a project are two types
Pre-Project Evaluation (Project Appraisal)
estimation for the future (Cost & Completion Time)
Post-Project Evaluation (Project Audit)
assessment for the past (Actual Cost & Actual
Completion Time)

For Public Projects, apart from studying the

variation of the above, Project Audit also makes
an assessment for
Actual Social Cost-Benefit Factors
Extent up to which Projects Objectives are
achieved.

Objectives
Building up an information base to help proper
estimation of project cost & time.
Educating all those concerned with the project about
the realities of project management.
Establishing correct time-cost relationship.
Creation of appropriate standards for work based on
suitable work techniques.
Sharing of project audit information among all
concerned
In order to build up better understanding and better
comprehension of the project and its problem areas.
Lapses could be avoided in the future.

Phases
Two phases:
1) Immediately after the
completion of the project.
2) After lapse of some time (i.e. 2
or 3 years) since the completion
of the project.

Project Audit Immediately after

Project Completion
Studying the differences between the actual project cost
and the estimated project cost.
Studying the differences between the actual time taken
for project implementation and the estimated time.
Locating the areas that have contributed to the variances
in project cost and time.
Identifying the reasons for such variances, classifying
them into avoidable and unavoidable variances.
Analyzing the steps that could have been taken to avoid
the avoidable variances.
Analyzing in depth the factors that have caused the
unavoidable variances and examining the possibilities of
their removal in future by adopting suitable methodology.

Project Audit carried out after

the Lapse of 2-3 Years
Studying whether the product goals and
objectives are achieved.
Knowing whether the project produces
products/services of acceptable quality.
Knowing whether estimated output is
achieved.
Knowing whether the product/service is
accepted by the market and
Knowing whether the production volume is
commensurate with the market share
planned to achieve.

Types of Project Audit

Technical Evaluation
Financial Evaluation
Economic Evaluation

Technical Evaluation
Evaluation of quality & quantity of production, the
operating costs in production etc.
Comparison done between what is presented in
the feasibility report/detailed project report and
what has been the actual achievement.
Plant operation is to be studied by varying the
input parameters and observing the output till the
production is stabilized at the maximum level.
Evaluation of utilities consumed by the plant
(power, fuel, water, steam, consumables, spares
etc.)

Financial Evaluation
Evaluation is done for the following costs to verify that
the actual is as per the estimates / projections made at
the time of appraisal:
Project Cost under various heads.
Operating Costs.
Profitability.
Cash Flow and Fund Flow.
Sources & Application of Funds.

Assessment of actual project cost can be done

immediately after project completion.
Other financial parameters say actual operation &
maintenance costs, profits etc. can be studied only after
the lapse of 2-3 years.

Economic Evaluation
Evaluation is most difficult since many subjective
aspects are involved and are difficult to be quantified.
Evaluator has to identify the Social Costs and Benefits
of the project.
Relevant for Public Sector & Community Development
projects social objective in mind.
Social Cost Benefit Analysis (SCBA) Technique
Analyze whether the social benefits anticipated are
achieved.
Analyze whether there is any adverse effects which were not
originally unforeseen have the nature of adding to the social
cost.

Project Audit Agencies

(Indian Scenario)
For Private Sector Projects:
Audit normally done by the project promoter/financial institution that
has funded the project.

For Community Development Projects:

Central Govt. Controlled PEO (Programme Evaluation
Organization) of the planning commission carries out the audit.
Evaluate the impact on the lives of the people & on the economy of the
community.
Offer suggestions/recommendations for rural development.

State Govt. Controlled SEO (State Evaluation Organization)

evaluate projects sponsored by State Govt.

For Public Sector Projects:

Audit done by the respective ministries along with the DPE
(Department of Public Enterprise) and BPE (Bureau of Public
Enterprise.
Also audited by the Comptroller and Auditor General of India also.