Post completion audit
Post completion audit aims to evaluate the efficiency and effectiveness of the capital budgeting decision that the management has implemented. It compares between the planned and the actual outcome, costs and the use of resources, results and benefits. It contains all assumptions that were made during the decision-making period. It is one of the ongoing continuous processes through which the organisation learns and improves.
Recent research suggests that capital budgeting involves far more than a simple concern with appropriate methods of appraisal. As Neale interlinked successful operation of the key phases of a sequential system as depicted below [5]. It highlights the key questions examined at different stages of the investment decision and control process.
1 Determination of the budget
* How much is available to spend?
2 Search
* What project ideas have emerged?
* What costs and benefits will they generate?
3 Evaluation
* What is the value of the projected costs and benefits?
* What is the target rate of return?
* Does the project's internal rate of return exceed this? (Or does it have a positive net present value?)
* How risky is the project?
4 Monitoring
* During implementation
- Is the project on schedule?
- Will costs exceed the budget?
* Ongoing
- Is the project performing to budget?
- If not, why not?
5 Post completion auditing
* Is the project performing to initial expectations?
* How justified were these expectations?
* What lessons can we draw to assist future appraisals?
Source: [5]
According to Neale, the final phase of the process is the post-completion audit of the project, and it involves:
* examination of the project's progress in its implementation phase; and
* in-depth analysis of the realised costs and benefits to date and the likely future prospects of a project, as compared to initial expectations.
The post completion audit is a positive and forward looking tool. The decision to carry out a post completion audit is
Recent research suggests that capital budgeting involves far more than a simple concern with appropriate methods of appraisal. As Neale interlinked successful operation of the key phases of a sequential system as depicted below [5]. It highlights the key questions examined at different stages of the investment decision and control process.
1 Determination of the budget
* How much is available to spend?
2 Search
* What project ideas have emerged?
* What costs and benefits will they generate?
3 Evaluation
* What is the value of the projected costs and benefits?
* What is the target rate of return?
* Does the project's internal rate of return exceed this? (Or does it have a positive net present value?)
* How risky is the project?
4 Monitoring
* During implementation
- Is the project on schedule?
- Will costs exceed the budget?
* Ongoing
- Is the project performing to budget?
- If not, why not?
5 Post completion auditing
* Is the project performing to initial expectations?
* How justified were these expectations?
* What lessons can we draw to assist future appraisals?
Source: [5]
According to Neale, the final phase of the process is the post-completion audit of the project, and it involves:
* examination of the project's progress in its implementation phase; and
* in-depth analysis of the realised costs and benefits to date and the likely future prospects of a project, as compared to initial expectations.
The post completion audit is a positive and forward looking tool. The decision to carry out a post completion audit is
References: 1. Bigg W. W. and Davies J.O., Internal Auditing, The Stellar press hatfield Herts, 5th ed., 1980, Ch.2, pp. 7-23 2. Cosserat, G. W., Modern Auditing, John Wiley & Sons, Ltd, England, 1999, Ch. 16, pp. 554-576 3. Garvin, D.A., "Building a learning organisation", Harvard Business Review, July-August 1993, pp. 78-91. 4. Johnson, H.T., Relevance Regained: From Top Down Control to Bottom Up Empowerment, Free Press, New York, NY, 1992. 5. Neale, C.W., "Post-completion auditing: avoiding the pitfalls", Managerial Auditing Journal, Vol. 10 No. 1, 1995, pp. 17-24.