Efficiency Audit
In essence, efficiency indicates how well an organization uses its resources to produce goods and services. It focuses on resources (inputs), goods and services (outputs), and the rate (productivity) at which inputs is used to produce or deliver the outputs. To understand the meaning of “efficiency”, it is necessary to understand the following terms: inputs, outputs (including quantity and quality), productivity, and level of service.
Inputs are resources (e.g., human, financial, equipment, material, facilities, information, energy and land) used to produce outputs
Outputs are goods and services produced to meet client needs. Outputs are defined in terms of quantity and
quality and are delivered within parameters relating to level of service
Quantity refers to the amount, volume, or number of outputs produced.
Quality refers to various attributes and characteristics of outputs such as reliability, accuracy, timeliness, service courtesy, safety, and comfort.
Productivity is the ratio of the amount of acceptable goods and services produced (outputs) to the amount of resources (inputs) used to produce them. Productivity is expressed in the form of a ratio such as cost or time per unit of output.
Efficiency is a relative concept. It is measured by comparing achieved productivity with a desired norm, target, or standard. Output quantity and quality achieved and the level of service provided are also compared to targets or standards to determine to what extent they may have caused changes in efficiency. Efficiency is improved when more outputs of a given quality are produced with the same or fewer resource inputs, or when the same amount of output is produced with fewer resources.
Efficiency audit refers to comparing the actual results with the desired/projected results. It is directed towards Lesson 11 Types of Auditing 339 the measurement of whether the measurement of whether plans have been effectively executed. It is concerned with the utilisation of the resources in economic and most remunerative manner to achieve the objectives of the concern. It comprises of studying the plans of organisation, comparing actual performance with plans and investigating the reasons for variances to take remedial action