Copyright 2009 John Wiley & Sons, Inc.

Chapter 12

Project Auditing

Project Audit

A formal review of any aspect of a project.

Project “audits” are not limited to financial matters

Project audits may not be performed by accountants

Purpose of Evaluation—Goals of the System

The main purpose of an audit is to help achieve the goals of the project

A project audit is equivalent to the application of TQM to project management

Approach to Project Audit

All facets of the project are studiedThe strengths and weaknesses are

identifiedRecommendations are prepared to help

this, and future, projects

Project Audit Recommendations

Identify problems earlier Clarify performance Improve performance Locate technological advances Evaluate quality Reduce costs Improve risk identification Many more…

Direct Versus Indirect

Direct goals Indirect goals

Indirect Goals

Improve understanding by parent organization Improve management by parent organization Improve team effort on the project Identify strengths and weaknesses Better identify project risks All access by external stakeholders Identify ways to improve the skills of project

members Identify potential project managers

Problems With Indirect Goals

1. Difficult to hold people accountable for unstated goals

2. Difficult to separate indirect goals from personal goals

3. Lack of trust4. Different ideas about the indirect

goals

The Project Audit

1. Current status of the project2. Expected status of the project3. Status of critical tasks4. An assessment of potential risks5. What lessons can be applied to other

projects6. What are the limitations of the audit

Depth of the Audit

1. General Audit

2. Detailed Audit

3. Technical Audit

Constraints

NeedTimeMoneyDistracting

Audit Timing

All significant projects should be audited

Larger projects may be audited several times

An audit may also be conducted after the project is over (post-project audits)

Construction and Use of the Audit Report

1. It should facilitate the comparison of actual versus predicted results

2. Significant deviations should be highlighted

3. Reasons for significant deviations should be given

4. Plans for resolving negative deviations should be discussed

Audit Information

1. Introduction

2. Current status

3. Future project status

4. Critical management issues

5. Risk analysis

6. Caveats, limitations, and assumptions

Responsibilities of the Project Auditor

Be honest and ethicalBe independentTell the whole truthSeek help for technical issues

The Project Audit Life Cycle

1. Project audit initiation

2. Project baseline definition

3. Establishing an audit database

4. Preliminary analysis of the project

5. Audit report preparation

6. Project audit termination

Some Essentials of a Project Audit

Need to select an audit team with experience and expertise

Auditors need access to top management

Auditors need access to project personnel and others

Auditors need access to all records

Measurement

Many aspects are easy to measurePerformance against budget and

schedule are usually straightforwardMeasurement on projects that include a

profit component is more difficult