C23; Financial Analysis of Project

Project Audit

a) What is Project Audit?

The Project Management Body of Knowledge (PMBOK) explains it best. “Audits
ensure the composition of a project’s configuration items is correct and that the
corresponding changes are registered, assessed, approved, tracked, and correctly
implemented.”

As a project management officer, it is necessary to run project audits to ensure that

projects are running smoothly and accomplishing their intended tasks.

Project auditing is a formal type of "project review", most often designed to evaluate
the extent to which project management standards are being followed. Audits are
typically performed by a designated audit department, the "Project Management
Office", an empowered Steering Committee or an external auditor.

b) Objectives/goals of Project Audit:

The ultimate goal of a project audit is to ensure that the project is meeting project management
standards through investigations and evaluations. The following are five main objectives of a
project audit:

i. Assure Quality of Products and Services: A project audit acts as a quality

assurance instrument. It scrutinizes the project life cycle system by evaluating the
deliverables produced during various phases of the project from the design phase all
the way to the implementation phase.

ii. Assure Quality of Project Management: A project audit assures that project
management is meeting the standards by evaluating if it follows the organization’s
policies, processes and procedures. It scrutinizes the methodology used to help
identify the gaps in order to make the necessary improvements.

iii. Identify Business Risk: Project audits help identify business risks that may involve
budget, time, scope and quality. After all, the company is the client itself, which has a
bigger stake at the outcome of the project. The project audit evaluates the feasibility
of the project in terms of affordability and returns by providing transparency to the
project status and performance by evaluating the cost, time and resources. . It
reports the business risks to help the company decide whether to proceed with the
project or not.

iv. Enhance Project Performance: Auditing the various phases in the project life
cycle can help improve performance of the project team. It also improves resource
and budget allocation. Identifying priorities, corrective measures and preventative
actions can lead to a successful project outcome. Discovering problems along the

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 way allows the project team to provide solutions. It also helps prevent future
recurrence of similar issues.

v. Learn: A project audit can lead to learning opportunities through assessments of

project management (organizational, team and individual) competency. Providing
reviews and feedbacks allow individuals and project teams to reflect on their
performance. The results aim to re-energize the project teams to improve their
performance, resolve conflicts and learn from their past mistakes.

c) The Project Management Audit Process

Process of the project audit: The project audit process can be structured and modified in
accordance with individual project phases. The audit can be realised during the realisation of
each individual phase, during the completion of each individual phase or after the completion of
the whole project, upon the discretion of the methodology user.

i. Preparatory phase
 Introducing the project audit methodology to the auditor
 Understanding the audited object and learning about the audited project
 Determining the audit goals – in accordance with recommendations in this
methodology guide
 Determining the audit subject (audited phase)
 Creating the audit team – the audit team must always have at least two members to
meet the objectivity criteria. Due to the fact that the project manger is the main
source of information during the questionnaire inspection, it is not recommended to
include the PM in the audit team.
 Creating the audit time schedule
 Providing the required body of evidence, choosing the appropriate audit techniques
 Obtaining data – list of required documentation

ii. Performance phase

 The audit is realised in accordance with the determined goal and extent or audit subject
 Using individual tools: documentation analysis, completing questionnaires, conducting
interview, recording into check-lists
 Obtaining other additional data, materials, if required

iii. Evaluation/analytical phase

 Analysis of results
 Obtaining and analysing other additional data, materials

iv. Conclusion phase

 Identification and description of findings within the audit, including the seriousness of
the results
 Making a draft of the audit report for the project, interpretation of results, including
recommendations of the audit team for individual results
 Introducing the draft report to the audit team and determining a deadline for its
statement on the findings included in the report.

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  Creating a final report including recommendations based on the audit team statement
 Delivering the final report version to the audit team and submitting a request for
accepting measures with regards to recommendations included in the report
 Processing measures (what are the measures, when will they be implemented) for
recommendations stated in the audit team report
 Delivering the audit report, including suggested measures, to the school management

d) Phases of Project audit:

The aim is to ensure that the audit team receives full and uninterrupted access to all required
information, people and facilities during their audit. This includes, but is not limited to, emails,
and documents developed by the project team. Having everything at your fingertips makes it
easy to answer questions when they arise.

When auditing the project, interview the PM as a starting point and review the project library to
ensure you know where to find the information you are looking for.

When you conduct an audit, determine whether the PM has addressed the key items in each
phase of the project lifecycle. This includes, but is not limited to:

i. Initiation Phase

 If main objective of the project has been identified.

 If project charter has been written.

After you complete reviewing the Initiation Phase, review the actual project plan or Work
Breakdown Structure (WBS). You should focus on how well defined the WBS is and how well
tasks and dependencies have been scheduled. A Visio or flow diagram is also a good alternative.
Ask the PM what software has been used to create the required documents. Make sure the
planning is sound. Failing to plan is planning to fail. Again, the key items that must be reviewed
after initiation are:

ii. Planning Phase

 If a Project Management Plan has been prepared

 If project deliverables have been finalized
 Existence of a project scope statement.
 If project budget has been set and if the same is justifiable.
 Distinguish project activities.
 Whether a schedule for the different activities of the project work has been prepared.
 If special skills needed to complete planned tasks have been determined.

Once the planning phase has been reviewed, the execution phase review takes place. Many
projects suffer from scope creep during this phase. Has the project team stuck to their scope?
Poor communication, misunderstandings and lack of information may have caused issues. Some
of the tasks to review are listed below.

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iii. Execution Phase

 Whether the team works are perfect

 Administer and guide the project team.
 If status review meetings are conducted.
 If project information are communicated to all stakeholders in due time
 Whether quality assurance measures are implemented.

Make sure the control measures are sound and the correction procedures are well described.

iv. Controlling Phase

 Measure performance against the plan.

 Evaluate the corrective measures taken.
 Manage change requests.

Once most of the work of the project is done, we approach to closing phase. Has the project been
documented and closed properly?

v. Closing Phase

 Manage acceptance of project deliverables.

 Whether Documentation has been done for lessons learned during the project.
 Whether project records have been archived or not.
 Formalize the closing of the project.
 Whether project resources have been released.
 To check correctness of final Status Report.

In general, you must try to understand all the processes. How well suited is the methodology to
this particular project? Are all the processes required in place? Did they miss anything from the
methodology that should be there?

A project audit is a project of its own, and as such, no one size fits all. It takes an experienced
and knowledgeable project manager to conduct an audit from beginning to end, and to adapt it
according to the environment.

e) Benefit of Project Audits

Project audits can help identify when a project is about to go off-course. In addition, a project
audit can provide the following benefits:

 Improve project performance.

 Increase customer and stakeholder satisfaction.
 Save costs.
 Control scope and avoid scope creep.
 Provide early problem diagnostics.
 Clarify performance/cost/schedule relationships.
 Identify future opportunities for improvement.
 Evaluate performance of the project team.

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  Inform client of project status/prospects.
 Reconfirm feasibility of/commitment to project.

f) Used methods: The following methods are recommended for the project
audit:

 Analysis of audit documentation

 Checklist – checking performed tasks, created documents through created checklists.
 Interview – additional questions to the checklist
 Self-assessment questionnaire

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