Descriptive Performance Audits?

Ever heard of a descriptive performance audit?

A descriptive performance audit does not fit my definition of an audit, but I’ve been wrong before. OK, I’ve been wrong many, many times before. 🙂

To me, an audit is the evaluation of a subject matter against criteria. A descriptive performance audit doesn’t use criteria, but instead shares descriptive data about a program.

It wasn’t an accident

Turns out what I thought was an accidental omission of a sentence in the 2018 version of the Yellow Book is very purposeful. With one simple edit, the GAO flips what constitutes an ‘audit’ upside down.

See, in the 2011 version of GAGAS, the definition of a performance audit was this:

2.10 Performance audits are defined as audits that provide findings or conclusions based on evaluation of sufficient appropriate evidence against criteria.

That fits my view of what an audit is.

But in the 2018 version of GAGAS, that sentence was gone and was replaced by this:

1.21 Performance audits provide objective analysis, findings, and conclusions to assist management and those charged with governance and oversight with, among other things, improving program performance and operations, reducing costs, facilitating decision making by parties responsible for overseeing or initiating corrective action, and contributing to public accountability.

Look at that all-over-the-place list! And notice… no criteria!

I thought it was an accidental omission

When I caught this change later, around 2019, I reasoned that the GAO didn’t highlight it in their summary of changes comparing the 2011 and 2018 versions was due to an error made by an overzealous editor. I decided to bring that little mistake up the next time they went through the revision process.

Oh, how innocent (or should I admit, CLUELESS?) I was!

Come to find out, the GAO changed that definition on purpose. They also added another little clue to the existence of a descriptive audit to boot.

What is the GAO up to?

Here is that other little clue. Notice the second sentence here in the 2018 version of the Yellow Book:

1.22 Performance audit objectives vary widely and include assessments of program effectiveness, economy, and efficiency; internal control; compliance; and prospective analyses. Audit objectives may also pertain to the current status or condition of a program.

Aha! What is that?

The second sentence alludes to the second type of performance audit which hasn’t been formally named in the standards: The descriptive performance audit.

Two types of performance audits: Descriptive and Evaluative

Through these simple tweaks, the GAO allows itself (and thus, us, as well!) the ability to conduct two ‘types’ of performance audits: Descriptive performance audits and evaluative performance audits.

Descriptive audits compile data (or conditions) maybe with some analysis, share findings without criteria and include no conclusions or recommendations.

Evaluative audits (the type I assumed we were all doing!) need criteria to support findings and conclusions. Recommendations are part of the package.

How can we make our promise with no conclusion?

The concept of a descriptive performance audit triggers multiple inconsistencies in standards.

For instance, in every performance audit report, auditors following GAGAS include this paragraph:

2018 GAGAS 9.03 We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

How will we make that promise if we don’t do an ‘evaluative performance audit’ against criteria? Paragraph 9.03 above is supposed to be left intact with no modifications!

Criteria is imbedded in findings, objectives and conclusions. Descriptive performance audits do not reach conclusions because they don’t ‘evaluate’ anything leading to a conclusion.

I could provide dozens of citations where this idea of a descriptive performance audit without criteria or conclusions is in conflict with the rest of the Yellow Book, including the 2023 exposure draft. I’ll spare you, though. You’re welcome.

Doesn’t a ‘descriptive performance audit’ sound eerily like a non-audit service?

I wonder if these so-called (and yes, I say that with a hint of disdain) descriptive audits would be better classified as a non-audit service. Why? Since criteria is necessary on every other engagement type: A financial audit, an attestation engagement and pre-2018 performance audits.

But you know how much the GAO hates non-audit services!

What do you think of descriptive performance audits?

Since I am still contemplating all of the impacts of this change and my nerd brain is working overtime, I’m interested to hear other nerds’ opinions on this. What does this mean to you, if anything? Nerds, please write to me at info@yellowbook-cpe.com.