Project Management: A
Managerial Approach
Chapter 12 – Auditing Projects
© 2006 John Wiley and Sons, Inc.
Project Audit
• The project audit is a thorough examination of
the management of a project, its methodology
and procedures, its records, its properties, its
budgets and expenditures and its degree of
completion
• The formal report may be presented in various
formats, but should, at a minimum contain
comments on some specific points
© 2006 John Wiley and Sons, Inc. Chapter 12-8
Project management in the corporate context
Project Managers and
Organizational
Alignment
3
Goals of Project Audit
• Four independent dimensions of success:
– The most straightforward dimension is the project’s efficiency
in meeting both the budget and schedule
– Another dimension, and the most complex, is that of customer
impact/satisfaction
– A third dimension, again somewhat straightforward and
expected, is business/direct success
– The last dimension, somewhat more difficult to ascertain, is
future potential
© 2006 John Wiley and Sons, Inc. Chapter 12-2
Purposes of Project Evaluation
• A successful project evaluation via audit can
help an organization:
– Identify problems earlier
– Clarify performance, cost, and time relationships
– Improve project performance
– Locate opportunities for future technological advances
– Evaluate the quality of project management
– Reduce costs
© 2006 John Wiley and Sons, Inc. Chapter 12-4
Purposes of Evaluation
• A successful project evaluation can help an
organization (cont.):
– Speed the achievement of results
– Identify mistakes, remedy them, and avoid them in the
future
– Provide information to the client
– Reconfirm the organization’s interest in, and
commitment to, the project
© 2006 John Wiley and Sons, Inc. Chapter 12-5
Purposes of Evaluation – Other Outcomes
• Ancillary/additional goals
– Identify organizational strengths and weaknesses in
project-related personnel, management, and decision-
making techniques and systems
– Identify risk factors in the firm’s use of projects
– Improve the way projects contribute to the professional
growth of project team members
– Identify project personnel who have high potential for
managerial leadership
© 2006 John Wiley and Sons, Inc. Chapter 12-7
Project Audit
• Six parts of a project audit:
– 1. Current status of the project
– 2. Future status
– 3. Status of crucial tasks
– 4. Risk assessment
– 5. Information pertinent to other projects
– 6. Limitations of the audit
• It is far broader in scope than a financial audit
and may deal with the project as a whole or any
component or set of components of the project
© 2006 John Wiley and Sons, Inc. Chapter 12-9
Audit Depth
• There are three distinct and easily recognized levels
of project auditing:
– General audit - normally most constrained by time and
resources and is usually a brief review of the project
touching lightly on the six parts of an audit
– Detailed audit - usually conducted when a follow-up to
the general audit is required
– Technical audit - generally carried out by a qualified
technician under the direct guidance of the project auditor
© 2006 John Wiley and Sons, Inc. Chapter 12-11
Audit Timing
• The first audits are usually done early in the
project’s life
• Early audits are often focused on the technical
issues in order to make sure that key technical
problems have been solved
• Audits done later in the life cycle of a project are
of less immediate value to the project, but are
more valuable to the parent organization
© 2006 John Wiley and Sons, Inc. Chapter 12-12
Project Auditor/Evaluator Responsibilities
• First and foremost, the auditor should “tell the
truth”
• The auditor must approach the audit in an objective
and ethical manner
• Must assume responsibility for what is included
and excluded from consideration in the report
• The auditor/evaluator must maintain political and
technical independence during the audit and treat
all materials as confidential
© 2006 John Wiley and Sons, Inc. Chapter 12-16
Project Auditor/Evaluator Responsibilities
• Steps to carry out an audit:
– Assemble a small team of experienced experts
– Familiarize the team with the requirements of the project
– Audit the project on site
– After the completion, debrief the project’s management
© 2006 John Wiley and Sons, Inc. Chapter 12-17
Project Auditor/Evaluator Responsibilities
• Steps to carry out an audit (cont.):
– Produce a written report according to a pre-
specified format
– Distribute the report to the project manager
and project team for their response
– Follow up to see if the recommendations have
been implemented
© 2006 John Wiley and Sons, Inc. Chapter 12-18
Access to Information
• In order for the audit/evaluation team to be
effective, it must have free access to all
information relevant to the project
• Most of the information needed will come from the
project team’s records or from various
departments such as accounting, personnel, and
purchasing
• Some of the most valuable information comes
from documents that predate (precede) the project
© 2006 John Wiley and Sons, Inc. Chapter 12-24
Access to Information
• Examples of documents that predate the project:
– Customer Requirements (i.e. RFP Process)
– Minutes of project selection meetings
– Minutes of senior management committees that decided to
pursue a specific area of technical interest
• Priorities must be set to ensure that important analyses
are undertaken before those of lesser importance
© 2006 John Wiley and Sons, Inc. Chapter 12-25
Measurement
• Measurement is an integral part of the audit/evaluation
process
• Performance against planned budget and schedule
usually poses no major measurement problems
• Measuring the actual expenditure against the planned
budget is harder and depends on an in-depth
understanding of the procedures used by the
accounting department
© 2006 John Wiley and Sons, Inc. Chapter 12-28
Measurement
• All cost/revenue allocation decisions must be made
when the various projects are initiated
• As long as allocations are made by a formula, major
conflict is avoided-or at least, mitigated
© 2006 John Wiley and Sons, Inc. Chapter 12-29
Copyright 2006 John Wiley & Sons, Inc.
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© 2006 John Wiley and Sons, Inc.
