1

Unit – V: Project Auditing

Project Audit

To audit is a verb that implies to inspect, analyse, check, assess,

review, or evaluate.

A project audit is a formal review of a project, intended to assess the

extent to which project management standards are being upheld.

A project audit is a structured review process of a project's

performance, progress, and outcome against pre-defined
objectives, goals, and criteria.

For a project manager, a project audit is really crucial as labor,

time, and money are all at stake.

A project audit is a systematic evaluation that attempts to analyse

a specific project using certain criteria. Project quality,
performance, and conformity to the statement of work are
examples of these.

The project audits are generally carried out by a specially

designated audit department, an advisory board, the Project
Management Office, an approved management committee or
an external auditor.

Audits differ from regular review meetings in that they are undertaken
by someone outside of the project team and the management team.
 2

Objectives of a project audit:

1. Ensure the quality of products and services
 A project audit acts as a quality assurance tool. It reviews
the project life cycle evaluating the results yielded during the
different stages, from the design phase to implementation.
 When reviewing the design phase, a project audit evaluates the
thoroughness of the design concepts, including the analysis of
alternative designs.
 Furthermore, it is assessed whether the solution is ready for
the pilot test and finally, during the implementation review, the
project audit assesses and confirms the implementation at each
site where the product is adopted.
 The identification of the errors during the process contributes
to the resolution of the problems and to understand if the project
should continue through a go/no-go decision at each stage.
2. Ensure the quality of project management
 A project audit ascertains that the project management satisfies
the standards by assessing whether it complies with the
organisation’s policies, processes and procedures.
 It evaluates the methodology used to help identify gaps in order to
introduce the required improvements.
 It further reviews the strategy utilized to simply help determine
spaces to be able to expose the necessary enhancements.
3. Risk identification
 Audits help to identify the risk factors due to the company policy
which may impact the quality, environment, time, and budget.
 The project audit assesses the feasibility of the project in terms of
affordability and performance by providing transparency and
assessing costs, time and resources.
 3

4. Performance improvement
 The monitoring of the various phases of the project life cycle can
contribute to the improvement of the project team’s performance.
 The audit also helps to improve the budget and resource
allocation.
 Identifying priorities, corrective measures and preventive actions
can lead to a positive project outcome.
 The troubleshooting process allows the project team to provide
solutions and helps prevent similar problems from recurring in the
future.
 Preventive actions and corrective measures can result in an
optimistic task result.
 Keeping track of different phases of the Project Management Life
Cycle can help the enhancement of the team’s efficiency.
 The review additionally enables you to boost your finances as well
as source allocation.
5. Learning
 A project audit can deliver learning opportunities through
assessments of project management expertise.
 Providing reviews and feedback allows individuals and project
teams to ponder their own performance.
 One can learn from experience with the help of the audit process
as well as from the feedback obtained. Thus, the team can
contemplate their very own performance
The final objective of a project audit is to ensure that the project meets
the standards of project management through investigation and
evaluation.
 4

Importance of Project Audit

 It helps us understand where we are in relation towards where
we want to be in the project.
 It informs us whether or not things are going as intended.
 We are continually assessing the health of our project, its
economic well-being, the timetable and timeliness of completion,
as well as the equipment and tools we are utilizing.
 Project audits are performed on a macro level to verify PM
standards are maintained, to discover underlying reasons of
project hiccups and failures, this is done to enhance future
project performance and results.
 An audit will strive to establish a project's total value as assessed
by return on investment.
 Another significant emphasis of project audits is risk
management. Projects must frequently adhere to industry-
specific standards and norms, and an audit will reveal areas
where the firm may be at danger of noncompliance.
 Furthermore, it allows embracing input from interested parties on
a continuous basis and making changes, which might fit with
Project audit goals.
 It offers feedback that has an immediate impact, especially if
you're performing a project review while the project is still in
process, rather than recognizing anything once the audit and the
project are completed.
 5

Types of Project Audit

Check out the list below for an overview:
1. Normal Audit
This is referred to as an audit, and it is a component of the Monitoring
and Controlling approach team. It is often known as Inspection since it
is essentially a quality control procedure. When the item is built, the
assessment is done.
2. Quality Audit
This is a critical examination of the project that forms part of the
execution method. They investigate if the team adheres to the
company's procedures.
3. Risk Audit
These audits are performed by both the Monitoring and Controlling
teams. They aid in the overall progression of the treatment.
4. Procurement Audit
The acquisition Audit Team is part of the Completion procedure team.
An organized general comment flushes out worries, establishes
mastered instructions, guarantees difficulties are fixed for future tasks,
and recognizes favorable outcomes as well as problems that warrant
transfer to different other procurements as part of procurements
closing.
 6

Project Management Audit Process

The project management audit process consists of the following steps:
1. Plan the Audit
You should never begin something without a strategy. Inform everyone
engaged in the audit and the project about the upcoming audit and
emphasize that it is nothing to be concerned about. It's a strategy of
improving things rather than assigning blame.
2. Conduct the Audit
Do the audit and go through a rigorous procedure to obtain all of the
data and proof. This involves conducting in-person, group, or
questionnaire interviews with the project sponsor, manager, and team.
3. Summarize the Audit
You'll have a lot of data at this stage, so summarize your findings
regarding any improvements and flaws in an executive summary to
provide a clear and wide overview. Make a point of recognizing and
praising people who have performed admirably.
4. Present the Results
Then, spanning from your team to your stakeholders, you'll want to
give that summary of results to everyone who needs to know about the
audit. At this stage, you should look for opportunities that have been
realised and executed, as well as a list of all problems that have been
resolved and have not been resolved. Also, please share your
recommendations.
5. Decide an Action Plan
With all of this information, you can now create an action plan to assist
in increasing efficiency. Get others involved and establish that path
with tasks and due dates. Define the solution using all of the records
gathered via interviews, meetings, or via questionnaires. This will be
forwarded to upper management.
 7

6. Plan a Follow-up
Don't let this action plan slide. Return to it and ensure that the strategy
is proceeding as planned.
7. Repeat
This is an exhaustive list that should be created in a circle because you
should never grow comfortable. Therefore, the more audits you do, the
better efficiencies you will achieve.
 8

Project Audit Process Checklist

Project audit process checklist consists of the following points:
1. Develop the Achievement Criteria
 Conduct interviews with both the project sponsors as well
as project manager to define as well as agree on the success
criteria for the project.
 Make certain that the criteria are developed in accordance with the
company's needs.
 Create a checklist with questions about the success criteria.
 Distribute the checklist to key team members and chosen
stakeholders who are actively connected to the project.
 Assign a mediator or auditor to conduct interviews with the team.
 Gather the team's responses.
 Concentrate on their perspectives on the project's
accomplishments, failures, lost opportunities, and obstacles.
 Create an audit questionnaire with open-ended questions.
 Offer the survey to the team.
 Arrange a team gathering to discuss their opinions and ideas
about the project's present stage.
 At the meeting, discuss and attempt to address important project
issues, concerns, and obstacles.
 Identify and agree on optimum cooperation and collaboration
techniques.
 Conclude the meeting by confirming that the first stage of the
project audit checklist has been completed.
 9

2. Analysis
 Individual research interviews should be conducted with key
stakeholders (funders, project manager, team) to discover and
explore the project's past, present, and future problems, difficulties,
and possibilities.
 Interview key players (contractors, vendors, and suppliers) about
the same issue.
 Create a report that summarizes the conversations and identifies
the project's general issues.
 Do a root-cause analysis to uncover and acquire insight into the
underlying causes of the problems.
 Examine each issue to assess its severity and influence on the
project.
 Prioritize the issues based on their effect and severity.
 Make a list of the problems that have been prioritized.
 Sort the list according to the following problem categories:
• Business necessities
• Team-related
• Scope
• Documentation
• Risks and contingencies Milestones and delivery status
• Changes and issues
• Quality
 Examine each problem category to find and assess which project
expectations have indeed been satisfied and which remain
unsatisfied and unmet.
 Examine the project quality plan to determine which solutions can
be implemented and which possibilities may be achieved.
 10

 Meet with the key stakeholders to discuss additional possible

solutions (not included in the quality plan) to the challenges.
 Identify and document the lessons learnt, which may be used to
enhance the quality and performance of future initiatives within the
same company.
 Check that the second stage of the project audit checklist has
been completed.
3. Report
 Gather all of the records created during all of the interviews and
meetings held throughout the previous phases in this project audit
checklist.
 Gather the information gathered from the surveys.
 Incorporate the information from the project documentation.
 Determine the quality plan-defined solutions that have been
effectively implemented to problem-solving.
 Determine which opportunities have been effectively realised.
Determine which additional solutions have been applied.
 Create a list of all the concerns that have been handled
effectively.
 Create a project audit report.
 Provide recommendations in the report.
 Describe the audit process's specifics.
 Send the report to upper management.
 Ascertain that the third stage of the project audit checklist has
been completed.
 11

How to Gather a Project Management Audit Checklist?

Here are a few crucial components to add on your project management
audit checklist.
1. Audit Objectives/Mission Statement
A project audit, like any other project, must have a clear aim or set of
objectives that it tries to fulfil. A overview of the auditing party, its
competence, and the precise sort of audit to be performed may also be
included in the audit mission statement.
2. Criteria for Project Auditing
Auditing criteria refer not only to the standards against which a project
will be assessed but also to the causes that led to the project being
audited at the initial place. A verification audit, for example, is
frequently pre-planned and selects projects for examination based on
predefined criteria. On the flip side, Issue response audits are usually
required when a project is suffering or failing. The audit's scope and
objective will be determined by the triggering conditions.
3. Procedures for Execution
Your project audit checklist ought to encompass the methodology and
processes for conducting the audit. Interviews between project team
members and stakeholders, evaluations of documents or other project
artefacts, and surveys are just a few examples.
4. Procedures for Reporting
Lastly, you should be certain about the audit reporting methods.
Informing all stakeholders on how audit results will indeed be shared
and used inside the business can go a long way towards minimizing
tensions and the perceived danger of a feared audit.
 12

Benefits of Project Management Audit

A project management audit is a structured review of a project's
management processes and performance. The audit aims to identify
areas of improvement and provide recommendations to enhance
project management practices and outcomes. Here are some benefits
of project management audit with examples:
Identify Potential Issues Early:
By conducting a project management audit, potential issues can be
identified early in the project lifecycle, allowing for timely corrective
action. For example, an audit may reveal that a project team is falling
behind schedule and has underestimated the time required to complete
critical tasks. This information can be used to adjust the project plan and
allocate resources more effectively.
Improve Project Outcomes:
A project management audit can help improve project outcomes by
identifying best practices and areas for improvement. For example, an
audit may reveal that a project team is not effectively communicating
with stakeholders, leading to misunderstandings and delays. The audit
may recommend implementing regular status updates and stakeholder
engagement to improve communication and ultimately improve project
outcomes.
Ensure Compliance with Regulations and Standards:
A project management audit can help ensure that the project is in
compliance with regulations and standards. For example, an audit may
reveal that a project is not meeting environmental or safety regulations.
The audit may recommend implementing specific procedures or controls
to ensure compliance with regulations and standards.
 13

Enhance Project Management Processes:

A project management audit can help enhance project management
processes by identifying areas for improvement. For example, an audit
may reveal that the project team is not effectively managing risks. The
audit may recommend implementing a formal risk management
process to identify, assess, and mitigate risks more effectively.
Improve Stakeholder Confidence:
By conducting a project management audit, stakeholders can gain
confidence in the project's management processes and outcomes. For
example, an audit may reveal that the project team has robust project
management processes in place and is effectively managing risks,
leading to increased stakeholder confidence in the project's success.

Project management audits can provide a range of benefits, including

identifying potential issues early, improving project outcomes, ensuring
compliance with regulations and standards, enhancing project
management processes, and improving stakeholder confidence. These
benefits can lead to more successful project outcomes, improved
organizational performance, and enhanced stakeholder satisfaction.
 14

Project Audit Life Cycle

The life cycle of an audit contains six phases: audit initiation,
project baseline definition, establishing a database, preliminary
project analysis, preparing final report and terminating the project.
As noted by Meredith and Mantel (2012) “The audit life cycle
includes audit initiation, project baseline definition, establishing a
database, preliminary project analysis, report preparation, and
termination” (p. 539). We are going to define what happens in each stage
of the audit life cycle:
1. Project audit initiation:
This step defines the purpose and the scope of the audit, determines the
proper audit methodology to use.
1. Project Audit Initiation:
This step involves starting the audit process, defining the purpose and
scope of the audit, and gathering sufficient information to determine the
proper audit methodology
2. Project baseline definition:
This step will determine which areas of the project will be audited. It will
establish the standards for which to measure the area on. Verify that the
performance established by management is meeting expectations.
2. Project Baseline Definition:
This phase of the cycle normally consists of identifying the performance
areas to be evaluated, determining standards for each area through
bench- marking or some other process, ascertaining management
performance expectations for each area, and developing a program to
measure and assemble the requisite information.
 15

3. Establishing an audit database:

 Begin the execution
 Create database depending on the basis of purpose and scope of
audit
 Database might include information for assessment, management,
project status, output quality, plans for future
 Focus on necessary information

3. Establishing an Audit:
Establishing an Audit Database Once the baseline standards are
established, execution of the audit begins. The next step is to create a
database for use by the audit team. Depending on the purpose and
scope of the audit, the database might include information needed for
assessment of project organization, management and control, past and
current project status, schedule performance, cost performance, and
output quality, as well as plans for the future of the project.
4. Preliminary analysis of the Project
 Judgment requires technical aspects such as statistics and
probability
 Analyze the data
 Present the analysis to managers
 Comparison of actuals to standard and improve processes

4. Preliminary Analysis of the Project:

After standards are set and data collected, judgments are made. But
judgment often requires a fairly sophisticated understanding of the
technical aspects of the project,and/or of statistics and probability,
subjects that may elude some managers.
 16

5. Audit report preparation:

This stage of the audit life cycle will take the information from the
preliminary analysis and prepare the audit report. The report will be made
to whatever format the organization agreed upon. Besides the findings in
the audit, there will be recommendations and a plan to implement the
recommendations in the report to use on the project. Before the
recommendations are published they will need to be verified an approved
by management.
5. Audit Report Preparation:
If the recommendations go beyond normal practices of the organization,
they will need support from the policy-making level of management. This
support should be sought and verified before the recommendations are
published.
6. Project audit termination:
When the project ends, the audit process itself will end after it has
finished the last task. There will be a final report generated and a review
of the audit process will be done. The review of the audit process is to
look for improvements in the audit and how it was conducted for future
use.
6. Project Audit Termination :
When the final report and recommendations are released, there will be a
review of the audit process. This is done in order to improve the methods
for conducting the audit.
 17

Project Termination
Project termination is the end of a project, regardless of whether the
project is complete. Typically, when a project terminates, the resources
become unavailable and the senior management might transfer team
members to other projects or the company might end their contracts.
Terminating a project at the right time is beneficial for companies as it
can help save time and money.
Reasons to Terminate a Project
Here are a few reasons to terminate a project:
Lack of funding: Often, a project might end prematurely when the initial
estimate of a project is wrong. A client or senior management might
terminate a project when the initial cost exceeds the funding cost.
Project length: When projects exceed their initial time frame, it might
become costly to complete them because the team requires additional
resources. Ending a project with no definite deadlines allows a company
to transfer or reposition employees in other projects.
Natural occurrence: Certain unpredictable natural events can be a
reason for terminating a project. Events like earthquakes, floods,
tsunamis and hurricanes might prevent project completion due to
damage to the project resources.
Unrealistic expectations: A client expects companies to exceed their
expectations when completing a project. Terminating such projects can
keep the client's expectations more realistic.
Failure in the testing process: A project might fail during the testing
process. Rather than spending more energy and resources, project
managers might prefer to terminate such projects.
 18

Types of Project Termination

Here are two ways of terminating a project:
Natural termination of projects
Typically, natural terminations of projects occur when a project reaches
its end goals and closes naturally. For example, a development team
might terminate a project after delivering software to the client. This
allows a team to deliver a report, measure the speed and efficiency at
which the project progressed and ensure the team can save project files.
When a team successfully completes a project, it allows them to close all
project needs and transfer to another project or take a rest period before
starting another task.
Unnatural termination of projects
The unnatural termination of a project occurs when a project reaches a
premature end. Reasons such as the end of funding and change in
investors might force a company to terminate a project. For instance, a
client might end the contract with a software development company and
give the contract to another company that offers greater resources at a
lower cost.
 19

Categories of Terminating a Project

Here are four categories of terminating a project:
Termination by extinction
Termination of a project by extinction occurs when the client stops a
project because it has a successful or unsuccessful outcome. Typically,
this termination occurs when the client accepts the final project outcome
or when external factors, such as technological advancement or market
crises, negatively affect the project's outcome. Another reason a client
might terminate a project is because it failed to achieve its goals. When
terminating these projects, all project activities stop.
Termination by addition
If the project is successful, it might get terminated by institutionalising it
as a new and formal part of the parent company. This process might
result in an added department, subsidiary, entity and division depending
upon the project's importance. When termination by addition happens,
resources such as materials, equipment and employees transfer to the
parent company's newly created entity.
Termination by integration
The project that a client is terminating either gets integrated into larger
projects or becomes an integral part of the ongoing operations of the
client's company. As a result, the project loses its purpose and identity
as an individual project. Typically, senior management distributes the
project resources, such as materials, equipment and employees, among
the existing projects of the client's company.
Termination by starvation
Termination by starvation happens because of budget constraints. Such
a project terminates because the project team fails to accomplish their
goals. Typically, project managers might terminate this project without
warning to save cost and embarrassment in front of clients.
 20

How to Terminate a Project?

Terminating a project requires several steps to ensure that project
managers notify the right people or departments. Here are a few steps to
follow when terminating a project:
1. Provide notice of the project's termination
Regardless of whether the client or senior management is terminating
the project, focus on informing the project managers and team members.
In addition, explain the reason for termination. Excellent communication
helps everyone understand why the project is ending and what the team
members and project managers can expect. Give details about why the
team could not deliver the final product.
2. Pause all work on the project
Notifying everyone in the company can help you pause the project's
progress. This might mean transferring resources to other projects,
closing some programmes and removing access to certain tools to
prevent any further progress. Putting a pause on all projects' progress
helps ensure that the company faces lower financial losses. For
example, when a remote employee receives a notice about the end of a
project, the company can immediately end their contract, which helps in
saving time and money.
3. Focus on the project's resources
The next step is accounting for all the project's resources, including any
programmes, tools and physical resources dedicated to the project.
Typically, these resources have a financial value and recovering them
can help managers use them in the future. When considering the
project's resources, focus on comparing the used resources with the
original estimate to understand how much the team used in the previous
projects and how much remains for the future. This allows the company
to create a termination report.
 21

4. Collect project reports and submit relevant documents

The last step in terminating a project includes creating a report that
details the project's progress and termination. Before creating the
termination report, collecting as much information as possible might be
beneficial. Though some clients might not require termination reports,
creating a detailed document can help you keep records of each project.
Maintaining records of terminated projects can help a company
understand why the project failed and what the company can do to
prevent future termination.
 22

Who Can Terminate A Project?

Only some people in a company can terminate a project. Here are some
people who have the motive and opportunity to end a project:
Client: A client has the power to end the project. As the client has an
interest in obtaining project deliverables, they might try every possibility
to avoid this termination.
Senior management: The senior management and client might start or
accept a project through a contract. This gives senior management the
power to decide whether to terminate the project.
Investors: Though investors might only be relevant in some projects,
some investors, like venture capitalists, can decide whether to terminate
the project. Often, these investors make quick termination decisions.
 23

How Can Companies Prevent The Termination Of Projects?

Companies can prevent the termination of projects in the following ways:
 Communicate the project strategy.
 Communicate how and why the project supports this strategy and
under what circumstances the project does not support it.
 Ensure a high level of senior management attention, even for
smaller projects.
 Conduct periodic meetings with clients, investors and senior
management to discuss the project's progress.
 Ensure open discussions with the senior management and client
about potential problems and ways to prevent them.
 If ending a project, clear communication and commitment from
senior management can help a team follow the project closure
procedures.
 24

Project evaluation
Project evaluation is a systematic and objective assessment of an
ongoing or completed project.
The aim is to determine the relevance and level of achievement of
project objectives, development effectiveness, efficiency, impact
and sustainability.
Project evaluation is the process of measuring the success of a project.
This is done by gathering data about the project and using an evaluation
method that allows evaluators to find performance improvement
opportunities. Project evaluation is also critical to keep stakeholders
updated on the project status and any changes that might be required to
the budget or schedule.

Project Evaluation Methods

There are three points in a project where evaluation is most needed. While
you can evaluate your project at any time, these are points where you
should have the process officially scheduled.

1. Pre-Project Evaluation
In a sense, you’re pre-evaluating your project when you write your
project charter to pitch to the stakeholders. You cannot effectively plan,
staff and control a new project if you’ve first not evaluated it. Pre-project
evaluation is the only sure way you can determine the effectiveness of
the project before executing it.
2. Ongoing Project Evaluation

To make sure your project is proceeding as planned and hitting all of the
scheduling and budget milestones you’ve set, it’s crucial that you
constantly monitor and report on your work in real-time. Only by using
 25

project metrics can you measure the success of your project and
whether or not you’re meeting the project’s goals and objectives. It’s
strongly recommended that you use project management software for
real-time and ongoing project evaluation.

3. Post-Project Evaluation
Think of this as a postmortem. Post-project evaluation is when you go
through the project’s paperwork, interview the project team and
principles and analyze all relevant data so you can understand what
worked and what went wrong. Only by developing this clear picture can
you resolve issues in upcoming projects.
 26

Project Evaluation Steps

Regardless of when you choose to run a project evaluation, the process

always has four phases: planning, implementation, completion and
dissemination of reports.

1. Planning

The ultimate goal of this step is to create a project evaluation plan, a

document that explains all details of your organization’s project evaluation
process. When planning for a project evaluation, it’s important to identify
the stakeholders and what their short-and-long-term goals are. You must
make sure that your goals and objectives for the project are clear, and it’s
critical to have settled on criteria that will tell you whether these goals and
objects are being met.

So, you’ll want to write a series of questions to pose to the stakeholders.

These queries should include subjects such as the project framework, best
practices and metrics that determine success.

By including the stakeholders in your project evaluation plan, you’ll receive

direction during the course of the project while simultaneously developing a
relationship with the stakeholders. They will get progress reports from you
throughout the project’s phases, and by building this initial relationship,
you’ll likely earn their belief that you can manage the project to their
satisfaction.

2. Implementation

While the project is running, you must monitor all aspects to make sure
you’re meeting the schedule and budget. One of the things you should
monitor during the project is the percentage completed. This is something
you should do when creating status reports and meeting with your team. To
 27

make sure you’re on track, hold the team accountable for delivering timely
tasks and maintain baseline dates to know when tasks are due.

Don’t forget to keep an eye on quality. It doesn’t matter if you deliver the
project within the allotted time frame if the product is poor. Maintain quality
reviews, and don’t delegate that responsibility. Instead, take it on yourself.

Maintaining a close relationship with the project budget is just as important

as tracking the schedule and quality. Keep an eye on costs. They will
fluctuate throughout the project, so don’t panic. However, be transparent if
you notice a need growing for more funds. Let your steering committee
know as soon as possible, so there are no surprises.

3. Completion

When you’re done with your project, you still have work to do. You’ll want to
take the data you gathered in the evaluation and learn from it so you can fix
problems that you discovered in the process. Figure out the short- and
long-term impacts of what you learned in the evaluation.

4. Reporting and Disseminating

Once the evaluation is complete, you need to record the results. To do so,
you’ll create a project evaluation report, a document that provides lessons
for the future. Deliver your report to your stakeholders to keep them
updated on the project’s progress.

How are you going to disseminate the report? There might be a protocol
for this already established in your organization. Perhaps the
stakeholders prefer a meeting to get the results face-to-face. Or maybe
they prefer PDFs with easy-to-read charts and graphs. Make sure that
you know your audience and tailor your report to them.
 28

Benefits of Project Evaluation

Project evaluation is always advisable and it can bring a wide array of
benefits to your organization. As noted above, there are many aspects
that can be measured through the project evaluation process. It’s up to
you and your stakeholders to decide the most critical factors to consider.
Here are some of the main benefits of implementing a project evaluation
process.
Better Project Management: Project evaluation helps you easily find
areas of improvement when it comes to managing your costs, tasks,
resources and time.
Improves Team performance: Project evaluation allows you to keep
track of your team’s performance and increases accountability.
Better Project Planning: Helps you compare your project baseline
against actual project performance for better planning and estimating.
Helps with Stakeholder Management: Having a good relationship with
stakeholders is key to success as a project manager. Creating a project
evaluation report is very important to keep them updated.