Project Audit: what it is and how to perform it

A project audit for a project manager is like a judgement day. That’s because work, time and money are at stake.

The word ‘audit’ may have a negative connotation sometimes, particularly for the one who’s subjected to it. Although it is not always a joyfully expected event, a project audit can lead to a positive result, regardless of whether a project manager overcomes it or not.

Let’s take a closer look at what this is about and how to perform it in the best possible way.

What is a project audit?

A project audit is a formal review of a project, often intended to assess the extent to which project management standards are being upheld.

Audits are generally carried out by a specially designated audit department, the Project Management Office, an approved management committee or an external auditor.

Whoever is responsible for performing the audit must be in charge of the designated authority and issue related recommendations.

The final objective of a project audit is to ensure that the project meets the standards of project management through investigation and evaluation.

Below are the five main 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.

3. Identify the business risk

Project audits support the identification of business factors where risks may reside, which could affect budget, time, environment and quality.

After all, the organization itself is keen to achieve a positive outcome to the project.

The project audit assesses the feasibility of the project in terms of affordability and performance by providing transparency and assessing costs, time and resources.

Apply a review and equalization approach when it comes to controlling the budget, examining data that includes estimated and actual costs, as well as costs of meeting goals.

4. Improve project performance

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.

5. Learn

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.

Audit policies and activation procedures

In order to achieve the benefits expected from a project audit, each stage, element and outcome of the audit process must be clearly set out and openly disclosed, including:

• Audit mission statement: this document should clearly define the purposes, objectives, authority and limits of the audit operation, as well as the type of audits to be conducted.
• Specification of audit competencies: a detailed specification of the auditor’s skills and experience, showing that the audit staff possess adequate expertise to audit the project.
• Roles and responsibilities of the actors involved: a detailed statement of all the roles and responsibilities covered by the audit, both for the person conducting the audit and for the project team – including the project manager, team members, project sponsors, clients and any stakeholder.
• ‘Trigger’ audit criteria: a complete list of all the criteria on the basis of which projects will be selected for an audit. It would be too costly and time-consuming and would defeat the purpose of the audit process itself. Thus, specific criteria should be established to identify projects to be audited on the basis of risk, complexity, internal value, costs, etc.
• Audit start procedures: a description of the procedures for the initiation of the audit, including the process by which individual project managers are informed of an outstanding audit and the related preparation requirements.
• Audit execution procedures: a list of audit procedures that cover the methods to be used during the audit. This varies according to the type and timing of each audit, but may include personal interviews with project staff, document reviews, questionnaires and more.
• Audit reporting procedures: a specification of the audit reporting procedures, which covers how and the way in which the audit results will be reported and reviewed. In order to minimize the threatening nature of the project audit, all parties should be fully aware of how the results will be disclosed and used within the organization.
• Audit redress procedures: a specification of all procedures to be followed to appeal and/or dispute the reported audit results.

When one or more projects fail to successfully complete an audit, this does not necessarily mean that the project manager or team are at fault..

Perhaps the project management standards are not adequately scaled and tailored to the needs of the project or organization?

Maybe a lack of training or communication is the cause that led to the negative result?

Basically, project audits are rarely well received and are often controversial, but if performed correctly they provide unprecedented opportunities for learning from mistakes and the identification of important problems that would inevitably lead to the failure of the project.

Finally, remember: if a project is well planned from the beginning and the company uses good management software, the auditing process will also run smoother.

A great tool for managing your projects is Twproject. You can take a free trial and see if it fits your needs. It will amaze you!