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Post Completion Audit Essay

1478 words - 6 pages

Post completion audit aims to evaluate the efficiency and effectiveness of the capital budgeting decision that the management has implemented. It compares between the planned and the actual outcome, costs and the use of resources, results and benefits. It contains all assumptions that were made during the decision-making period. It is one of the ongoing continuous processes through which the organisation learns and improves.Recent research suggests that capital budgeting involves far more than a simple concern with appropriate methods of appraisal. As Neale interlinked successful operation of the key phases of a sequential system as depicted below [5]. It highlights the key questions examined at different stages of the investment decision and control process.1 Determination of the budget* How much is available to spend?2 Search* What project ideas have emerged?* What costs and benefits will they generate?3 Evaluation* What is the value of the projected costs and benefits?* What is the target rate of return?* Does the project's internal rate of return exceed this? (Or does it have a positive net present value?)* How risky is the project?4 Monitoring* During implementation- Is the project on schedule?- Will costs exceed the budget?* Ongoing- Is the project performing to budget?- If not, why not?5 Post completion auditing* Is the project performing to initial expectations?* How justified were these expectations?* What lessons can we draw to assist future appraisals?Source: [5]According to Neale, the final phase of the process is the post-completion audit of the project, and it involves:* examination of the project's progress in its implementation phase; and* in-depth analysis of the realised costs and benefits to date and the likely future prospects of a project, as compared to initial expectations.The post completion audit is a positive and forward looking tool. The decision to carry out a post completion audit is normally made before the project is engaged. Unless an appropriate information system already exists, otherwise, firms should set it up from the beginning to assure that the information needed for a proper audit is available as the project progresses. The carrying out of such an audit can lead to the identification of individuals who may appear to be responsible for deviations from forecast. However, the post completion audit team should always aim to determine why and how deviations occurred, not who can be blamed for them. Once the original cause has been determined, a key step must be taken toward choosing the appropriate action for the future. The emphasis is to be placed on collecting factual and quantifiable data and information, not on second guessing the decision makers who made decisions during the various phases of the project.The post completion audit is not aimed to apportioning blame; it is aimed at understanding and at generating continuous progress. It is a major component of the strategic development of the firm. Neale...

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