Asian Review of Accounting

The perception of public sector auditors on performance audit in Malaysia: an

exploratory study
Chew Har Loke, Suhaiza Ismail, Fatima Abdul Hamid,
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ARA
24,1
90
Received 29 December 2013
Revised 12 August 2014
Accepted 21 August 2014
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Asian Review of Accounting
Vol. 24 No. 1, 2016
pp. 90-104
© Emerald Group Publishing Limited
1321-7348
DOI 10.1108/ARA-12-2013-0082
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1321-7348.htm
The perception of public sector
auditors on performance audit in
Malaysia: an exploratory study
Chew Har Loke
Department of Accounting, International Islamic University Malaysia,
Kuala Lumpur, Malaysia
Suhaiza Ismail
Department of Accounting, Faculty of Economics and Management Sciences,
International Islamic University Malaysia, Selangor, Malaysia, and
Fatima Abdul Hamid
Department of Accounting, International Islamic University Malaysia,
Kuala Lumpur, Malaysia
Abstract
Purpose – The purpose of this paper is to explore the perception of public sector auditors on
performance audit in Malaysian public sector entities. In particular, this study elicits the respondents’
opinions on the elements of performance audit, the need for involvement of auditors in policy making,
relevant experts to undertake a performance audit, major constraints in carrying out performance
audit and the potential of performance audit to improve public administration.
Design/methodology/approach – The study employed a postal questionnaire method to seek the
perception of the auditors. The questionnaire was distributed to the population of public sector
auditors in the National Audit Department in Malaysia and a total of 503 usable responses were
received. The responses were analysed using descriptive statistical analysis including mean score and
mean score ranking.
Findings – The results reveal that auditors were of the opinion that effectiveness element should be
one of the performance audit elements and that public sector auditors should be given the opportunity
to influence policy decisions. In addition, the results show that the public auditor is not the only
profession that can carry out performance audit, but can team up with other professions. In relation to
constraints in performance audit, “Lack of cooperation and commitment from auditees in conducting a
performance audit” was claimed to be the topmost constraint. Furthermore, performance audit was
claimed to be able to enhance public accountability, as well as to enable more economical, efficient and
effective utilising of public resources.
Originality/value – This paper is one of few studies on public sector auditing particularly on
performance auditing in the context of a developing country (i.e Malaysia).
Keywords Malaysia, Government, Performance audit, Public sector auditor, Value for money audit
Paper type Research paper
1. Introduction
Performance audit also known as value for money audit is an independent evaluation
of public sector entities’ performance in achieving stated objectives or goals. The audit
comprises three related elements: economy, efficiency, and effectiveness (3Es). Of the
three elements, auditing the effectiveness of the entity is considered to be the most
challenging (Glendinning, 2007; Guthrie, 1987; Hossain, 2010; Pendlebury and Shreim,
1990). Undertaking a performance audit is essential to ensure efficient utilisation of the
yearly budget allocation by government entities. It is also to provide greater public
accountability and transparency in terms of public financial management.
 In the context of Malaysia, performance audit evolved due to the growing concern Perception of
for better governance and greater accountability in the management of public funds public sector
which has significantly changed the role of the public sector auditors. The number of
performance audit carried out increases from year to year with more areas being
auditors
covered including construction, agriculture, social, socio-economics, services,
procurements, ICT and privatisation. The Prime Minister, Dato’ Sri Najib Tun Abdul
Razak emphasises the importance of performance audit in line with the adoption of the 91
new budgeting system called “programme and performance based budgeting” (PPBB)
in Malaysia that replaces the modified budgeting system. The PPBB focuses on the
outcome of projects or programmes instead of the output and is consistent with
the fundamental concept of the performance audit (Buang, 2006). The Auditor
General (AG) of Malaysia, H.E. Tan Sri Dato’ Setia Haji Ambrin Bin Buang, emphasised
the need for such an audit by expressing his concern about the importance of public
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accountability and the role of the public sector auditing in discharging accountability.
Performance audit is not a recent issue, having existed since the nineteenth century
(Flesher and Zarzeski, 2002). For instance, the performance audit has been employed in
the USA since the 1800s and in the UK and Australia since the 1970s (Glynn, 1985;
Jones and Pendlebury, 2000; Flesher et al., 2003). However, there is still very little research
and literature on performance audit internationally, including in Malaysia. To overcome
this deficiency, the present research aims to contribute to the literature on performance
audit particularly concerning the concept of performance audit, professional groups
that participate in carrying out a performance audit, constraints in undertaking a
performance audit and impact of a performance audit on accountability.
This study is significant as it does not only extend the limited literature on
performance audit in the public sector of a developing country but also provides useful
input to the AG Office in improving performance audit of the public sector. The
remaining part of this paper is structured as follows. The following section (Section 2)
describes auditing in the public sector in Malaysia. This is followed by Section 3, which
reviews relevant literature in the context of the present study. Section 4 provides
information on the research methodology in carrying out this study, Section 5 discusses
the results of the study and, finally, Section 6 outlines the implications of the study, notes
its limitations, suggests directions for future study and makes a concluding remark.

2. Public sector auditing in Malaysia

In Malaysia, the Malaysian Audit Act (1957) Section 6 governs the audit of public
sector organisations (National Audit Department, 2012). Under this Act, public auditors
are required to ensure that public money has been properly safeguarded, utilised and
recorded. Furthermore, authorised activities are to be carried out economically,
efficiently and effectively. In general, there are two types of audit: internal audit and
external audit. Under the heading of external audit, there are three common types of
audit: financial audit, compliance audit and performance audit (Rauf et al., 2008).
A financial audit in the public sector is carried out in accordance with the provision
of the Malaysian Federal Constitution and Malaysian Audit Act 1957 (National Audit
Department, 2012). This is to ensure a sound accounting and financial system, so that
all accounting transactions are under proper control and authorisation ( Jones and
Pendlebury, 2000). The financial audit has priority among other types of audit, because
its objective is to report on the true and fair view of the financial statements and their
compliance with all the legal and regulatory requirements. A compliance audit is
 ARA mandatory under the Malaysian Audit Act, 1957 (National Audit Department, 2012).
24,1 It is used to verify that all incurred expenditure has been approved and is in accordance
with policies, laws and regulations ( Jones and Pendlebury, 2000). The auditors will
report on the degree of compliance of the government financial or operating activities in
accordance with stipulated rules and policies.
Finally, the introduction of Programme and Performance Budgeting System in
92 Malaysia in 1968 has shifted the audit emphasise to a performance audit. In 1978, the Audit
Act 1957 was amended to incorporate the mandatory requirement for the AG to undertake
a performance audit in ensuring public funds were managed economically, efficiently and
effectively. Since a performance audit determines that the government is not paying extra
public money for any spending on goods or services but solely to achieve the established
goals or objectives of a public organisation (Rauf et al., 2008), it is receiving more attention
nowadays. This is mainly because the public demands higher accountability from the
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government to ensure they receive value for the taxes they have paid (Morin, 2003).
Moreover, the uniqueness of a performance audit concerns its capability beyond the
financial and compliance audits, which is to examine the 3Es. Therefore, the present study
focuses on performance audit in public sector organisations in Malaysia.

3. Literature review
There are two types of literature on performance audit: the first type comprises of studies
which focus on the development and implementation of performance audit in various
countries; the second type seeks the perceptions of respondents on certain aspects of
performance audit. The review of the literature in this paper will cover both types
of literature, although the present study is tailored towards the second type of study.
A study by Glynn (1985) reviewed the practices and implementation of performance
audit in six countries: the UK, Canada, Australia, New Zealand, the USA and Sweden.
The study found that the UK implemented audits for economy and efficiency, rather than
for effectiveness. Effectiveness audits were practised in Australia and New Zealand,
but in Australia they were restricted to the Prime Minister’s Department and Cabinet,
and in New Zealand they addressed the adequacy of operation systems rather than the
effectiveness of actual programmes. Although the National Audit Bureau of Sweden
undertook both financial audits and audits of effectiveness, there was a lack of a
standard approach to performance audit. Thus, as Glynn (1985) concludes, different
countries have implemented performance audit differently.
The findings of Grimwood and Tomkins (1986) support those of Glynn (1985). Using
a case study, they examined whether effectiveness elements form a part of the value for
money (VFM) audit of UK local authorities. Their findings showed that little
consideration was given to the evaluation of effectiveness. By contrast, Levy’s (1996)
study in the European Union revealed a significant number of VFM audits. This was
mainly due to the growing recognition of the VFM audit within European Union
legislation, which recommended that it should form part of the financial management
and policy making process. However, Levy (1996) noted that audit development was
facing some problems, such as contradictory and incomplete accountability lines,
lack of a common approach and co-ordination, ineffective use of audit resources and
limited expertise in respect of VFM audit practices.
Guthrie (1992) published a conceptual paper on the development of public sector
auditing in Australia. In practice, in line with Glynn (1985), performance audit in
Australia was far from successful, even though it had been embarked upon in 1979.
Clearer goals and lines of responsibility were required for performance measurement and
 accountability (Guthrie, 1992). Subsequently, Hossain (2010) examined the progression of Perception of
performance audit from 1970 to 2005 in Australia. The findings showed that performance public sector
audit reports increased from 31 (1995-1996) to 48 (2004-2005) over the period of a decade.
The development of performance audit was connected to a radical change in government
auditors
policies, activities and implementation of new management systems.
Other literature studied the implications of VFM. Morin (2001) used six case studies in
1995 and 1996 to investigate whether auditors were able to influence the auditee on public 93
administration in Canada. Document analysis and interviews revealed that the VFM
audit is a useful instrument to control and improve the management of public affairs.
Glendinning (2007) conceptualised the implications of VFM for government activities in the
UK and developing countries and the problems associated with a VFM audit. The study
stated that the expenditure of the UK government had reduced since VFM was introduced;
however, VFM audit in developing countries was less advanced than in the UK.
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More recently, Gronlund et al. (2011) studied types of audit in the Swedish National
Audit Office (SNAO) from 2003 to 2008. The findings from 150 audit reports of SNAO
showed that only 18 out of the reports focused primarily on the 3Es. The SNAO seems
to treat compliance audit and VFM as the same. Analysis of the above literature seems
to indicate that although there is growing awareness of the benefits of performance
audit, the implementation, particularly of the effectiveness element is still difficult.
The concerns regarding implementation are reflected in the perception of respondents
on VFM, as discussed below.
Pendlebury and Shreim (1991) included managers of various departments of UK
local authorities as the respondents. Managers in the service and finance departments
were in agreement that the effectiveness element should not be audited as the output of
the services department was not measureable and the evaluation of effectiveness was
subjective in nature. Furthermore, the service managers also disagreed with the
application of personal judgment as part of the audit process. Similar views were
echoed in the Lapsley and Pong (2000) study of VFM audit in Scotland. The responses
from the questionnaire survey and interviews indicated that in practice, the
respondents viewed VFM audit as problematic, challenging, messy and experiential,
and that it still failed to meet the theoretical concept of a VFM audit.
By contrast, an earlier study by Pendlebury and Shreim (1990) produced more
encouraging and positive views from respondents when they surveyed the perception
of UK auditors concerning effectiveness auditing. Specifically, the study sought the
perception of auditors on whether the effectiveness element should be audited;
if external auditors were the appropriate profession to carry out the audit and whether
they should team up with other experts; whether effectiveness auditing involves the
auditor too closely with policy matters; and to identify the major constraints in performing
effectiveness auditing. The results revealed that the majority of respondents agreed that
the element of effectiveness should be part of the performance audit and that external
auditors are the appropriate profession to carry out effectiveness auditing but that it
should be conducted together with other experts, including service specialists and service
department managers. Furthermore, the majority of the respondents were of the opinion
that even though they were not involved in policy making or influenced policy decisions,
they were still able to carry out the audit on the effectiveness element. Even though the
auditors were optimistic about performance audit, they recognised that are constraints on
its implementation. The major constraints as perceived by the auditors were: the lack of
final output measurements, auditees’ concerns that the auditors would question their
policy, and the lack of clearly defined objectives (Pendlebury and Shreim, 1990).
 ARA From the review of prior studies on performance audit, it is evident that the
24,1 overwhelming majority of the studies were conceptual papers and were conducted on
the public sector in developed countries. This paper aims to fill the gap by carrying
out an empirical research on performance audit by exploring the perception of public
sector auditors on key aspects of performance audit in the context of the Malaysian
public sector. Specifically, six research questions were formulated for the present
94 study, as follows:
RQ1. Should effectiveness be an element of a performance audit?
RQ2. Do auditors need to get involved in policy making in order to perform well in a
performance audit?
RQ3. Are auditors the appropriate profession to carry out a performance audit?
RQ4. What other professions should be involved in a performance audit?
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RQ5. What are the obstacles to carrying out a performance audit?

RQ6. Does a performance audit improve public administration?

4. Methodology
4.1 Research instrument and research questions
The questionnaire used in this study is adapted from Pendlebury and Shreim (1990),
with permission. The rationale for adopting the instrument is that, although it was
developed many years back and used for exploring performance audit in the UK, its
contents focus on concept and aspects of performance audit that are compatible with
performance audit in the Malaysian context. The questionnaire is widely recognised in
the academic literature, and because it has been used internationally it facilitates future
studies to compare and contrast practices of performance audit between countries.
The questionnaire consists of five sections: Part A comprises five questions pertaining to
demographic information and the remaining four parts (Parts B-E) gather perceptions on
the various aspects of performance audit in answering the research questions.

4.2 Respondents
A total of 225 and 599 copies of the questionnaires were sent to the population of
federal and state levels of the public sector auditors in Malaysia, respectively. Before
the questionnaires were distributed to the respondents, an official letter was sent to the
AG of Malaysia, H.E. Tan Sri Dato’ Setia Haji Ambrin Bin Buang, requesting his
approval to engage public sector auditors as the respondents in this study. Upon
receiving approval from the AG, phone calls were made to all federal and state audit
department offices to confirm the postal address and number of auditors in the
respective offices. After receiving the confirmation, questionnaires were sent via
ordinary mail. An e-mail was sent to a representative in each of the national audit
offices a week after mailing out the questionnaires to obtain acknowledgement of
receipt of the questionnaires. Each target respondent received a copy of the
questionnaire together with a covering letter and a copy of the approval letter from the
AG. The respondents were clearly informed in the cover letter that the survey is for
educational purposes only.
The researchers came to an agreement with the respective audit department
offices to distribute, collect and return the completed questionnaires on behalf of
 the researchers. Two weeks later, a courteous reminder was sent via e-mail to those Perception of
offices that failed to return the questionnaire survey. This was also followed by a public sector
phone call to those who failed to reply to the e-mail. Finally, after five weeks from
the initial mailing, all except a few questionnaires were received. Table I shows an
auditors
overall response rate of 61 per cent. The Cronbach’s α test on the responses to the
questionnaire survey reveals more than 0.7 for the consistency of measurement.
95
5. Findings and discussion
5.1 Demographic information
Table II shows the demographic information of the respondents in terms of their salary
grade, academic qualifications and working experience. In total, 77 per cent of the
respondents have more than three years of work experience at NAD, with the majority
(38 per cent) of the auditors having more than ten years of work experience at NAD.
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The majority of the respondents (68 per cent) are in Grade W27/32/36. In terms of
academic qualification of the respondents, 5 per cent of the respondents gained master
degree as the highest qualification. A little over one third of the respondents are degree
holders. Whereby, the majority of the respondents (56 per cent) are diploma holders.
These results seem to be consistent with the information on respondents’ salary scale,

Questionnaires
Respondents from Distributed (population) Received and usable Response rate (%)

Federal level 225 117 52 Table I.

State level 599 386 64 Summary of
Total 824 503 61 responses

Frequency Percentage (%)

Position (grades)
Below W27 51 10
W27/32/36 338 68
W41/44/48/52/54 110 22
VU4/5/6/7 – –
Total 499 100
Academic qualifications
Diploma 258 52
Advance diploma 7 1
Degree 164 33
Master 22 5
PhD – –
Other qualifications 43 9
Total 494 100
Work experience
⩽3 years 111 23
4-6 years 134 27 Table II.
7-9 years 58 12 Demographic
⩾10 years 188 38 information of
Total 491 100 respondents
 ARA whereby the majority of the respondents are in Grade W27/32/36 posts. They are the
24,1 staff gained diploma level and required to conduct the groundwork on performance
audit. In other words, they have the practical experience to undertake a performance
audit and sufficient knowledge on performance audit, and, hence, are most suited
to provide an opinion on the subject matter addressed in the questionnaire.
The demographic information indicates that the respondents have considerable
96 knowledge and experience in undertaking performance audits and therefore should be
a reliable source of information for this study.

5.2 RQ1: Should effectiveness be an element of a performance audit?

Table III shows that the majority of the respondents disagreed with Statements 1
(54.2 per cent) and 2 (79.8 per cent) that performance audit is and should be restricted to
elements of economy and efficiency and not to effectiveness. Evidently, then, they were
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of the opinion that effectiveness should be part of the elements of performance audit.
The above results are consistent with the findings of Pendlebury and Shreim (1990),
who also claimed that effectiveness should be a component of performance audit.
Although, theoretically, this is an expected result, because performance audit should
consist of the elements of economy, efficiency and effectiveness, Grimwood and
Tomkins (1986) discovered that little emphasis has been given to the effectiveness
component of performance audit of the UK local authorities.

5.3 RQ2: Do auditors need to get involved in policy making in order to perform well
in a performance audit?
Table IV shows that nearly three quarters (74.9 per cent) of the respondents believed
that they were closely involved with the policy decisions of the public sector entity
being audited. Furthermore, 71 per cent of the respondents agreed that if they want to
conduct an audit for the effectiveness element, they should be given a chance to
influence the policy decisions of the public sector organisation being audited. These
findings, contradict the findings of Pendlebury and Shreim (1990), who claimed that
public sector auditors were not involved in policy decisions or were not given the
opportunity to influence policy decisions in carrying out a performance audit in the UK.

5.4 RQ3: Are auditors the appropriate profession to carry out a performance audit?
As shown in Table V, the majority of the respondents (72 per cent) disagreed that the
public sector auditor is the only relevant profession to make an audit judgment on a

Likert scale
1 2 3 4 5 6
No. % Mean values

1. In practice, performance audit is primarily

concerned with the audit of economy and efficiency
rather than the audit of effectiveness 8.6 26.9 18.8 18.6 24.0 3.2 3.32
Table III. 2. Performance audit should be restricted to the
Effectiveness elements of economy and efficiency, and should not
element as part of cover the effectiveness element 16.7 41.0 22.1 8.0 10.6 1.6 2.59
the performance Notes: 1 ¼ strongly disagree; 2 ¼ disagree; 3 ¼ somewhat disagree; 4 ¼ somewhat agree; 5 ¼ agree;
audit 6 ¼ strongly agree
 Likert scale
Perception of
1 2 3 4 5 6 public sector
No. % Mean values auditors
7. In undertaking a performance audit, the public
sector auditors are closely involved with the policy
decisions of the public sector entity being audited 4.8 12.2 8.2 21.4 46.5 7.0 4.14
8. In order to audit for effectiveness, the public sector 97
auditors should be given the opportunity to Table IV.
influence the policy decisions of the public sector Involvement of
organisation being audited 3.6 14.4 11 25.6 41.4 4.0 3.99 public sector
Notes: 1 ¼ strongly disagree; 2 ¼ disagree; 3 ¼ somewhat disagree; 4 ¼ somewhat agree; 5 ¼ agree; auditors in policy
6 ¼ strongly agree decisions
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Likert scale
1 2 3 4 5 6
No. % Mean values

3. Public sector auditor is the only profession

relevant to make a judgment on performance audit 14.3 35.0 22.7 12.1 13.9 2.0 2.82
5. The performance audit team should include other
relevant professions (such as engineer, Table V.
lawyer, doctor) 0.6 1.4 3.6 17.3 50.3 26.8 4.96 Public sector
Notes: 1 ¼ strongly disagree; 2 ¼ disagree; 3 ¼ somewhat disagree; 4 ¼ somewhat agree; 5 ¼ agree; auditors undertaking
6 ¼ strongly agree performance audit

performance audit, with 94.4 per cent of them agreeing that other professions should
also be involved in undertaking a performance audit. This result is in line with the
mean value of 4.96. The findings reveal that although the public sector auditor is
the usual profession that carries out a performance audit, there is a necessity to include
other experts. This is due to the broad coverage of a performance audit and with the
assistance from other professions a more reliable audit judgment could be reached.
Therefore, these findings from Malaysian auditors are similar to Pendlebury and
Shreim’s (1990) findings that other experts should be involved in carrying out a
performance audit.

5.5 RQ4: What other professions should be involved in a performance audit?

There are seven professional groups listed in the questionnaire. Table VI shows that all
the professional groups were perceived by the respondents as being at least
“moderately important”, as the mean value for all the groups are above 4. The highest
mean score (5.29) indicated that public sector auditors were deemed the most relevant
profession to conduct a performance audit. More importantly, three other professional
groups were perceived by the respondents as “very important” groups to be involved in
a performance audit. They are: technical specialists, finance officers, and services
specialists, with a mean score value of 4.95, 4.74 and 4.55, respectively.
These results imply that public sector auditors desire the assistance of technical
experts in carrying out a performance audit. The possible reason for this is that
auditors are mostly trained in accounting and auditing but not in other technical fields.
 ARA Likert scale
24,1 1 2 3 4 5 6
No. % Mean values Ranking

1. Public sector auditors 0.2 – 0.6 8.5 50.8 39.8 5.29 1

4. Technical specialists (engineers,
quantity surveyors, etc.) – – 2.4 21.1 54.9 21.5 4.95 2
98 2. Finance officers 0.6 2.9 7.1 17.9 53.3 18.0 4.74 3
3. Services specialists (lawyers,
doctors, etc.) 0.4 2.2 9.6 31.2 42.2 14.3 4.55 4
6. Internal public sector auditors 1.0 1.8 13.5 28.8 43.3 11.6 4.46 5
5. Management consultants 2.9 5.7 16.6 30.9 36.6 7.4 4.14 6
Table VI. 7. Service department managers 2.9 8.6 16.9 31.4 33.6 6.7 4.04 7
Professional groups Notes: 1 ¼ not important at all; 2 ¼ of little importance; 3 ¼ slightly important; 4 ¼ moderately
in performance audit important; 5 ¼ very important; 6 ¼ extremely important
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However, public sector activities and programmes in various sectors (including health,
education, transport and defence) involve not only financial performance but also
performance in terms of the extent the goals and objectives of the activities have been
achieved. Thus, auditors need extra support from other disciplines relevant to the
sector being audited. This is in line with Glynn (1985), Pendlebury and Shreim (1990)
and Pollitt (2003), who note that it is a trend in performance audit to seek consultation
from other disciplines. The findings of Pendlebury and Shreim (1990) also showed that
public sector auditors were ranked at the top of the list of professional groups. Hence,
the opinions of the Malaysian public sector auditors seem to be consistent with their
counterparts in the UK.

5.6 RQ5: What are the obstacles to carrying out a performance audit?
Table VII presents the responses of the public sector auditors in respect to obstacles to
carrying out the performance audit. Overall, the results reveal that the respondents
perceived all constraints as “moderate constraint”, with mean score values ranging from
2.51 to 3.13. Only one constraint is perceived as a “minor constraint”. Based on the mean
score values, as shown in Table VII, the top five constraints, in sequence of severity are:
first, “lack of cooperation and commitment from auditees in conducting the performance
audit”; second, “inadequate management information”; third, “lack of measurable final
output”; fourth, “auditees do not take the necessary action upon the recommendations
suggested by the public sector auditors”; and fifth, “lack of external experts (such as
engineer, lawyer, doctor, etc.) in a performance audit”. On the other hand, the constraint
that was ranked last, and, on average, perceived as a “minor constraint”, is “the seminars,
workshops or training available are not suitable for your post”.
“Lack of cooperation and commitment from auditees” is ranked as the top constraint
in performance audit which means that auditees failed to work closely with auditors and
were not willing to cooperate with them. The importance of commitment from auditees in
carrying out a performance audit was emphasised by Morin (2001), who stated that if
auditors want to highly influence auditees in enhancing the entity’s performance, then it
is essential to create a cooperative atmosphere between the two parties.
“Inadequate management information” is ranked as the second top constraint in
performance audit. The result indicates that 35.8 per cent of the respondents were
of the opinion that “inadequate management information” appeared to be a
 Perception of
Likert scale public sector
1 2 3 4 Mean auditors
No. % value Rank

3. Lack of cooperation and commitment from auditees in

conducting the performance audit 2.0 18.4 44.6 35.0 3.13 1
1. Inadequate management information 2.8 18.4 43.0 35.8 3.12 2 99
2. Lack of measurable final output 0.6 18.6 50.7 30.1 3.10 3
14. Auditees do not take the necessary actions upon the
recommendations suggested by the public sector auditors 3.0 20.2 45.5 31.3 3.05 4
12. Lack of participation of external experts (such as engineer,
lawyer, doctor, etc.) in a performance audit 1.6 20.6 50.0 27.8 3.04 5
7. The public sector programmes/activities lack clearly defined
goals/objectives 5.2 22.8 45.3 26.7 2.94 6
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11. Public sector auditors lack skills and expertise to conduct

the performance audit 5.8 25.5 40.7 27.9 2.91 7
15. Lack of implementation of key performance indicators (KPI)
by the respective public sector organisations 3.0 25.6 49.8 21.6 2.90 8
4. Lack of good rapport between public sector auditors
and auditees 2.6 30.1 45.8 21.5 2.86 9
6. Lack of clearly defined scope of performance audit 5.2 28.5 40.9 25.3 2.86 10
13. The law does not stress the importance of a
performance audit 8.4 29.0 39.4 23.2 2.77 11
9. Public sector auditors lack spare time to attend different
seminars, workshops or training sessions 9.6 37.9 38.5 14 2.57 12
5. The agencies being audited fear that public sector auditors
will question their policies 8.6 40.3 43.1 8.0 2.51 13
8. Seminars, workshops or training sessions are not always
available for the public sector auditors to participate 10.8 39.1 38.5 11.6 2.51 14
10. The seminars, workshops or training sessions available are Table VII.
not suitable for your post 13.3 45.2 30.5 11.0 2.39 15 Possible constraints
Notes: 1 ¼ not a constraint at all; 2 ¼ minor constraint; 3 ¼ moderate constraint; 4 ¼ severe constraint to performance audit

“severe constraint” in undertaking a performance audit. The advancement and

development of information technology have an impact on performance audit. Hence,
the planning of adequate management information in a performance audit is crucial.
Interestingly, in the study of Pendlebury and Shreim (1990), it appeared to be the least
constraint in the UK context.
The third rank of constraint in performance audit based on mean score ranking is
“lack of measureable output”. Based on the findings, 30 per cent of the respondents
agreed that “lack of measureable output” is a “severe constraint”; merely 0.6 per cent
of the respondents believe that this is “not a constraint at all”, which means that there
seems to be insufficient review mechanisms to measure the performance of
the government’s activities or programmes. Similarly, lack of measureable output
was one of the major constraints identified in the study of Pendlebury and
Shreim (1990). Lapsley and Pong (2000) stated that auditors were having problems to
form an opinion based on qualitative measures, as there would always be conflict
among the audit team members. This is consistent with Roberts and Pollitt (1994),
who revealed that the audited report rarely identifies detailed measures that allow for
future improvement.
 ARA “Auditees do not take the necessary actions upon the recommendations suggested
24,1 by the public sector auditors” was perceived by respondents as the fourth top
constraint in carrying out a performance audit, with approximately 31 per cent
perceiving it as a “severe constraint”. In addition, there are respondents who explained
in the open-ended question that the audit recommendations are not accepted by the
auditees because of influence from high-level management. Auditors could provide
100 relevant recommendations to improve public administration, but the efforts
contributed by the public auditors may not be appreciated because there is a lack of
initiative for corrective action. Lapsley and Pong (2000) commented that it was
extremely difficult to induce change, as the excuse given by the auditees was that it
might work theoretically but would not work practically. Clearly, poor cooperation in
the administration and the resistance to change could hinder a performance audit.
The next constraint is “lack of participation of external experts (such as engineer,
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lawyer, doctor, etc.) in a performance audit”. Approximately 28 per cent of the respondents
agreed that lack of external experts is a “severe constraint”, which indicates the need of
other professions in undertaking a performance audit. A simple reason is that auditors are
unable to become experts in all areas, particularly in technical aspects. Traditionally,
public sector auditors were the only official group or profession to carry out a performance
audit, without including the opinions of other experts. However, this has become one of the
roadblocks to a performance audit. This result is in line with the study of Pendlebury and
Shreim (1990), who claimed that a performance audit requires a high level of non-financial
skills, particularly in respect to the effectiveness element, to form a quality opinion.
Similarly, Glynn (1984) suggested involving non-accounting specialists to assist in a
performance audit even though it is not specified who should be part of the audit team.

5.7 RQ6: Does a performance audit improve public administration?

The last research question of the present study is to examine whether a performance
audit could improve public administration. The results in Table VIII shows that
89.3 per cent of the respondents “somewhat agree” that auditees have followed the
recommendations given by the auditors to enhance the performance of the public sector
entities. This is supported by the mean score value of approximately 5, which means
that, on average, the respondents agreed that the auditees have taken the necessary
action based on the recommendations made by the auditors. This is a positive sign as it
shows that public sector entities are taking the recommendations made seriously,
which, ultimately, will result in an improvement in the public administration of the
audited entity.
The results also show that a vast majority (W90 per cent) of public sector auditors
“somewhat agree” that performance audit increases public accountability, economy,
effectiveness and efficiency of public sector entities. Furthermore, more than 95 per cent
of the respondents perceived that once the constraints (as listed in Table VII) are
resolved, performance audit would definitely increase accountability and achieve the 3Es.
The two findings are supported by the mean values of above 5, which signify that, on
average, the respondents agreed that performance audit could improve public
administration in terms of accountability, economy, efficiency and effectiveness.
The result is consistent with the claim made by Salleh and Khalid (2011) and Lapsley
Pong (2000) that performance audit is an effective approach to enhancing accountability
and it is needed to maintain public accountability. Similarly, Hossain (2010) asserted that
performance audit is useful to report the overall performance of an entity in terms of
utilising the public resource economically, efficiently and effectively.
 Likert scale
Perception of
1 2 3 4 5 6 public sector
No. % Mean value auditors
1. Auditees have followed auditors’ recommendations 0.6 0.6 9.5 33.5 47.9 7.9 4.51
2. The performance audit currently carried out by the
public sector auditors does assist the public sector
organisations to 101
(i) increase public accountability – 0.4 1.4 12.3 59.0 27.0 5.11
(ii) achieve economy 0.2 0.4 3.0 19.5 55.6 21.3 4.94
(iii) achieve efficiency 0.2 0.2 2.8 16.6 57.9 22.2 4.99
(iv) achieve effectiveness 0.2 0.2 2.2 18.1 56.2 23.1 4.99
3. Without those constraints in part D, performance
audit should assist the public sector organisations to
(i) increase public accountability 0.2 0.2 2.2 11.2 53.5 32.7 5.16
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(ii) achieve economy 0.2 0.4 2.2 13.5 55.8 27.9 5.08 Table VIII.
(iii) achieve efficiency 0.2 0.4 2.6 11.2 57.0 28.5 5.10 Improvement in
(iv) achieve effectiveness 0.2 0.4 2.2 11.9 55.3 30.0 5.12 public administration
Notes: 1 ¼ strongly disagree; 2 ¼ disagree; 3 ¼ somewhat disagree; 4 ¼ somewhat agree; 5 ¼ agree; due to
6 ¼ strongly agree performance audit

6. Implications, limitations, suggestions for future research

and conclusion
The main objective of this study is to investigate the perception of Malaysian public
sector auditors on performance audit. Based on the findings of the study, Malaysian
public sector auditors are optimistic about performance audit and perceive that the
effectiveness element should be an element of any performance audit. The auditors
believe that they are the appropriate profession to conduct the performance audit, but
they welcome the participation of other professions. Furthermore, even though there
are considerable concerns on the possible constraints of performance audit, the
majority of the auditors are of the opinion that the auditees do consider the
recommendations made by the auditors. They are also are of the opinion that a
performance audit could improve public administration and accountability.
The empirical evidence offered in this study contributes in several ways. First, the
evidence on the positive impact of performance audit on public accountability is useful
to the National Audit Department in preparing their annual audit plan. Specifically, the
NAD may want to consider the need to expand the coverage of performance audit not
only on few selected high impact programmes and activities but also on other
government activities and programmes in order to further improve the effectiveness
and efficiency of public services as well as the accountability of the government to
the public.
Second, on the composition of audit teams, the AG may want to establish a policy to
encourage other professions besides audit experts to participate in undertaking a
performance audit. It may also be useful to consider the exchange of valuable audit
experience, skills or expertise of different government programmes or activities
between countries. These initiatives could possibly optimise the achievement of
performance audit’s objectives.
Third, in minimising the key constraints of undertaking performance audits of
“Lack of cooperation and commitment from auditees” and “Auditees do not take
 ARA necessary action upon the recommendations suggested by the public sector auditors”, the
24,1 National Audit Department may want to consider organising awareness workshops to
representatives of government entities in order to help auditees better understand the
importance of performance audit, to realise that their cooperation is needed throughout
the audit process and to take seriously the recommendations made by the auditors.
Fourth and finally, the contribution of this present study is that it discloses the
102 empirical evidence concerning the perception of public sector auditors of performance
audit in the Malaysian context. Since there is scant research on the public sector and a
lack of studies in examining the perception of the Malaysian public sector auditors on
performance audit, this study contributes to filling the research gap. In addition, this
research will, hopefully, initiate more research on the public sector that will expand the
present study.
This study has shortcomings. Due to the limitations of the survey method, the
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respondents may have lacked commitment to answering the questionnaire due to time
constraints and fear of negative consequences, even though respondents were informed
that their confidentiality is ensured and that the data are collected for research
purposes only. Nevertheless, measures were taken to reduce the likelihood of Malaysia
to carry out the study. In addition, although auditors are the most appropriate
respondents to the research questions, as they themselves directly experience
undertaking performance audits, there is the possibility of self-response bias.
Therefore, other groups of respondents such as private auditors, technical specialists or
auditees are suggested to be the part of the respondents in future research. The present
study analysed the results mainly based on the overall respondents regardless of
whether they are auditors at the federal or the state levels. In minimising the potential
bias in the opinion between the two groups of respondents, future study may want to
also investigate the differences in the perceptions between the two groups of auditors.
In addition, future studies may want to refine the results by analysing the responses
based on length of experience and job positions of the respondents in order to identify
the differences in auditors’ perceptions. Also, Furthermore, where this study used only
the survey method concerning perception, future research may opt for focus groups,
case studies or interviews, as research methods, which would enable direct interaction
with the respondents.
Despite the mentioned shortcomings, this exploratory study provides relevant
information to stimulate more interest in this area of research and pave the way for
future studies. It also hopes to support the AG in the development of performance
audit. Such effort is desirable, since performance audit is a mechanism to ensure the
accountability of the government.
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Further reading
Ahmad, H.N., Othman, R., Othman, R. and Jusoff, K. (2009), “The effectiveness of internal audit in
Malaysia”, Journal of Modern Accounting and Auditing, Vol. 5 No. 9, pp. 53-62.
Ismail, S.S.S., Ali, E.I.E., Fadzil, F.H.H. and Hussin, H. (2011), Public Sector Accounting and
Financial Management in Malaysia, Pearson Custom Publishing, Petaling Jaya.
 ARA Jones, P.C. and Bates, J.G. (1990), Public Sector Auditing: Practical Techniques for an Intergrated
Approach, 1st ed., Chapman and Hall, London and New York, NY.
24,1
National Audit Department (2008), “Performance management of the national audit department of
Malaysia”, 20th Commonwealth Auditors General Conference, available at: www.audit.gov.
my/index.php?option¼com_content&view¼article&id¼72&Itemid¼276&lang¼en (accessed
January 2014).
104 Othman, O., Ismail, M.S.H., Ismail, S.S.S., Saidin, S.Z.H., Rahim, M.S.H., Saleh, M.S.M. and
Lazim, M.M. (2007), Public Sector Accounting in Malaysia, Cengage Learning Asia Pte Ltd.

Corresponding author
Suhaiza Ismail can be contacted at: suhaiza@iium.edu.my
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