Basics of Project Management: Project Auditing and Termination

By Akhil Gupta|Updated : May 18th, 2021























































Project evaluation is considered an essential tool in project management. Project audit assesses the performance of the project with respect to its available resources. In other words, it provides comprehensive feedback on project status. Such feedback enables senior management to make an informed decision that will push the project in achieving its objectives.

Some of the primary benefits of project audit are:

(i) It helps improve the performance of the project.

(ii) It enhances customer and stakeholder satisfaction, saves costs.

(iii) Project Auditing provides early problem diagnostics, identifies future opportunities for improvement

(iv) Evaluates performance of the project team

(v) Reconfirms feasibility of commitment to the project.


Project auditing refers to the systematic evaluation of the ways project management ideals are applied to the project. It involves a thorough review process to establish best practices and serves as a pillar to support management decisions needed for the project.

Following are the documents that must be gathered by the audit team before starting the process of auditing:

  • Preliminary project documents such as Request for Proposal (RFP), minutes of project board meetings and other technical documents from senior management
  • The project plan and other documents developed during the course of project implementation
  • Status report on the project and other important technical documents

2.1.   Project Audit Lifecycle

There are six phases in project auditing:

(i) Audit initiation: This is the first phase that signals the start of the entire audit process. It involves the following activities:

  • The purpose and scope of the audit are established. It defines when and how the auditing will be done.
    • All the necessary documents are collected in this phase of auditing only.
    • Auditing methods and practices suitable for auditing the project are established in this phase of the process.
    • Rules, guidelines, and other auditing protocols are clearly defined.

    (ii) Baseline definition of the project: This phase focuses on the establishment of concrete benchmarking parameters used to assess the project. These parameters can be the previous projects implemented, standards set by project management bodies, or agreed standards set by the parent organization and the audit team. The output of the project will be evaluated based on these parameters established at this phase.

    (iii) Audit database: Once the yardsticks for the assessment of the project are established then, a database should be created to enable the audit team in discharging its duties. The information gathered in the initial stage of the audit exercise should be stored in this database for the evaluation of:

    • The management of the project
    • The current and future status of the project
    • The project schedule, budget, and quality in terms of its performance and meeting client’s requirements

    This database can serve as an important repository that the parent organization can use to manage similar and future projects.

    (iv) Initial analysis of the project: After the collection of data and database is created, an initial assessment is done by the auditing team and the facts are presented before the management. Decisions are made by management only regarding the project.

    (v) Preparation of the audit report: This involves collating the facts about the project and putting it in a format called an audit report. This format should be approved by the parent organization before being used by the project audit team. The report should contain recommendations made by the team and possible remedies if there be concerning the project.

    (vi) Termination of the audit: This involves bringing to a close the entire audit process. However, it can only be terminated when the report has been properly reviewed, recommendations addressed and released by the management.

    2.2.   Types of Audits

    (i) Technical Audit: Technical audit is an audit performed by an auditor that evaluates deficiencies or areas of improvement in a process, system or proposal. The technical audit covers the technical aspects of the project implemented in the organization. For this, an auditor should have a deep knowledge of development, design and security standards, with the latest algorithm updates.

  • (ii) Financial Audit: At the time of project appraisal, a proper estimate of project cost, operation cost, maintenance cost, etc. is made. Financial auditing is done to find out whether the actual project cost is as per the estimate made at the time of appraisal or not. Remedial measures are taken immediately if the deviation of the actual cost is much larger than the estimated cost.

    (iii) Economic Audit: In this type of evaluation social cost and benefits of the project are identified. This type of evaluation is most relevant in public sectors and community development projects.

    Evaluation is an essential component of every project geared towards achieving project objectives. During the evaluation of the project, the project manager and team will be able to estimate schedule, cost and quality which are critical in the assessment of project performance. The progress made so far in the project can be estimated using parameters such as schedule variance, cost variance and time variance. These parameters compare the planned estimates as against what is achieved so far in the project; thus, enabling the project manager and team to establish whether the project is doing fine or not. Allocating cost to project evaluation proves beneficial to the project manager and team in their pursuit to achieve project success.


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Akhil GuptaAkhil GuptaMember since Oct 2019
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