What is a performance audit and how does it differ from a financial audit?

• A. Evaluates program performance and outcomes; financial audit focuses on financial statements and compliance.
• B. They are the same type of audit.
• C. Performance audits only assess budgets.
• D. Financial audits assess program outcomes.

Answer: (A)

The main idea here is understanding the different aims of the two types of audits. A performance audit looks at how well a program is doing—whether it achieves its objectives, how efficiently and economically resources are used, and what outcomes or impacts result from the program. It asks questions like: Are goals being met? Are there better ways to design or run the program? What improvements could boost effectiveness?

A financial audit, in contrast, focuses on the financial side: the accuracy and presentation of financial statements, compliance with accounting standards and laws, and the effectiveness of internal controls over financial reporting. It examines monetary data—revenues, expenses, assets, liabilities—and ensures the numbers are fairly presented and supported by evidence.

So the correct choice captures this distinction: a performance audit evaluates program performance and outcomes, while a financial audit concentrates on financial statements and compliance.