Data Envelopment Analysis as a New Managerial Audit Methodology-Test and Evaluation.

Data Envelopment Analysis (DEA) is a linear programming-based technique that was developed to evaluate relative efficiency of nonprofit and public sector Decision Making Units (DMU's) that use multiple in. puts to produce multiple outputs. In this study, DEA is evaluated and tested for use as a managerial audit tool to identify and measure inefficiencies among a set of DMU's. Based on three applications of DEA, this technique is found to be useful for allocation of audit resources and for analytic review of operating efficiency when applied to a specific set of audit situations and when interpreted with recognition of DEA's particular strengths and limitations. The value of DEA is further found to extend to a class of for-profit managerial audits in addition to the nonprofit and public sector audits.