Its document 'The Efficient Government Initiative: a progress report' said the 32 Scottish councils achieved£122m efficiency gains in 2005/06.
Audit Scotland said: 'The overall approach is insufficient to validate the accuracy of reported savings.'
A group has been set up to look at how efficiency savings in councils can be better measured. Led by performance management consultants Aspiren, the team also includes COSLA, the Improvement Services and CIPFA's directors of finance section.
Audit Scotland concluded that the Scottish Executive should ensure all reported efficiency savings are calculated using robust methods.
And the executive should improve the standard of measures available to show the impact of efficiency savings on the quality of services delivered.
To compile the report, Audit Scotland reviewed progress made under the initiative by reviewing a sample of 12 projects covered by efficiency technical notes.
In local government,£168m of the£318m expected savings will be delivered by top-slicing grant assisted expenditure.
The remaining gains are expected to come from locally managed projects, although councils do not have individual targets.
Local government is expected to make£168.3m in savings in 2007/08, compared with£112.6m in 2006/07 and£81.8m in 2005/06.