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This article was first published in the June 2020 UK edition of
Accounting and Business magazine.

As part of ACCA’s theme on the purpose of the profession, AB spoke to auditor generals around the world – including some members – before the outbreak of Covid-19, about their views on the value of public sector audit, its purpose and how its role can be extended.

While not all auditor generals come from an accountancy background, the environment of a supreme audit institution (SAI) is one where finance professionals can wield significant influence over public finance. During the current Covid-19 pandemic, auditor generals are under more pressure than ever as governments increase spending where they can to support business and citizens through unprecedented times.

Mohammad Naiem Haqmal FCCA has been auditor general of Afghanistan since January 2019. He is crystal-clear about what he sees as the key purpose of supreme audit institutions. They represent, he believes, an important pillar of national democratic systems and governance mechanisms.

‘Supreme audit institutions are established as an important actor in a country’s accountability chain,’ he says, ‘being independent of those charged with governance or responsible for management of public resources.

‘In a democratic system, elected governments entrusted with raising resources from taxpayers and other sources, and to use these to provide services to citizens and other service recipients. Those governments have established public-sector organisations to deliver services on the basis of their  mandates and the needs of the citizens.

‘They are accountable for their management and performance, and their use of resources to those that provide them with the resources and those that depend on them to use the resources to deliver necessary services, including citizens.’

Pamela Monroe Ellis FCCA, who has been the auditor general of Jamaica since 2008, agrees. ‘The SAIs are an important element of the governance arrangement and the public financial management system, providing an independent and objective oversight function of government,’ she says. ‘The aim is to determine whether government practices, expenditure and transactional activities are in keeping with guidelines, regulation and laws.’

One key auditor general role is to ensure that taxpayers’ money is being spent wisely and delivers value for money – an area that will be tested to the limit by the Covid-19 demands on public spending.

Independent review

‘This takes it further than our compliance work,’ Monroe Ellis says. ‘SAIs have for the most part, especially in the “Westminster” system, a level of independence under the constitution, which should provide auditor generals with the tools to carry out such reviews.’

Pakistan’s auditor general Javaid Jehangir, in post since 2017, believes the auditor general plays a vital role in a country’s overall financial management. ‘Through feedback to the legislature, the auditor general informs the public at large how their funds are being spent and whether government functionaries are delivering the right type of services and goods to the public,’ he explains.

Haqmal also emphasises the extent of the SAI role. ‘Public sector auditing does not exist just to make sure the figures add up,’ he says. ‘It also helps to create the conditions and to reinforce the expectation that public sector entities and public servants will perform their functions effectively, efficiently, ethically and in accordance with laws and regulations.’

And the tone at the top for the auditor general is fundamental here. ‘In addition to leading and directing the day-to-day operations of the entity, the auditor general is involved in deciding the overall strategy and policies for the institution,’ Monroe Ellis says.

The purpose of public sector audit work goes far beyond checking the financial position of government, providing taxpayers – the public sector equivalent of shareholders – with the assurances that their ‘investment’ is subject to good governance, proper controls and effective stewardship.

Value for money is a phrase that crops up all around the world. The UK’s National Audit Office (NAO), for example, prepares a regular series of reports on key government projects such as the progress made with the HS2 high-speed rail link or the cost of European Union exit preparations. It also provides an audit service for government departments and other public sector bodies such as the BBC.

In the case of the BBC, it is the licence-fee payer who expects an appropriate audit. Even here, the NAO also conducts value-for-money assessments of the use of the licence fee and the BBC’s commercial activities.

Recommendations

Based on the results of its audits, Haqmal says that the auditor general may provide corrective recommendations and policy advice to the public sector entities or the government as a whole. For example, the Supreme Audit Office of Afghanistan is in the process of conducting an audit of government preparation for implementing sustainable development goals. Based on the findings, the auditor general will be able to advise the government about areas that require attention or a change in policy. Indeed, the auditor general may well be involved in formulating public financial management policy, implementing policies and reforms, strengthening governance and accountability, managing change and building capacity.

However, in some cases the purpose of the auditor general’s office can be undervalued. With the private sector offering greater rewards, the brightest and best candidates do not necessarily gravitate towards the SAI. Against this, Monroe Ellis stresses the importance of measurement – reporting the expenditure that is under review and juxtaposing that with the cost of the audit. ‘This is an effective way of championing our effectiveness and therefore our purpose,’ she says.

Jehangir also stresses the constant need to be on the lookout for corruption. ‘We keep a firm watch and monitor the national situation, putting red flags on issues where there are suspicions of mismanagement or corruption,’ he says.

SAIs are traditionally known for overseeing public expenditure, and that remains a core part of the audit portfolio. They undertake financial audits to assess the reliability and accuracy of public entities’ financial reporting, and compliance audits to assess their compliance with governing authorities.

However, as Haqmal says, the role of SAIs is evolving, as they increasingly take a broader, more comprehensive view on reliability, effectiveness, efficiency and economy of policies and programmes. ‘SAIs have untapped potential to go beyond their traditional oversight role and contribute evidence for more informed policymaking,’ he says.

‘The value-for-money audits that are carried out under the title of performance audits are focusing on systems, results or complaints from society, media and the citizens,’ he adds. ‘Performance auditing is an important building block with which to improve accountable and responsive governance of public resources.

‘Public sector auditing is essential in that it provides legislative and oversight bodies, those charged with governance and the general public, with information and independent and objective assessments concerning the stewardship and performance of government policies, programmes or operations.’

Philip Smith, journalist