USING RISK TO ALLOCATE AUDIT RESOURCES

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USING RISK TO ALLOCATE AUDIT RESOURCES

• Peter Carlill
• Audit Manager, UK NAO
• UK National Audit Office (since 1980)
• International Technical Co-operation (since 2001)
• Resident Advisor Latvia (2 Years)
• Short-term Advisor Sri - Lanka, Lithuania,
  Albania

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Our role

• To provide independent information, assurance and
  advice to Parliament on the use of public
  resources
• To help promote better financial management and
  value for money

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The Comptroller Auditor General (CAG)

• Officer of the House of Commons
• Appointed by the Queen
• Comprehensive access rights
• Independent

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CAGs responsibilities Discretionary powers -
he may

• Carry out performance audit examinations
• audit and certify other accounts by agreement
• report to Parliament on the results of these
  examinations
• He does NOT
• Formally disallow expenditure, give judgements
  or rulings
• Question policy objectives in performance audit
  examinations
• Report other than to Parliament except
  International accounts

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Audited bodies

• CAG audits 600 financial statements covering
  456 billion
• Revenue of 337 billion
• Assets worth 203 billion
• Long term\liabilities of 37 billion

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Financial audit

• Audit Opinions
• Reports on Accounts
• Advice and guidance

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Value For Money audit

• How well Government policy is delivered
• In particular
• Economy
• Efficiency
• Effectiveness

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Impact

• Savings of over 8 every 1 spent by the NAO
• 1.4 BILLION saved over the last three years
• Over 90 PER CENT of PAC recommendations accepted

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Resources by Objective

• Allocation of Resources by Objective
• Exp Inc
• Certifying and reporting on accounts 31m
  9m
• Value for Money work 18m -
• Examining risk to financial systems
  5m -
• Other work for Parliament and the Public 9m
  4m
• Comptroller Function
  - -
• Total 63m 13m

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USE OF RISK

• Choosing performance audit topics
• In undertaking financial audits

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Performance audit

• Balance between 4 areas
• Delivery of public services
• Large resources/ assets high risk
• Financial Impacts
• Topicality/ previous reports

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Risks to VFM

• Overspending, projects late
• Performance targets not being met
• Complaints
• Debt
• Innovation
• Failing systems
• Small spend/high impact

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RISKS TO VFM

• Analyse
• Performance against objectives
• Main costs
• Use of resources
• Level of service
• Compliance with regulations

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RISK MATRIX

• CRITERIA DEPT/PROG/ACTIVITY
• Spend/assets/revenue
• Risk to vfm
• Parliamentary interest
• Potential for improving vfm
• OVERALL RATING

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FINANCIAL AUDIT

• All accounts split into account areas/transaction
  streams
• Risk of Material error?
• Management Response
• Audit response
• Audit reporting

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QUESTIONS?
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http//www.nao.gov.uk