PRIORITIZING IMPROVEMENT IN AUDITING PERFORMANCE

1
PRIORITIZING IMPROVEMENT IN AUDITING PERFORMANCE

• A COUNTRY CASE STUDY FROM SOUTH AFRICA (strategy
  translated into operational)

2
BACKGROUND
The Auditor-General of the 1980s

• Seated within government
• The annual budget
• The Public Service Commission
• The Exchequers Act and Audit Circulars
• Reporting to segregated Houses of Parliament
• The quest for an identifiable public sector audit
  profession
• Shortage of skilled auditors and guidance

3
WHERE DID WE WANT TO BE?

• Independent of government
• Self-funded
• Empowered to obtain skilled resources
• Auditable legislative requirements
• A credible accountability process
• Professionalism
• Healthy skills base and adequate tools

4
INDEPENDENCE

• Auditor-General is now entrenched in the
  Constitution of South Africa as an Institution
  Supporting Constitutional Democracy
• Auditor-General is appointed, effectively, by
  Parliament
• Has fixed, non-renewable term of between five and
  ten years
• Two thirds majority in Parliament necessary to
  dismiss
• May appoint an office separate of government
  (Office of the Auditor-General)
• CEO of this office reports only to
  Auditor-General and Audit Commission
• Auditor-General and office must display no
  political agenda and report without fear or
  favour may develop government auditing as seen
  fit

5
SELF-FUNDING

• Dependence on vote by National Treasury
  compromised position
• Various other models options available
• AG now invoices auditees legislation supports
  recovery
• Credit control is continuous management issue
• Prepares income and expenditure budget Audit
  Commission approves independently of the executive

6
PUBLIC SERVICE COMMISSION (PSC) AND HUMAN
RESOURCES

• Regulates and controls government human resources
• Auditor-General now independent of PSC
• Human resources are now an equation of budget,
  market, needs and performance
• Able to implement own systems and performance
  management process specifically designed for
  auditors

7
AUDITABLE LEGISLATIVE REQUIREMENTS

• Constitutional mandate to audit and report on -
• financial statements
• financial management
• of all tiers of government
• to acquire resources, implement liaisons
  processes as needed to do the above
• without interference by anyone

8
AUDITABLE LEGISLATIVE REQUIREMENTS (continued)

• Therefore, as is international best practice,
  someone else to regulate -
• requirements for financial statements
• requirements for financial management
• for all tiers of government
• Public Finance Management Act (1999)
• Municipal Finance Management Bill
• Accounting Standards Board only just commenced
  operations

9
A CREDIBLE ACCOUNTABILITY PROCESS

• Segregated houses of Parliament replaced by
  integrated legislatures for each sphere of
  government various Auditors-General negotiated
  and amalgamated to one
• Constitution and subsequent legislation spells
  out competencies and accountability of each
  sphere
• Audits completed as per internationally
  standardized process

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A CREDIBLE ACCOUNTABILITY PROCESS (continued)

• Includes queries management letters to top
  management, obtains responses before reporting
  externally
• Final reports to relevant legislature,
  discussions public hearings, corrective measures,
  follow-up
• Municipal process is complex due to number and
  location of municipalities

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A CREDIBLE ACCOUNTABILITY PROCESS (continued)

• Municipalities amalgamated, elected 2001
• Public entities process under review
• Accountability for performance, environment etc.
  is new

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PROFESSIONALISM

• Affiliation with INTOSAI and development of SA
  Institute of Government Auditors laid the
  foundation
• Harmonisation with IFAC auditing standards
  followed
• Process not completed as many stakeholders
  outside the office the following processes
  underway
• Accounting Professions Bill
• Standardisation of qualifications
• Institute for Public Finance and Audit
• The Auditing Standards Board of SA, linked to
  IFAC

13
SKILLED AUDITORS WITH ADEQUATE TOOLS

• Independence from government and PSC enabled
• demand-supply participation on HR market
• The development of the profession, and
  international harmonisation enabled usage of
  CAs article scheme
• The promulgation of comprehensive legislation
  enables compilation of proper programmes and
  scheduling of audits, e.g. PFMA catch-up action

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SKILLED AUDITORS WITH ADEQUATE TOOLS (cont.)

• Audit software employed to standardise audits,
  increase
• cost-efficiency, enforce review of audits
  quality control
• Harmonisation of auditing standards improved
  cooperation with private audit firms.
• Technical committee process distribution by cd
  intranet

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CONCLUSION

• The relationship with the tax-payer is a long
  term one that evolves slowly
• Auditing performance must first improve and
  establish value and credibility
• It has taken a long time to establish an image of
  independence at least

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CONCLUSION (continued)

• SA has other historic issues of public trust that
  are difficult to remedy
• Further refinement and consolidation of
  legislation is underway with the Auditor-General
  Bill
• Public communication roadshow process inside
  outside office was continuous process throughout

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CASE STUDY OF HOW SA WENT ABOUT ABOVE PROCESS
GLOBAL HARMONISATION PROFESSIONAL DEVELOPMENT