Role of the Auditor-General
The role of the Auditor-General is an important one. Parliament relies on the Auditor-General to provide independent assurance that governmental activities are carried out, and accounted for, consistent with Parliament's intentions.
The role of the Auditor-General in any jurisdiction is based on some common principles which have not always been clearly stated or understood. Those people who can make decisions that might affect the role of the Auditor-General especially need to understand these principles.
This booklet sets out the fundamental principles that underpin the role of every Auditor-General. The booklet should be useful to Members of Parliament, Ministers, policy advisors, and researchers.
THE CONSTITUTIONAL BASIS FOR THE ROLE
PRINCIPLE: The role of the Auditor-General is derived from the functions of Parliament. The role exists to provide Parliament with independently derived audit information about the executive arm of government.
Parliament is supreme in our systems of government. The executive arm of government (Executive Government) relies on Parliament's authority for most of its powers and resources. The Executive Government is responsible to, and subject to scrutiny by, Parliament for its performance. The role of the Auditor-General is derived from these constitutional arrangements.
Parliament may scrutinise governmental performance by directly examining Ministers or officials, or by asking that certain information be presented to it. This scrutiny by Parliament is concerned with ensuring governmental activities are carried out in a manner consistent with Parliament's intentions, and are effective, efficient and economical.
Parliament may also rely on an independent statutory officer, the Auditor-General, to provide it with information about whether governmental activities are being carried out and accounted for consistent with the Parliament's intentions.
The role of the Auditor-General is therefore an important element of helping to maintain the integrity of any systems of government. The Auditor-General ensures that Parliament has access to independent audit information as part of the framework of accountability and scrutiny of the Executive Government.
INDEPENDENCE AND COMPETENCE
PRINCIPLE: To be effective the Auditor-General must been seen to be independent and competent. The Auditor-General must:
be free from direction by the Executive Government, and free from political bias; and
have the means to acquire the resources necessary to do the job properly.
The role of the Auditor-General can only be effective if the office is viewed as being independent and competent. Without these characteristics, the assurances of the Auditor-General may lack credibility.
To be seen to be independent the Auditor-General must be both free from control or direction of the Executive Government and free from political bias. Consequently, an important feature of the statutory framework that supports the office of Auditor-General should be that it provides an appropriate level of freedom for the Auditor-General to act without direction or interference.
To be seen to be competent, key stakeholders must view the Auditor-General as being the right person for the job. The Auditor-General must also have the means to acquire resources according to the skill requirements of the job to be done.
Factors that may significantly affect both the perception and the fact of the Auditor-General's independence and competence are:
- the process for appointment, suspension or removal from office;
- the term of office;
- the determination of the Auditor-General's salary and conditions of employment;
- the ability to employ staff or other suppliers of services; and
- the process for determining the budget and work plans of the office.
While the particular arrangements may differ between jurisdictions, they must all ultimately be designed to provide an appropriate level of independence and competence for the office of Auditor-General.
FUNCTIONS, DUTIES AND POWERS
PRINCIPLE: To be effective, the Auditor-General must have appropriate functions, duties and powers to achieve the tasks of auditing and reporting on the range of matters on which Parliament seeks independent assurance.
If the Auditor-General is to meet Parliament's needs for independent assurance about governmental activities, then the Auditor-General must have functions, duties and powers that reflect Parliament's range of interests. Any limitation will have the effect of reducing Parliament's ability to rely on the Auditor-General for assurance.
The functions of the Auditor-General are the range of matters that Parliament wants to fall within the purview of the Auditor-General. Although they may be expressed differently, the functions of the Auditor-General have been categorised by INTOSAI as incorporating:
The Regularity Audit including the audit of the financial and other information in the accountability statements of an entity, the audit of systems of internal control, and the consideration of probity and propriety.
The Performance Audit including the consideration of economy, efficiency and effectiveness.
The duties of the Auditor-General are the activities that Parliament considers the Auditor-General must perform. These duties may vary according to the extent to which Parliament feels it needs to regulate how the office's functions are discharged. A common duty of Auditors-General is to conduct an audit every year of the statements of account (which may include both financial and performance information) of each public sector entity, and to issue an audit report on those statements. Another common duty is to make at least one report to Parliament each year on any matters arising from the Auditor-General's powers, duties and functions.
The powers of the Auditor-General are the rights and privileges that Parliament believes are needed to properly discharge the Auditor-General's functions and duties. Perhaps the most important power of Auditors-General is that of access to information to carry out the audits. Another important power is the freedom to report to Parliament on such matters as the Auditor-General considers necessary.
PRINCIPLE: Parliament should desirably appoint the auditor of all entities which are part of the Executive Government.
Parliament may appropriately delegate the right to appoint the auditor to someone else if Parliament decides it does not have a primary interest in scrutinising the performance of the entity concerned.
Parliament should desirably appoint the Auditor-General whenever it exercises the right to appoint the auditor of an entity.
The range of entities of which the Auditor-General is the auditor is a matter for Parliament to determine. Parliament will usually appoint the auditor of an entity when Parliament itself has some direct interest in the accountability and scrutiny of the entity's performance. By appointing the auditor, Parliament is ensuring it has access to independent audit assurance about the entity.
Parliament usually appoints the auditor of most public sector organisations because these organisations are, given our constitutional arrangements, accountable to Parliament. However, in some cases, Parliament has decided to delegate the right to appoint the auditor to someone else (e.g. a Board or Minister). In doing so, Parliament has limited its ability to rely on the audit function as part of Parliament's own scrutiny of governmental performance.
When Parliament exercises its right to appoint the auditor of an entity, normally it will appoint the Auditor-General because:
- Parliament can be sure that the audit role will be discharged in a manner which is independent of the Executive Government;
- Parliament derives significant benefits from having a specialist professional agency devoted to serving the Parliament's interests; and
- Parliament would find it administratively impractical to appoint and oversee separate auditors for every public sector entity.
PRINCIPLE: The Auditor-General must be fully accountable for the performance and use of public resources in discharging the mandate of the office.
The Auditor-General must be primarily accountable to Parliament (not the Executive Government) in a manner consistent with the office's independence.
Auditors-General play an important role in ensuring sound and proper accountability of public sector organisations. Auditors-General must expect the same high standards of accountability and scrutiny to apply to their own performance.
The role of the Auditor-General exists to help Parliament perform its functions and to be independent of the Executive Government. Further, the functions, duties, powers, and resources of the Auditor-General are conferred by Parliament. Accordingly, the Auditor-General should be primarily accountable to Parliament not the Executive Government.
Different arrangements have been adopted for holding the Auditor-General to account. Common features include:
- arrangements that allow Parliament to scrutinise and endorse the proposed budget and performance of the Auditor-General; and
- arrangements for reporting actual performance and audit of the Auditor-General's activity.
Some care is always needed to ensure that the particular arrangements adopted, while providing for effective accountability, do not impinge upon the independence of the office of Auditor-General and compromise the effectiveness of the role.