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External Auditing in Difficult Settings

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Best practices in public sector external audit ... Shortage in essential supplies like fuel , stationery, computer consumables etc ... – PowerPoint PPT presentation

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Title: External Auditing in Difficult Settings


1
External Auditing in Difficult Settings
Regional Workshop Towards Auditing Effectiveness
  • John F S Muwanga FCCA, CPA(U)
  • Auditor General, Uganda

May 12-15 2003 , Addis Ababa
2
Structure of this presentation
  • Best practices in public sector external audit
  • Auditing in a difficult setting a framework for
    understanding the constraints
  • External constraints
  • Limits of audit independence
  • Poor financial management
  • Weak governance environment
  • Response and strategies for reform

3
Best practices in public sector auditing
  • Role of public sector external audit
  • Precepts of government auditing Lima
    declaration.
  • Auditing in a difficult setting barriers in
    meeting the Lima standard

4
Lima precepts
5
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6
Limits of audit independence
7
The issue of audit independence
  • Legal and administrative independence. Conditions
    of service and powers
  • Factors that limit independence
  • The Uganda experience

8
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9
Poor financial management how does it affect
the performance of external audit?
Poor Financial Management
10
Poor accounting practices
  • Delays in bank reconciliation
  • poor record keeping
  • weak internal control structures
  • poor asset management
  • weaknesses in procurement practices

11
How do these factors affect external audit work?
  • Timing of audit work
  • Affects quality of audits due to improperly
    reconciled statements
  • High risk environments . Need for more
    substantive testing .
  • Inefficient use of audit resources .

12
Weak Governance Environment
13
Accountability process in the public sector
Source IFAC
14
Factors that adversely affect governance
  • Lack of political will
  • Inadequate legislative framework
  • Weak or poorly defined accountability
    relationships
  • lack of transparency in policy and decision
    making
  • Loose Ethical and values framework . Poor tone at
    the top
  • Poor understanding of and awareness about best
    practices in governance and controls

15
Weak governance diminishes public audits
effectiveness
  • Direct financial benefits
  • Improvements in financial management, internal
    controls and enhanced efficiency and
    effectiveness in use of resources
  • Adoption of best practices
  • General improvement in the accountability
    environment and maintenance of financial
    discipline

16
Practical difficulties which weak governance
creates for public audit
  • Non-cooperation and lack of response from audited
    agencies
  • Denial of information and records
  • Classified expenditure kept outside audit purview
  • Ignoring audit findings and recommendations

17
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18
Responding to the Challenges
19
Strategies for response
Limits of audit independence
20
Response to limitations on audit Independence
  • Legal
  • Financial
  • Administrative

21
Inadequate financial resources affects audit
operations
  • Inadequate travel expense budget
  • Shortage in essential supplies like fuel ,
    stationery, computer consumables etc
  • Hinders training and continuing professional
    development of staff

22
Lack of administrative independence
  • Limited administrative powers
  • Absence of a professional culture
  • Difficulty in ensuring professional conduct and
    quality of performance
  • Difficulty in bringing about reforms

23
Strategies for response
  • Seek changes to legislation
  • Support from IMF and World Bank
  • Seek National Audit Office status

24
Strategies for response
Poor Financial Management
25
Responding to poor financial management
  • Result of a poor financial management culture
  • Lack of qualified accountants
  • Widespread fraud , waste and abuse
  • Expectations from Audit

26
Influence external reforms
  • work with the Government to bring about
    improvement in financial management practices
  • make recommendations for improving financial
    management practices and strengthening of
    internal controls
  • following up audit issues regularly
  • organizing seminars and workshops to create
    awareness

27
Changes in audit approach and techniques
  • risk based audit approach
  • concentrate on those areas where the risks of
    mismanagement or non-compliance are high
  • Greater use of automated audit techniques

28
Automated audit approach for IFMS in Uganda
  • OAG auditors electronic access to central
    database
  • Ability to interrogate and download data
  • Better use of resources through better audit
    planning and sampling
  • New risks and need develop IT audit capacity

29
Strategies for response
Weak Governance Environment
30
Weak governance- responding to a reduced demand
for accountability
31
Weak governance strategies
  • Strengthen relationship with Public Accounts
    Committee and other parliamentary committees
  • Recommend strengthening of internal audit and
    establishment of audit committees
  • Obtain support of donor agencies and provide
    timely professional audit services for donor
    funded projects

32
Weak governance strategies (contd.. )
  • Enhance credibility enforce high standard of
    ethics and professional behaviour amongst audit
    staff
  • Conduct issue based audits
  • Improve presentation and format of Audit reports
  • Better relations with stakeholders and media
  • Create awareness about public sector audits role

33
Conclusion
  • Determine strategic response
  • Decide on the short term and long term
    priorities
  • Training, education and professional development
    of OAG staff
  • Develop ownership for reform initiatives

34
Thank you for your attention !
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