Part 3: Providing assurance

Most of the work of the Office (about 87%) comprises annual audits of the financial reports of public entities. This work is required by statute, and we carry it out in keeping with professional standards. The rest of our work is done under the Auditor-General's other reporting powers, and includes:

• advice to Parliament and select committees in support of financial reviews and Estimate examinations;
• responding to enquiries from ratepayers, taxpayers, and members of Parliament;
• promoting improvement on sector and specific entity matters through our in-depth performance audits and other studies;
• working with the accounting and auditing profession, including contributing to the international auditing community and to the development of accounting and auditing standards; and
• wider assurance and advice, including liaison with government bodies and other agencies in the public sector.

Our annual audits, which provide assurance about the financial statements and, in some instances, the performance statements of public entities, are our core business. They are the foundation for our ability to have a positive influence on public sector performance. Alongside annual audits, our performance audits, inquiries, and special studies allow us to review in depth how a public entity (or several entities) use resources and to suggest opportunities to improve performance where we have considered specific matters.

We plan to maintain the underlying quality of all our annual audits and performance audits and inquiries, and focus on how to add value to the organisations that we audit. We will also focus on improving our reporting and our supporting communications and relationships, and on improving our own effectiveness and efficiency.

Each year, we issue an audit brief for each category of public entities. An audit brief provides instructions for audit emphasis and guidance for the auditors of those entities. Figure 6 shows the categories of entities for which we have issued audit briefs.

Figure 6
Audit brief categories of public entities

* Māori trust boards are expected to progressively move out of the mandate of the Auditor-General as a result of the Māori Trust Boards Amendment Act 2011.

In 2012/13, as part of our focused work on Our future needs – is the public sector ready?, our audit briefs ask auditors who carry out annual audits to collect information toward our reports on:

• insurance; and
• management of significant assets.

The Public Audit Act 2001 requires us to report the results of our annual audits to Parliament. We do this in two or more reports each year that set out the results of our annual audits of central and local government and in a report every three years on the results of our audits of local authorities' long-term plans.

Our reports to Parliament on the results of annual audits routinely comment on:

• the effectiveness of internal controls;
• the timeliness of financial reporting; and
• financial reporting developments.

We are working towards preparing more sector-specific reports on the results of our annual audits (such as those we prepared for the health and education sectors during 2011/12).

The Auditor-General is the auditor of almost 4000 public entities. Of these, 3500 are small public entities, including 2500 schools. The cost to us of carrying out annual audit work is funded mainly by audit fees paid by the public entities.

The External Reporting Board (XRB) is considering how it might tailor reporting requirements for different types of entities, through the reporting standards that it is developing. This approach will affect the standards for financial and non-financial performance reporting. We are contributing to the XRB's development work, with the expectation that it will go some way towards improving the fit between entities and their reporting requirements.

For non-financial performance, legislation specifies in some detail whether and how public entities should go about reporting, irrespective of size. We have expressed concern that this prescriptive approach sometimes risks becoming a barrier to progress. Alongside the work on standards, we are contributing to work by the Treasury to look at the legislative requirements and related aspects of public sector management to see what changes might be needed to support sensible progress.

The standards of integrity and accountability within the New Zealand public sector are well-regarded internationally and underpin trust in the government. We make a significant contribution in the wider Pacific region through our work with the Pacific Association of Supreme Audit Institutions (PASAI). PASAI is the official association of supreme audit institutions (government audit offices and similar organisations) in the Pacific region. PASAI is one of the regional working groups belonging to the International Organisation of Supreme Audit Institutions (INTOSAI).

As the current Secretary-General of PASAI, New Zealand's Auditor-General provides leadership and guidance to the Secretariat in carrying out PASAI's long-term strategic plans and work programmes, and advises the PASAI Congress and the Governing Board. The strategic goals of PASAI are to:

• strengthen regional co-operation and co-ordination;
• build and sustain public auditing capability;
• conduct co-operative financial and performance audits; and
• strengthen communication, and advocate transparency and accountability.

The Auditor-General is also actively a member of the Governing Board of INTOSAI, and we actively contribute to a range of INTOSAI projects that are designed to develop guidance for audit offices and similar organisations around the world.