Part 3: Providing assurance

Most of our work (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:

• promoting improvement on sector and specific entity matters through our in-depth performance audits and other studies;
• responding to enquiries from ratepayers, taxpayers, and members of Parliament;
• advice to Parliament and select committees in support of financial reviews and Estimate examinations;
• building opportunities for co-operative work with other professional and representative organisations working toward integrity, transparency, and accountability for New Zealand, such as Transparency International;
• 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 entities 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 our annual audits of each category of public entities. An audit brief provides instructions for audit emphasis and guidance for the auditors of those entities. Figure 2 shows the categories of entities for which we have issued audit briefs.

Figure 2
Audit brief categories of public entities

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

In 2013/14, alongside the work on our Service Delivery theme, we will carry out the following work:

• Recovery from the Canterbury earthquakes, particularly rebuilding of the city of Christchurch and environs, are matters of significant public interest and involve investing a large amount of public money. Over the last two years, we have monitored the situation in Canterbury, resulting in a report to Parliament in October 2012 on the roles, responsibilities, and funding of public entities after the Canterbury earthquakes. We will report on two other pieces of work (see page 8) later in 2013. In 2013/14, our work on the recovery from Canterbury earthquakes will include:
  • Our annual audits of the financial statements of all public entities in Canterbury. There is still considerable uncertainty on asset and liability valuations in these financial statements.
  • Monitoring of the major developments including funding, the housing repairs, procurement processes for the CBD rebuild, and other matters. We will report on those matters we consider to be of interest to Parliament and the public.
• Our auditors will pilot in local government the development of a common approach to auditing asset management information and systems that are critical to the delivery of public services. Asset management is a common area of focus for annual audits across the public sector. This reflects both the financial value of public sector assets and the fact that delivery of many important public services relies on the performance of assets that underlie those services. Although we have frequently reported on asset management issues for sectors and entities within the public sector in the past, we have not had a shared set of objectives and areas for scrutiny to identify areas of strength and risk across the public sector. We will report on the progress with the pilot in our proposed report on local government asset and service-level management.
• We continue to work with public entities and to provide advice to parliamentary select committees to help improve performance information and use it to consider effectiveness and efficiency. The Auditor-General's revised auditing standard on reporting non-financial performance information now applies to our audits of most public sector entities that are required to include non-financial information in their annual reports. The revised standard was scheduled to apply to all applicable audits for reporting periods beginning on or after 1 July 2013, but we have decided to phase in the approach more slowly in the large and varied council-controlled organisation (CCO) sector. Although we are continuing with the scheduled implementation of the standard for Auckland Council's substantive CCOs for 2013/14, full implementation for other CCOs is deferred until the 2015/16 reporting period. We will do a practice run in 2014/15, when we will follow the approach in the revised standard but without any effect on our audit opinions.

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

The XRB is establishing tailored reporting requirements for different types of entities, through the reporting standards that it is developing. This approach affects the standards for financial and non-financial performance reporting. We are contributing to the XRB's development work, which we expect will go some way towards improving the fit between entities and their reporting requirements. In 2013/14, we will also help to prepare our auditors to audit in the environment of these new reporting standards, which are expected to become effective in 2014/15.

Legislation amending the Public Finance Act 1989 and the Crown Entities Act 2004 is presently before Parliament. An important part of the implementation will be the guidance that the XRB provides for entities preparing non-financial performance information. We are also contributing to this work by the XRB, to support its development of guidance to enable effective implementation of the new legislation.

The standards of integrity and accountability within our 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 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.