Part 1: Background

Annual Plan 2015/16.

Why is there an Auditor-General?

Parliament authorises all government spending and gives statutory powers to public entities. Public entities are accountable to Parliament for how they use the resources and powers that Parliament gives them. Parliament seeks independent assurance from the Controller and Auditor-General (the Auditor-General) that public entities are accountable for their performance in the way that Parliament intended.

The Auditor-General's work also covers local authorities, which are accountable to the public for how they use the resources they collect from rates and other sources.

The Auditor-General's role is to help Parliament to ensure that public entities are effective, efficient, and accountable. To be effective and credible in this role, the Auditor-General must be independent of the Government. The Auditor-General does not comment on the policies of the Government or local authorities.

One way in which the Auditor-General accounts to Parliament is by consulting with members of Parliament on her proposed annual work programme.

The Auditor-General's work

The Auditor-General is the auditor of all public entities (about 3800). Figure 1 provides a summary of the number and type of entities audited in 2013/14.

As well as the entities summarised in Figure 1, we also expect to carry out audits each year of:

  • the financial statements of the Government;
  • the Government of Niue, its subsidiaries, and other associated entities;
  • the Government of Tokelau; and
  • entities the Auditor-General has agreed to audit under section 19 of the Public Audit Act 2001.

The Auditor-General's work gives assurance to Parliament, public entities, and the public that public entities' financial statements fairly reflect the results of their activities. The Auditor-General can also audit whether public entities carry out their work effectively and efficiently, and whether they act with probity, comply with legislation, and are prudent with money.

The Auditor-General reports her findings and makes recommendations so that those responsible for making improvements can do so. She also highlights examples of good practice that can help to improve how the public sector works.

Figure 1
Summary of our 2013/14 audit portfolio

EntitiesSubsidiaries and related entitiesTotal
Central government entities
Government departments 37 17 54
Crown research institutes 7 28 35
District health boards 20 27 47
Tertiary education institutions 29 111 140
Other Crown entities 65 81 146
Other central government entities 85 22 107
State-owned enterprises and mixed-ownership companies 18 104 122
Rural education activities programmes 14 - 14
Schools 2461 - 2461
Local government entities
Local authorities 78 - 78
Council-controlled organisations 180 180
Exempt council-controlled organisations 28 28
Other local government entities 63 63
Energy, port, and airport companies
Energy companies 24 47 71
Airport companies 19 4 23
Port companies 12 24 36
Other public entities
Fish and game councils 14 1 15
Licensing and community trusts 20 19 39
Administering bodies and boards 38 - 38
Cemetery trusts 95 - 95
Māori trust boards 11 - 11
Section 19 entities 6 - 6
Total 3053 756 3809

Providing assurance

The Auditor-General has a statutory duty to audit every public entity. Most of our work (currently about 88%) comprises annual audits of the financial reports of public entities.

Annual audits provide independent assurance about the reliability of financial statements – and, in many instances, service performance information – that public entities are required to report. The Auditor-General, as the auditor of all public entities, has a statutory duty to audit that information. We issue an audit report for each audit we carry out, which includes our opinion about the fairness of the presentation of the financial statements (and service performance information where relevant).

To give managers and governors of public entities assurance about significant matters, we prepare management reports. These detail our main findings and recommendations, and help managers and governors to understand how well their management systems and controls are working. For example, a management report may include our views on how a public entity manages its resources and performance, including its operational policies and practices, and how it manages risks.

Forming an audit opinion on financial and performance statements and their accompanying notes requires us to examine the underlying accounts and records, including the systems and processes used to generate this information. Auditing standards require us to have a risk-based approach to gathering and assessing audit evidence. To address identified risks, we seek evidence that financial balances, results, and disclosures are reasonable.

Each year, before the annual audits, we prepare 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.

After our audits of the public entities in each significant sector are complete, we collate the results of the audits, including our understanding of the entities and their internal control systems. This allows us to identify and report on any systemic problems and opportunities.

We use our annual audits to gather information about public entities and to help advise select committees in their work in holding public entities to account. We work with public entities to improve performance information and help entities to use it to improve effectiveness and efficiency.

Performance audits, inquiries, and other work

The Public Audit Act 2001 empowers the Auditor-General to carry out performance audits, and to inquire into how a public entity uses resources.

Each year, we publish reports on the results of our annual audits, performance audits, major inquiries, and other work. Through this reporting to Parliament and other stakeholders, we consider matters in greater depth than is appropriate within the statutory scope of an annual audit, and examine ways that public entities can perform better.

Our other work

We also:

  • advise Parliament and select committees to support annual reviews and Estimate examinations;
  • carry out and report on our responsibility under the Local Government (Auckland Council) Act 2009 to review the service performance of Auckland Council; and
  • answer enquiries from ratepayers, taxpayers, and members of Parliament.

We make a significant contribution to the international auditing community by sharing our knowledge, skills, and expertise. We take part in national and international organisations, forums, and working groups that develop auditing and accounting guidance and standards. These groups include:

  • the New Zealand Accounting Standards Board and the New Zealand Auditing and Assurance Standards Board;
  • the Financial Management Working Party of the Society of Local Government Managers;
  • the Global Audit Leadership Forum (GALF); and
  • the International Organisation of Supreme Audit Institutions (INTOSAI), and its various committees and working groups.

New Zealand has been chosen to chair one of two meeting themes at the 2016 International Congress of Supreme Audit Institutions (INCOSAI). The theme is Professionalisation – implementing a professionalisation agenda into SAIs. Preparations for this role will take place in 2015/16. Being chosen to chair the theme is an honour for the Office, and a reflection of the high regard in which New Zealand is held in the international auditing community.

We work to improve public sector auditing in the Pacific as part of our commitment to the Pacific Association of Supreme Audit Institutions (PASAI). PASAI is the official association of supreme audit institutions in the Pacific, and is one of the regional working groups belonging to INTOSAI. The Auditor-General is Secretary-General of PASAI and represents PASAI on the governing board of INTOSAI.