Part 1: Background
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 through rates and from 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.
Auditor-General's work
The Auditor-General is the auditor of all public entities. Figure 1 provides a summary of the number and type of entities we audit.
Each year, we also expect to carry out audits of the following:
- the financial statements of the Government;
- the Government of Niue;
- 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 and performance information 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 in their use of public 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 audit portfolio at March 2016
| Entities | Subsidiaries and related entities | Total | |
|---|---|---|---|
| Central government entities | |||
| Government departments | 37 | 13 | 50 |
| Crown research institutes | 7 | 25 | 32 |
| District health boards | 20 | 18 | 38 |
| Tertiary education institutions | 29 | 110 | 139 |
| Other Crown entities | 66 | 15 | 81 |
| Other central government entities | 86 | 23 | 109 |
| State-owned enterprises and mixed-ownership model companies | 17 | 101 | 118 |
| Rural education activities programmes | 14 | - | 14 |
| Schools | 2413 | 42 | 2455 |
| Local government entities | |||
| Local authorities | 78 | - | 78 |
| Council-controlled organisations | 175 | 175 | |
| Exempt council-controlled organisations | 29 | 29 | |
| Other local government entities | 61 | 61 | |
| Energy, airport, and port companies | |||
| Energy companies | 20 | 48 | 68 |
| Airport companies | 19 | 3 | 22 |
| Port companies | 12 | 28 | 40 |
| Other public entities | |||
| Fish and game councils | 15 | 1 | 16 |
| Licensing and community trusts | 19 | 19 | 38 |
| Administering bodies and boards | 39 | - | 39 |
| Cemetery trusts | 92 | - | 92 |
| Total | 2983 | 711 | 3694 |
Providing assurance
The Auditor-General has a statutory duty to audit the information that public entities are required to have audited. Most of our work (currently about 87%) 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, performance information – that public entities are required to report. 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 performance information where relevant). We also work with public entities to help improve the information they report.
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 well 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 statements and performance information requires us to look at 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, reported performance, and disclosures are reasonable.
Each year, before commencing our 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 for improvement.
We also 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.
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 its 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 are able to 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.
Following an increase in Crown funding in 2015/16, we have set up a new Inquiries team in order to enhance the Office's capacity to carry out inquiries and improve the timeliness of their completion.
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
- consider 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 accounting and auditing guidance and standards. These groups include:
- the New Zealand Accounting Standards Board and the New Zealand Auditing and Assurance Standards Board;
- the Global Audit Leadership Forum; and
- the International Organisation of Supreme Audit Institutions (INTOSAI), and its various committees and working groups.
Our preparations for chairing one of the two meeting themes at the 2016 International Congress of Supreme Audit Institutions (INCOSAI) in December are progressing well. New Zealand has been selected to chair the professionalisation theme at INCOSAI. The theme discussions will focus on how INTOSAI could become a more influential international organisation acting in the public interest. We are looking forward to exploring with our international colleagues how professionalisation can be enhanced at all levels of INTOSAI.
We continue our 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 of INTOSAI. The Auditor-General is the Secretary-General of PASAI and represents PASAI on the governing board of INTOSAI.