Annual report 2022/23

Sustainability of public sector audits

Many issues are affecting the long-term sustainability of public sector audits, including a global auditor shortage, fewer people studying accountancy-related subjects in New Zealand universities, ongoing challenges from the Covid-19 pandemic, new standards that are increasing expectations on auditors (such as standards on quality management and risk assessment), and pressure on audit fees.

Significant public sector reforms and severe weather events have also affected many public organisations and their ability to adequately prepare for being audited. The Covid-19 pandemic has exacerbated this. As a result, the workload for our audit service providers continued to increase in 2022/23.

Completing deferred audit work

In 2022/23, we again completed most of the audits of large public organisations and those most important to New Zealand’s public accountability system on time. However, because of the issues described above, there were many audits that were deferred, including audits of several councils and Crown entities.

We have made good progress in completing these deferred audits. We have also increased capacity in Audit New Zealand and reallocated audits between providers to ensure that the available auditor capacity in New Zealand is fully utilised.

In 2023/24, we are aiming to complete most audits within their pre-Covid-19 statutory deadline. We will continue to work with public organisations affected by ongoing public sector reforms and severe weather events to ensure that audits are carried out as efficiently as possible.

Public sector reforms and new auditing responsibilities

Ongoing public sector reforms present us with both a challenge to ensure that we are ready to carry out new engagements and an opportunity to increase the impact of our work. These reforms will also present challenges for public organisations.

In 2022/23, we started working through the implications of auditing the New Zealand Health Plan (Te Pae Tata) 2024-27 and auditing the reporting against the interim Te Pae Tata (which was put in place for 2022/23 and 2023/24).

The purpose of Te Pae Tata 2024-27 is to provide a three-year plan for the delivery of publicly funded health services. To provide Parliament and the public with assurance on Te Pae Tata 2024-27, we need to develop new methodologies for what will be complex and high-profile audit work.

In August 2022, we wrote a submission to the Finance and Expenditure Committee about our concerns with the accountability arrangements in the Water Services Entities Bill. We noted in our submission that the Bill’s proposed reduction in audit scrutiny of water services entities (compared to when councils were responsible for water services) was a serious diminution in public accountability.

Our submission influenced better accountability and audit arrangements for the water services entities. The Water Services Act 2022 requires the Auditor-General to audit the water services entities’ statements of intent, infrastructure strategies, and consumer engagement strategies.

Because these will be new types of audits, we will need to prepare an approach, plan for the work, and ensure that we have appropriate resources. This will be a focus in 2023/24.