Strategic priority 1: Strengthening our core assurance role

The public audit system provides assurance to Parliament, councils, governing bodies, and the public that public organisations are reporting relevant and reliable information about their finances and their performance.

The public audit system is critical to effective public accountability but it is under significant pressure. We are carrying out work to strengthen this system.

Audit allocation

The Auditor-General uses both in-house and external capability to carry out the 3300 mandatory audits each year. The allocation of audits to audit service providers is an ongoing process that seeks to match audits to the capacity and capability of each provider. We also balance having providers gain a depth of knowledge in particular sectors (which supports efficient auditing) with rotating appointed auditors periodically.

As well as the normal rotation of appointed auditors, we have focused in the last few years on matching allocation to the capacity of the Auditor-General’s in-house provider, Audit New Zealand. Between 2021 and 2023, as a consequence of Covid-19, the Auditor-General reallocated about 80,000 hours of audit work previously carried out by Audit New Zealand to other audit service providers to relieve pressure on Audit New Zealand’s capacity, to maintain audit quality and, as much as possible, to maintain timeliness in completing audits.

Since that reallocation, Audit New Zealand has carried out a change programme that includes capacity building, enhanced workforce planning, and deployment of new audit management software.

In 2024/25, about 15,000 hours of audit work previously carried out by other audit service providers was reallocated to Audit New Zealand. Further reallocation of work to Audit New Zealand will be undertaken in 2025/26 and subsequent years. Overall, we expect to allocate up to 40,000 additional hours of work to Audit New Zealand.

In 2025/26, the Auditor-General will also consider whether we need to rotate the audit service providers for the audits of public organisations with shares or debt listed in public markets.

Developments in the auditing and accountability system

We maintain an interest in developments that could affect the accountability system, the role of the Auditor-General in supporting trust and confidence, or the requirements for audits of public organisations.

In 2025/26, we will assess the implications of the emerging changes outlined below.

Auditing of schools

Every year, more than 2400 schools are audited. These audits have been carried out by private sector firms on behalf of the Auditor-General. Appointing auditors to carry out these audits and reducing an audit backlog built up during the Covid-19 pandemic has been challenging.

We have taken several actions to help improve the timeliness of school audits. In 2024/25, we increased the number of audit firms that we use to carry out school audits. We also ensured that the school audit fees for 2024 to 2026 were set at a reasonable and competitive level.

There is also an opportunity to consider the scope of school audits. The Ministry of Education has undertaken to start work on this in 2025/26. We will assist the Ministry of Education with this project, where appropriate.

Auditing of less complex entities

In 2025/26, we expect the New Zealand Auditing and Assurance Standards Board (NZAuASB) to issue a New Zealand standard on auditing less complex entities. This has the potential to simplify and consolidate the requirements for auditing smaller entities. If a new standard is issued, we will consider its applicability to public sector audits and whether we should issue a standard for audits of less complex public organisations to supplement the NZAuASB standard.

Reforms of water management

The Government’s Local Water Done Well reforms might result in the establishment of new water management entities. Those entities will need to be audited. In addition, changes to the responsibilities of councils might affect both annual audits and audits of long-term plans. In 2025/26, we will assess the implications of these changes for future audit requirements.

Future challenges for public sector audits

There is a long-term decrease in the number of tertiary students pursuing accounting qualifications relevant to a career in auditing. This creates a significant challenge for maintaining the audit workforce over time. At the same time, increasing standards and requirements are adding to audit complexity and increasing the costs of an audit.

In 2025/26, we will consider how these challenges affect the public audit system. As part of this work we will consider our workforce planning to maintain Audit New Zealand’s capacity. This will include expanded secondment arrangements with overseas public audit offices to increase capacity at peak times and build attractive career paths for our staff.

Submissions on proposed legislation

Public organisations need to have strong governance, clear accountability arrangements, good performance reporting and strong independent assurance of their performance. They also need to be responsive to the communities they serve.

We have a keen interest in the accountability of public organisations to Parliament. Where appropriate, we will continue to make submissions to Parliament promoting strong public accountability.