Appendix 2.1 flowchart

Flowchart to assist in determining what services1 can be provided to entities.

1. Is the public entity for which the services are to be provided audited by the ASP on behalf of the Auditor-General?

  • If YES, proceed to step 2
  • If No, proceed to step 3

2. The services to be provided shall be generally limited to “work of an assurance nature” as defined in this Guide, although some exemptions are permitted in limited circumstances

3. Do the services to be provided relate to a public entity group?

4. Do the services to be provided to the entity, irrespective of whether it is a public entity, relate to an actual or proposed transaction3 between the public entity audited on behalf of the Auditor-General and the entity seeking the services?

  • If YES, proceed to step 5
  • If No, proceed to step 6

5. The provision of services of this nature is generally prohibited because it results in a conflict of interest for the ASP (as the independent auditor of a public entity on one hand and as an adviser to an entity on the other hand). If uncertainty exists about the services to be provided to the entity that is proposing to transact with the public entity then the matter shall be referred to the OAG for a ruling at independence@oag.parliament.nz 2.

  • Upon completion of step 5, stop

6. Do the services to be provided, irrespective of whether it is a public entity, relate to an application for funding from the public entity audited by the ASP on behalf of the Auditor-General?

  • If YES, proceed to step 7
  • If No, proceed to step 8

7. Refer the matter to the OAG for a ruling at independence@oag.parliament.nz2.

  • Upon completion of step 7, stop.

8. Do the services to be provided, irrespective of whether it is a public entity, relate to a regulatory activity that is imposed by a public entity audited by the ASP on behalf of the Auditor-General?

  • If YES, proceed to step 9, stop
  • If No, proceed to step 10

9. Proceed with the service if the OAG has provided prior approval, otherwise refer the matter to the OAG for a ruling at independence@oag.parliament.nz2.

  • Upon completion of step 9, stop.

10. Is there doubt whether the services to be provided to an entity, irrespective of whether it is a public entity, may threaten independence in respect of a public entity audited by the ASP on behalf of the Auditor-General?

  • If YES, proceed to step 11
  • If No, proceed to step 12

11. Refer the matter to the OAG for a ruling at independence@oag.parliament.nz2.

  • Upon completion of step 11, stop.

12. For private sector ASPs, there are no limitations on the services that can be provided to the entity seeking the services. For employees of the Auditor-General, including Audit New Zealand, the services to be provided can only be provided to a public entity and shall be limited to “work of an assurance nature” as defined in this Guide.

1: In the context of this decision tree, “services” consist of:
a) “work of an assurance nature” as defined in this Guide (see the flowchart in Appendix 2.3) and
b) all services other than “work of an assurance nature” as defined in (a) above.

2: In referring the matter to the OAG, please support your recommendation with an analysis of the situation that is based on:
a) Parts 1, 3 and 4A of this Guide; and
b) The application of the reasonable and informed third party test described in paragraphs AG R120.15 A1.2 to AG R120.15 A1.4 and the application material in paragraph AG 120.15 A1.5.

3: For the purposes of this assessment a transaction is a process where a willing seller and a willing buyer enter into negotiation to agree on the terms of the transaction by way of a contract. This differs from a situation where a party applies for funding on terms that are predetermined by a public entity and where the power to provide funding rests entirely with the public entity.