International Journal of Government Auditing – January 2003
18th Commonwealth Auditors General Conference
From October 7-9, 2002, auditors general from Commonwealth countries met in Kuala Lumpur, Malaysia, for discussions on reengineering auditing in the public sector. The delegates represented Antigua and Barbados, Australia, Bahamas, Bangladesh, Botswana, Brunei Darussalam, Cameroon, Canada, Cayman Islands, Cook Islands,
Cyprus, Fiji, Gambia, Ghana, India, Kenya, Kiribati, Lesotho, Malawi, Malaysia, Maldives, Malta, Mauritius, Mozambique, Namibia, New Zealand, Nigeria, Seychelles, Sierra Leone, South Africa, Sri Lanka, Swaziland, Tanzania, Tonga, Tuvalu, Uganda, United Kingdom, and Zimbabwe. Other conference participants included observers from the INTOSAI Secretariat (Austria) and this Journal.
The Auditor General of Malaysia, Y.Bhg. Datuk Dr. Hadenan bin Abdul Jalil, officially opened the conference on Monday morning. In his address, he pointed out that the role of auditors in the public sector has, in many instances, been taken for granted. Auditors are expected to be the “watchdogs” and guardians of those responsible for managing public funds. Auditors examine and review all financial transactions, which enables them to determine whether public sector management has taken sufficient actions to ensure that government funds are used economically, efficiently, and effectively and in conformity with rules and regulations. This traditional role will continue to be the chief responsibility of public auditors.
Discussions at the conference focused on the following three themes:
Theme I: Privatization of State Activities: (Presenter: Australia; Chairperson: Malaysia; Panelists: Canada, Zimbabwe, and Malaysia).
This theme focused on the development of the SAIs’ role in protecting the public interest and providing an objective assessment of the government’s administration in the hands of the private sector. It was agreed that SAIs face many common issues and problems in auditing privatized projects. The issues identified included (1) the legal aspects SAIs face in carry out audits on privatized projects, (2) the accounting methods adopted by the implementing agency on the projects, (3) the SAI’s decision on whether to carry out pre- and/or post-audit on the projects, (4) whether due consideration was given to the interests of the public and workers on the privatized projects, (5) a lack of skills to perform the audit effectively, (6) whether the SAI is given full access to records of privatized projects, and (7) the SAI’s involvement in planning government policies and in the decision-making process.
Several areas of concern were identified and discussed, including a lack of detailed analysis on the viability of projects before final decisions were made; wrong choice of the company undertaking the privatization projects; privatized projects not being properly monitored by the government agencies; the objectives of privatization not being achieved; and weaknesses in the privatization agreements between the government and the related parties.
Theme II: Role of SAIs in Transition from Cash- to Accrual-Based Reporting (Presenter: New Zealand; Chairperson: Ghana; Panelists: South Africa, Mauritius, and a representative from Pricewaterhouse Coopers).
The SAIs agreed on the following points: (1) accrual accounting will ensure better quality and more informative financial reports to end-users, (2) a change in the accounting system should include legislative deliberation to ensure a more positive and serious commitment among auditees, (3) guiding principles are needed before SAIs have any involvement in this process of change, (4) trained and experienced audit personnel are needed in an accrual-based environment, and (5) there are difficulties in valuing assets and a consistent system should be implemented.
In addition, it was noted that accounting reforms are highly unlikely without strong political support and political will. In conclusion, the panel determined that (1) accounting bodies in developing countries should play an active role in the process of accounting reforms, (2) financial implications should be considered in any decision to move towards accrual accounts, and (3) guidelines should be issued to assist SAIs in discharging their role in managing this change.
Theme III: SAIs’ Involvement in Systems Development: Opportunities and Risks (Presenter: the United Kingdom; Chairperson: Sri Lanka; Panelists: Canada, India, and a representative from the Malaysian Administrative Modernization and Management Planning Unit).
Theme III focused on management weaknesses that lead to the failure of government IT projects. Discussions concluded that SAIs need to take a more proactive approach in the audit of IT projects. This gives the SAI an opportunity to add value to the audit process and provide quality assurance for various phases of the project. Most SAIs believe that involvement in the audit of system development can only be carried out if sufficiently trained staff are available, as such audits involve complex planning, major coordination efforts, and specialized project knowledge.
The Auditor General of Malaysia closed the conference by emphasizing the following key issues related to the three themes.
In addition, the Auditor General of Malaysia noted that SAIs in Commonwealth countries need to determine whether they will maintain their traditional roles or move to more proactive roles as advisors to the public sector.
For more information about the conference, contact the Office of the Auditor General of Malaysia, Level 9, Block D2, Pusat Pentadbiran Kerajaan Persekutuan, Malaysia - 62502 Putrajaya (e-mail: email@example.com).