Technical Articles



International Journal of Auditing – April 2003

Accountability and Audit

Editor’s note: The following article has been adapted from a paper presented by the Auditor General of Trinidad and Tobago at a Regional Public Expenditure Management Conference held in Port of Spain, Trinidad, in February 2003.

Accountability has been defined as an obligation to answer for a responsibility that has been conferred. It is often linked with the obligation of leaders, governments, and corporate managers to answer for their actions to those who selected, elected or appointed them.

In 1993, Trinidad and Tobago’s then Minister of Finance addressed this issue at an Integrity Symposium:

“Public confidence in Government’s integrity and accountability in public affairs is of paramount importance in a democracy. Legitimate government in the eyes of the public is Government that displays expertise, entrepreneurship and stewardship. . . If there is accountability in public affairs, the public’s expectation that Government will operate with due regard for economy, efficiency and effectiveness can be realized. While integrity in public affairs is distinct from accountability, it can be said that if Government operates in an environment which demands accountability, there will be little room for integrity standards to slip.”

This article will outline the cycle of accountability in Trinidad and Tobago, the contribution of the internal and external audit functions to this process, and the role of the Public Accounts Committee.

The Accountability Cycle in Trinidad and Tobago

In Trinidad and Tobago, the accountability cycle begins with the laying of the Annual Estimates of Revenue and Expenditure in Parliament. The Estimates detail the expected revenues and expenditures for all governmental activities.

Following this, the Minister of Finance presents the “Budget Speech” outlining the
government’s general financial plans for the following fiscal year— recurrent expenditures, development programs, etc. This is followed by the Budget Debate and the passing of the Appropriation Act, the Provisional Collection of Taxes Order, and the Finance Act. The Minister of Finance releases funds to Accounting Officers after the Auditor General grants credits on the Exchequer Account. These funds are to be spent, as voted by Parliament, for the “service” of Trinidad and Tobago. Accounting Officers must be guided by the Exchequer and Audit Act, the Financial Regulations, and periodic directives issued by the Treasury ( Minister of Finance).

The Exchequer and Audit Act requires a number of accounts and statements to be submitted within 4 months after the end of each financial year (currently, January 31st). The Treasury must submit Treasury Statements, each Accounting Officer must submit an Appropriation Account, each Receiver of Revenue must submit a Statement of Receipts and Disbursements, and each Administering Officer must submit Statements of the Funds administered. The Auditor General is then required to examine these accounts and statements and report to Parliament on its examination within 7 months of the end of
the financial year (currently, on or before April 30).

After being laid in Parliament, the Report of the Auditor General and the attached
Financial Statements are referred to the Public Accounts Committee for scrutiny and the examination of the stewardship of the Treasury, Accounting Officers, Receivers of Revenue, and Administering Officers. The Public Accounts Committee reports to Parliament on its examinations and recommendations. The resulting Treasury Minutes direct Accounting Officers of corrective action to be taken.

The Internal Audit Function

A system of internal control which includes an internal audit function plays a significant monitoring role in the accountability process. The Institute of Internal Auditors defines internal auditing as

“an independent appraisal function established within an organization to examine and evaluate its activities as a service to the organization. The objective of internal auditing is to assist members of the organization in the effective discharge of their responsibilities.”

Top management is responsible for ensuring that as far as possible, the internal audit function, while carried out by the organization’s employees, is free from restrictions that could limit its scope. It is mandatory, therefore, that the internal auditor be responsible only to senior management to preserve the independence of the internal auditor from influences by the personnel subject to internal audit.

Furthermore, internal auditing must not be confined to financial transactions. In the final analysis, it assists the organization through its fact-finding, judgmental evaluation followed by recommendations, and follow-up action. The internal auditor can also assist line management by ensuring that adequate financial and management controls have been implemented and are operating effectively or by identifying weaknesses in the system and recommended remedial actions, where necessary.

In Trinidad and Tobago, the Financial Regulations of the Exchequer and Audit Act provide for the internal audit function within each accounting unit of the public service. In its annual examination of the Public Accounts, the Auditor General of Trinidad and Tobago has found that the internal audit function in the public service has been misunderstood, misused, abused or simply ignored over the years. Serious weaknesses have been reported since the 1980s. To date, however, the internal audit function has not shown improvement as a significant management tool to any appreciable extent. Currently, the Ministry of Finance is undertaking reform of the Financial Management System of the Public Service in Trinidad and Tobago. It is hoped that this effort will help establish the internal audit function in its correct place and provide adequate resources, including suitably trained and qualified staff.

External Audit

The external auditor helps an entity achieve its objectives by bringing an independent and objective view. The external auditor contributes directly through its audits—whether compliance, financial statement, value-for-money, comprehensive or performance audits—and indirectly by providing useful information to management, the board of directors, and shareholders/stakeholders.

In Trinidad and Tobago, the appointed auditor of the public accounts is the Auditor General, whose office was created in accordance with section ll6(l) of the Constitution. The Auditor General is required to examine and report in accordance with the Constitution and the Exchequer and Audit Act. In addition, the enabling acts of certain statutory bodies may make provision for audits by the Auditor General. Further, the Exchequer and Audit Act provides for the Auditor General to audit statutory bodies if Parliament so directs.

It is a fundamental requirement that the Auditor General should be, and be seen to be, independent. The Constitution of Trinidad and Tobago states, “In the exercise of his functions under this Constitution the Auditor General shall not be subject to the direction or control of any other person or authority.” Without such independence, the authority of the Auditor General’s opinion and its value to those who seek to rely upon it would be eroded.

The Public Accounts Committee

Historically, the Public Accounts Committee of the Parliament has been one of the main links in the chain of public accountability (the others being Parliament itself, the Treasury, and the Office of Auditor General). In Trinidad and Tobago, the need for a Public Accounts Committee was recognized by the Secretary of State for the Colonies in 1957 when commenting on financial devolution in the West Indies. He stated that “such a Committee has a vital part to play in safeguarding the interests of the legislature in the proper expenditure of public funds.” In 1960, the Speaker of the Legislative Council of Trinidad and Tobago appointed the first Public Accounts Committee. The present Constitution of Trinidad and Tobago makes provision for a Public Accounts Committee and a Public Accounts (Enterprises) Committee. Accounting officers and other responsible parties must explain their stewardship and actions on issues raised in the Auditor General’s reports before these Committees.

In accordance with the Constitution of the Republic of Trinidad and Tobago, the Auditor General reports to the Speaker of the House of Representatives, the President of the Senate, and the Minister of Finance. The Speaker is required to lay the Report in the House of Representatives and the President of the Senate is required to lay the Report in the Senate, thus making the documents public.

Conclusion

In conclusion, let me emphasize that accountability is key to good governance. If leaders in public life operate in an environment which demands accountability, there will be little room for integrity standards to slip. Checks and balances provided by legislation, systems, procedures, and methodologies will ensure accountability and allow governments to operate with due regard to economy, efficiency, and effectiveness. What is vital and at times lacking is the standard of conduct in public life that will allow individuals at all levels to operate within established parameters of accountability.

An obligation to answer for a responsibility conferred means in common parlance that “Accountability is Answerability.”