MEANING OF PUBLIC SECTOR AUDITING 

Auditing is an independent appraisal process often governed by statute, for examining investigating and verifying the financial statements of an organization, by a person competently appointed.

It is the process of examining and evaluating records intended to show the financial condition and result of the operation in order to provide a basis for an opinion concerning the reliability and authenticity of the records.

A person carrying out an audit seeks to establish an opinion concerning the truth, accuracy, validity, reliability and fairness or otherwise of the statements and the underlying records on which the statements have been built and whether or not they comply with any statutory or other requirements.

Auditing in the public sector is the means through which the parliament extracts accountability from the executives. Thus it serves as a watchdog for accountability, expected to investigate and report on the responsibility assumed by the executives, whether the report given by the executives as regards the discharge of responsibility is correct.

OBJECTIVES OF PUBLIC SECTOR AUDITING

The main objective of public sector audit is to provide assurance to parliament, the government and the public that government department, ministries and agencies are operating and accounting for their performance in accordance with the Act of Parliament, the relevant regulations and public interest.

READ ALSO: WHAT ARE THE TYPES OF PUBLIC SECTOR AUDIT

To achieve these main objectives, the following three sub-objectives needs to be achieved;

1. Legal and regulatory compliance

To assure parliament that the transactions undertaken by the government reporting organization were with the appropriation law and specifically in line with the regulations set for the organization concern

2. Reliability

To assure parliament as to the fact that, the published accounts resulting from the organizational transaction in using the appropriated fund is reliable.

3. Value for money

To determine the extent of economy, efficiency and effectiveness that resulted in the use of the resources that were given to the organization.

The parliament achieves these objectives through the audit work of the external auditors. In Ghana, this is done mainly by the government audit department known as the Ghana Audit Service.

TYPES OF AUDIT IN MALAYSIA

READ ALSO: WHAT IS THE MAIN DIFFERENCE BETWEEN PUBLIC SECTOR AUDITING AND PRIVATE SECTOR AUDITING?

Types of Audit Services that we provide in Malaysia are listed below:

• Statutory Audit, required by the Malaysian Companies Act, 2016

• Due Diligence Audit, normally prepared before purchasing or investing in an existing business

• A forensic Audit, also known as an investigative audit, normally prepared to investigate or discover fraud and mismanagement

• Another special audit as per the requirement of any business.​

TYPES OF AUDIT APPLIED IN THE PUBLIC SECTOR

1. Operational / system Audit

This is a form of audit which concerns every sphere of organization activities. It has thee prime aim of monitoring management performance at every level of management to ensure optimal functioning according to predetermined criteria. A set of recommendations should be made to the governing body.

The audit may involve setting efficiency standard, beside the usual budget targets and performance is assessed in terms of their standards.

The external Auditor (the Auditor General) in performing operational audit may consider the following activities:

1. Parliamentary procedures used to plan, appraise, authorized and control the use of all resources.
2. The rules and legal regulations in operation

• Analytical techniques such as policy analysis, value analysis, unit costing work, study, organization and methods and the extent of their use

The internal auditors in the public sector will perform operational audits on all aspect of an organization with respect to materials, stores, energy, transport, personnel, IT, Information systems, capital schemes, etc.

2. Financial Audit

This is a type of audit that consist of a systematic examination and evaluation of the accounting systems, transactions and accounts of the organizations so as to offer an opinion concerning the fairness or reliability of the financial statement preparation.

It involves assessing the accounting and financial control systems of public sector organization to ensure that they are operating properly and efficiently, with all transactions well authorize and properly accounted for.

Hence financial audit considers basically the accounting control system established and thus can reveal any inadequate documentation, inaccuracies, failure to meet generally accepted accounting procedure or even calculated or planned fraudulent activities or any other abuse.

A financial audit provides an assurance that, in all material respect, the accounts of the various spending organizations are presented in a proper manner and all transactions are properly recorded.

3. Regularity Audit

Regularity Audit (also known as compliance Audit) is a type of audit that is much concern with whether the incurrence of expenditure is in accordance with statutory regulating and whether the expenditure incurred was approved.

thus the main aim of the audit is for the auditor to satisfy himself of the fact that the appropriate laws and regulations have been followed or complied with by the spending organizations.

regularity audit provides assurance that in all material respect< spending organization have spent the parliamentary appropriation as described by the estimated and as approved at the beginning of the budget or financial year.

it also brings out the fact that the expenditure of the spending organizations well all regular and within the governing and prescribed authority.

4. Value for money audit

Value for money audit is a type of audit carried out to determine whether an organization achieves economy, efficiency and effectiveness in the usage of resources made available to them.

There are often referred to as the ‘3 E’s’.

1. The economy is concerned with the number of resources that an organization has used in its operations; put bluntly the question is how much did it cost? It should be noted that the economy is primarily concerned only with inputs, without reference to either quantity or quality of outputs.

Thus the economy is achieved by obtaining input at their lowest acceptable cost. However, quality of input should not be a sacrifice with economy; Economy refers to seeking the lowest level of input cost for a given level of output.

1. Efficiency is concerned with the relationship between the resource used and the output of goods and services.

It follows that the outcome of this measure can be affected by changing either the inputs and/or outputs. Thus such measures are equivalent to, say, the cost of a unit produced in a factory.

Often though, it is not clear-cut as to what the measure should be and a range of effective measures are often used as a response to this.

Thus, efficiency refers to seeking the highest level of output for a given level of input resources or seeking the lowest usage of input resources for a given level of output.

• Effectiveness is about the achievement of intended results: are the policy objectives being achieved? Effectiveness refers to the extent to which output produced meets the specified objectives, for example in terms of provision of a required range of services.

Thus effectiveness measures are concerned only with the impact of output, regardless of inputs. Since they are concerned with objectives and goals they are often “soft” measures rather than those which can be objectively quantified.

Again a range of measures is usually appropriate.

CONCLUSION

The economy is concerned with inputs, effectiveness with outputs and efficiency with the relationship between the two