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 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 watch dog for accountability, expected to investigate and report on the responsibility assumed by the executives, whether the report given by the executives as regards to 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 to with the Act of Parliament, the relevant regulations and public interest.
To achieve these main objectives, the following three sub objectives needs to be achieved;
- 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
To assure parliament as to the fact that, the published accounts resulting from the organizational transaction in using the appropriated fund is reliable.
- 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.
DIFFERENCE BETWEEN PUBLIC SECTOR AUDIT AND PRIVATE SECTOR AUDIT
Even though the approach of auditing public sector organizations and private sector organizations are similar, they can be distinguished in the following areas.
DIFFERENCE BETWEENN PUBLIC SECTOR AUDIT AND PRIVATE SECTOR AUDIT
|PUBLIC SECTOR AUDITING||PRIVATE SECTOR AUDITING|
|APPOINTMENT||Public sector auditor known as the auditor general is appointed by the government through the provision of the constitution of Ghana and the Ghana Audit Act, 2000.||Private sector Auditor is appointed by the share holders in the annual general meeting through the provision of the Ghana Companies Code 1963, Act 179.|
|Legal and ethical basis of operations.||The constitution of Ghana the financial administrative Act, the Ghana Audit Act, 2000, Auditing Standard of International Organization of Supreme Audit Institutions.||Ghana companies Code, International Accounting Standards, International Auditing Standard.|
|Audit Approach||Financial and Operational Audit, Value for money Audit||System bases audit Risk base Audit|
|Remuneration||Determine by the parliament under the provision of 1992 Constitution of Ghana. The remuneration of the Auditor General is charged on the consolidated fund.||Determine by the shareholders and is treated as part of administrative expenditure.|
TYPES OF AUDIT APPLIED IN THE PUBLIC SECTOR
- Operational / system Audit
This is a form of audit which concerns with 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 pre determined 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:
- Parliamentary procedures used to plan, appraise, authorized and control the use of all resources.
- 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.
- Financial Audit
This is a type of audit which 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 prepare.
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 consider 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.
Financial audit provides and 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.
- Regularity Audit
Regularity Audit (also known as compliance Audit) is a type of audit which is much concern with whether the incurrence of an expenditure are 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 bring out the fact that the expenditure of the spending organizations well all regular and within the governing and prescribed authority.
- 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’.
- Economy is concerned with the amount of resources which as organization has used in its operations; put bluntly the question is how much did it cost? It should be noted that economy is primary concerned only with inputs, without reference to either quantity or quality of outputs.
Thus economy is achieved by obtaining input at their lowest acceptable cost. However, quality of input should not be sacrifice with economy; Economy refers to seeking the lowest level of input cost for a given level of output.
- 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 effectiveness measures are often used as 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.
Economy is concerned with inputs, effectiveness with outputs and efficiency with the relationship between the two