Government auditing & use of Internal Audit Work

Main Objective of Government Auditing

The primary role of the Government Auditor is to support the Parliament as parliamentary watch dog. CAG support the parliament in meeting its constitutional responsibilities and helps to improve the performance and accountability of the central government for the benefit of the People

The CAG support parliament by auditing government operations to determine whether public funds are spent efficiently and effectively

Reporting on How well the Government programs and policies are meeting their objectives.
Analyzing government policy and outlining options to parliament through PAC for considerations

Advise parliament and head of executive agencies about ways to make government more efficient effective ethical, equitable and responsive.
Our work leads to laws and acts that improve government operation, saving the government and taxpayers billions of rupees.

Objective of Internal Auditing

The institute of Internal Auditors has defined the Internal Auditing as an independent, objective, assurance and consulting activity designed to add value and improve an organization’s operations. It helps an organization accomplish its objectives by bringing a systematic, disciplined approach to evaluate and improve effectiveness of Risk Management, control, and governance process.”

Similarities of Role of Government auditing and Internal Auditing

Both are independent function though there may be difference between level of independence each function is enjoying

Both aim to improve an operations of government

Both aim to deliver a level of assurance to the work performed in the operations.

Both assist the stake holders to make better decision and use taxpayer’s money more responsibly and effectively.

Why two different set of functions needed, though they are meeting all most all the same objective?

The question seems logical, but there is difference in the primary stakeholders it really serves to achieve the above objectives. The difference is not here for the universe of stake holders it serves, rather the primary (main) stakeholders it serves.

The internal audit function reports primarily to the management of the government operations.

However, the government auditor reports to the parliament.

So internal audit function can be taken as one of the control established by the government management to ensure they are meeting government objective as per the people’s mandate they obtained through the parliament. This gives them an opportunity to proactively improve their efficiency and effectiveness before it goes critical.

Internal Audit to discharge this responsibility reviews the adequacy of control put to ensure Risk Management, compliance, and proper governance. They conduct control assessment. This helps government management to self asses their performance and ensures the compliance of application of government fund as per the objective of mandate given to the government to apply those funds.

Hence internal audit are more focused towards the adequacy of control and effectiveness of control but the government auditing consider this element as one of the critical factor to obtain assurance about the fair financial statement presentation, effective and efficient utilization of public funds.

External Audit work beyond the level then an internal audit does because their objective is to ensure that government funds are spent as per the mandate irrespective of the matter whether controls are there or not.

What are the scopes a government audit has, to take advantage out of internal Auditing?

The internal auditing does thorough risk assessment, control testing and they report the outcome to the management based on their review. This result can be of great use, if government auditor could gather enough evidence that they can rely on the Internal Audit work. It is very important to take due professional care to the internal audit work since their reliance to IA work does not release them from their professional responsibility to the parliament.

The recommendation of the IA to improve policy and procedure are of great help to the government auditors. Government auditor can apply their professional skepticism with respect to the appropriateness of those recommendations and give more pressure to management to implement those appropriate recommendations through the parliament. This helps to enhance the value IA added through the magic tools government auditors have in executing its jobs with the parliament.

External audit can also use the internal audit resources to execute external audit work which does not require high level of independence to execute and can be done under its own supervision.

Internal audit tools could turn to be magic stick to the external auditors in order to execute follow-up and ensure effective implementation of their recommendation. This can be done by requiring IA to ensure its implementation and raise as follow up issues to the top level management on timely basis. This helps management to take action on those issues before it becomes critical.

The internal auditors continuously help management ensure effective control there by reducing the control risk this helps to reduce Audit Risk of the Government Auditor.