7.2.14Matters of significance can include one or more of the following:a)Large expenditures or large revenues; b)Areas of high risk (significant control weaknesses, potential for largelosses/negative impacts);c)Matters of propriety, or probity (even if not of high materiality or risk);d)Important aspects of the programme’s performance;e)Politically sensitive areas, where the reputation of the government could beadversely affected;f)Substantial errors or misrepresentations in financial and other managementreports;g)Serious problems of compliance, especially regarding laws and regulations;andh)Areas where the audit is likely to identify opportunities for significantimprovement.7.2.15The auditor may decide to address one or more of these or to limit auditcoverage to financial attest requirements together with the more criticalaspects of compliance with key laws and regulations. Ultimately thedecision as to what sub-entities are significant and should be included in a particular audit is a matter for DAGP management. As noted in Chapter 5,there are various entities that DAGP may decide to include in any specificaudit. Entities may be organisational units, such as agencies, DAOs, DDOsetc., functional areas, such as the payroll function or the purchasingfunction, or accounting entities, such as objects of expenditure, grants or appropriations. DAGP may determine that all entities should be reviewedin a particular audit, for example ensuring complete coverage of all DDOsor grants and appropriations, and the planning phase for individual auditswill be guided by this direction from management.7.2.16In determining what areas are significant, an understanding of the auditentity and its business is important. In selecting matters of significance for performance audits, the auditor should not focus only on the potential of negative findings. It is also important that key aspects of the programme areexamined even if they are well managed. Providing the Legislature, the public, and also management, with assurances that programmes are welladministered can be of value. When providing an assurance, the auditor must obtain sufficient evidence to conclude that there is a low risk that anysignificant problem has gone undetected. This usually requires much moreaudit effort than is required for finding weaknesses.
Entity Communication Letters
7.2.17DAGP has a legal mandate to perform its audit work. This mandate permitsit to determine the nature, extent and timing of its work. As such, DAGPdoes not need to negotiate the scope of its work with the entity, or to makeuse of formal engagement letters.
Audit Manual – Chapter 7