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The Role of Audit Committees in Enhancing Accountability for the Use of Resources in the

Public Sector: A Case of Public Entities in the UK

By (Name)

Course

Professor

University

State

Date
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Abstract

The main objective of this study was to determine if the audit committees played a role in
enhancing accountability in public sector entities. This study also sought to determine the
roles and responsibilities of audit committee in enhancing accountability in the use of
resources in public entities in the UK as well as giving recommendations on how audit
committees can better enhance their roles. The study made use of secondary data acquired
from the audit committee handbooks’ terms of reference on the respective entity websites.
Qualitative research technique was use with the data analyzed thematically based on the
prominent roles and responsibilities identified across a sample of 18 public entities. The study
found out that the audit committees play a role of enhancing accountability in public entities.
Based on the thematic analysis review and oversight of accounting policies, the accounts and
annual reports was identified as the main responsibility of audit committee in enhancing
accountability in the use of public resources supported by 100% of the entities. Reviewing
tendering proposals for purchase of external audit services and purchase of non-audit services
from contractors providing audit services as well as processing and arranging for special
investigations were found to be the least prominent roles performed by audit committees in
regards to accountability supported by only 11% of the sampled entities. The study
recommend that the audit committees can further enhance their roles through efficient and
effective communication, training and development of the committee members as well as
ensuring transparency of the committee.
Keywords: Audit committees, accountability, and public sector.
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Table of Contents

Abstract.....................................................................................................................................2
1.1 Background of the Study..................................................................................................5
1.1.1 Audit committees and accountability for use of public resources.................................6
1.2 Scope of the study............................................................................................................8
1.3 Research Structure............................................................................................................9
Chapter 2: LITERATURE REVIEW..................................................................................11
2.1 Introduction....................................................................................................................11
2.2 Theoretical review..........................................................................................................11
2.2.1 Audit committees.....................................................................................................11
2.2.2 Accountability in the public sector..........................................................................12
2.3 Theoretical framework...................................................................................................13
2.4 Empirical review............................................................................................................14
2.4.1 Role of audit committees in enhancing accountability............................................14
2.4.2 Enhancing the role of audit committees in the area of accountability.....................16
2.5 Chapter summary............................................................................................................18
CHAPTER 3: METHODOLOGY........................................................................................19
3.1 Data Sources and Types.................................................................................................19
3.2 Research Methods..........................................................................................................19
3.3 Data Analysis..................................................................................................................20
3.4 Ethical Consideration...................................................................................................20
CHAPTER FOUR: RESULTS.............................................................................................22
4.1 Introduction....................................................................................................................22
4.2. Accountability for Use of Resources in Public Sector..................................................22
4.4 Role of Audit Committees in Enhancing the Accountability for Use of Resources in
Public Sector Entities...........................................................................................................36
4.5 Recommendations..........................................................................................................43
Chapter 5: SUMMARY AND CONCLUSION..................................................................46
5.1 Summary.........................................................................................................................46
5.2 Limitations of this Study................................................................................................48
5.3 Suggestions for Further Research...................................................................................48
5.4 Conclusion......................................................................................................................49
References...............................................................................................................................50
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Chapter One: INTRODUCTION

1.1 Background of the Study

Audit committees play an important role in providing transparency and accountability

across public and private sectors. An audit committee comprises of members charged with

the responsibility of overseeing financial reporting and disclosure within an entity, private or

public (Manes Rossi, Brusca, & Condor, 2020). The overseeing process includes the financial

reporting procedures, internal and external audit, internal control systems, and the compliance

with the rules and regulations set by the government.

In the UK, the public sector is responsible in providing public services such as

healthcare, education, and infrastructure, emergency services, among others, all of which

work towards improved social welfare of UK citizens. Audit committees within the

government agencies in the UK are not a new phenomenon. They were introduced during the

19th century and focused on positive governance tenets such as accountability, openness, and

rectitude (Manes Rossi, Brusca, & Condor, 2020). Over the years, principles on auditing

practices within the public sector have been dynamic and in line with the emerging trends in

management within government entities. Other aspects such as advancements in technology,

population growth, public scrutiny in government expenditure, and increased government

revenue have also influenced the auditing principles within the public sector within the UK

(Manes Rossi, Brusca, & Condor, 2020). The National Audit Act 1983 is proof of the

dynamicity in management and control of government accounts. Since its enactment, the

National Audit Act (1983) has provided a coherent framework that allows efficiency and

accuracy in reported expenditure (Beasley, et al., 2009). Over the years, audit committees

have grown in relevance following scandals such as the Mid Staffs hospital (2009). The

widening role of the audit committees within the public sector has attracted research on their

level of effectiveness in enhancing accountability for use of public resources in the UK.
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Existing empirical studies have focused more on the role of audit committees within

the private sector and their effectiveness in improving corporate governance. These studies

affirm that audit committees have led to improved structures and mechanisms in financial

reporting, which has led to improved corporate governance. This research is enthused by the

rarity of empirical studies that focus on the role of audit committees within the public sector

in UK. Issues within the public sector in UK go further in terms of transparency and

accountability as far as administration of public funds is concerned (DeZoort, et al., 2002).

The management of the structures and mechanisms in financial reporting within the public

sector is far much complex due to the multiplicity of stakeholders and the nature of the

projects undertaken by the government (Beattie, Fearnley, & Hines, 2013). This research

aids in providing empirical evidence on whether audit committees enhance accountability for

use of public resources in UK.

1.1.1 Audit committees and accountability for use of public resources

Currently, the Value for Money Audit is the mechanism applied by most audit

committees in evaluating government reporting. Value for Money (VFM) Audit is an

evidence-based examination on the financial reporting practices that evaluates on the

efficiency and effectiveness of the use of public funds (Böhm, Bollen, & Hassink, 2016). The

VFM audit was established under the National Audit Act (1983) and is considered a

combination of management consulting and conventional audit approach (Song & Windram,

2004). During its establishment, this approach was considered an effective approach that

would integrate the aspects of corporate governance in auditing to the public sector (Gendron

& Bédard, 2006). Over the years, this model seems not to have changed despite the major

changes within the public sector across the UK. Existing studies point that the existing

mechanisms focus on accountability of the different entities based on their effectiveness in

their expenditure. In a nutshell, audit committees within the public sector need to evaluate the
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levels of accountability in government expenditure and how the accountability relates to the

quality of services dispensed to the public (Manes Rossi, Brusca, & Condor, 2020).To attain

such a goal, Hegazy, (2015) recommends on the need for highly effective structures and

mechanisms that are tailored to the specific public entity. In addition, Abdullah, Ismail, &

Smith (2016) add on the need for dynamicity in these structures and mechanisms that

captures the emerging trends such as technology and their impact in improving accountability

within the public sector. As it stands, these aspects are yet to be captured within the existing

mechanisms and structures that are applied by the audit committees within the public sector

in the UK. The existing body of literature does not seem to relate accountability and

transparency within the public sector. The paucity of the extant literature on the effective

mechanisms and structures on how the current audit committee enhances accountability has

motivated this research.

The major source of government revenue is through tax. The VAT, Income Tax, and

National Insurance contributions make up 60% of the total tax revenue contributed in UK

(Hegazy, 2015). These taxes aim at improving the welfare of UK citizens through provision

of services such as healthcare, education, infrastructure, among others. In the recent past,

there has been increase in pressure from the public towards the transparency in the use of

public funds. According to Hegazy & Stafford (2016), scrutiny of public funds has increased

especially due to scandals and increased interest by the public on public governance. This

research aims to provide recommendations in enhancing audit committees’` role in enhancing

accountability for use of public resources.

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1.2 Scope of the study

This research studies the role of audit committees in enhancing accountability for use of

resources in public entities in the UK. The paper will examine the setup of these committees,

their roles, responsibilities, structures, and mechanisms that they operate under in overseeing

financial reporting within public entities. This paper applies an approach founded on

institutional theory that explains the importation of audit committees from the private sector

and directly implemented via the VFM audit within the public sector in UK. The paper seeks

to evaluate the effectiveness of how these measures and mechanisms that have been applied

in the private sector can be considered effective and efficient in the public sector. The

research evaluates whether there is a conventional model that applies for audit committees in

the private and public sector. Notably, the public sector is highly sensitive due to the many

sectors such as healthcare, education, and infrastructure. This research delves into the

existing mechanisms and structures that are applied by audit committees within the public

entities and their level of effectiveness in improving financial reporting within these entities.

The results obtained will help to come up with recommendations to enhance the audit

committees’` role in enhancing accountability for use of resources. The objectives of the

study are:

I. The role of audit committees in enhancing accountability for use of resources in

public sector entities in the UK

II. The mechanisms and structures applied by audit committees’ in enhancing

accountability for use of resources in public entities

III. Recommendations to enhance the audit committees’` role in enhancing

accountability for use of resources

The main research questions to be addressed by the study are:

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I. Do audit committees enhance accountability for use of resources in public

sector entities in the UK?

II. How do audit committees enhance accountability for use of resources in

public entities?

III. What are the recommendations to enhance the audit committees’ role in

enhancing accountability for use of resources

1.3 Research Structure

Chapter 1- Introduction

This chapter provides research background, the scope of the study, and the structure of the

research. The part on the research background provides a summary of existing literature and

how they correlate to the research questions identified. The introduction section also

identifies the research questions and objectives.

Chapter 2- Literature Review

This section reviews the existing research on the research topic on the role of audit

committees in enhancing accountability for use of resources in public sector entities in the

UK. This section assesses the existing body of literature and their relevance in answering the

research questions.

Chapter 3- Data Description and Methodology

This section describes the strategies that will be applied in collecting data, the type of data

and their respective sources. This section also describes the statistical models that will be

applied in collection, analysis, and presentation of data. The section will also justify the

choice of these models.

Chapter 4- Results Analysis and Discussion

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This chapter provides the results for the data collected and analyzed. The chapter also

describes the findings and how they relate with the existing body of literature on the research

topic. This section also highlights the limitations of the research study.

Chapter 5- Conclusion and Recommendations

This chapter provides an overview of the study on the role of audit committees in enhancing

accountability for use of resources in public sector entities in the UK. This section describes

the limitations of the existing mechanisms and structures in audit committees and how they

influence poor governance of different public entities in UK. This section provides relevant

recommendations on how to use audit committees in improving accountability within the

public sector. The recommendations are based on the research findings.

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Chapter 2: LITERATURE REVIEW

2.1 Introduction

This chapter seeks to review the numerous studies examining the contribution of audit

committees in public sector accountability. It aims to provide a basis for developing an

understanding of the importance of audit committees in the public sector. The section is also

written to identify any literature gaps that the current study needs to fill. Thus, the chapter

critically reviews both theoretical and empirical studies to identify their strengths and

limitations that need to be addressed by the current study.

2.2 Theoretical review

This section covers the theoretical review of literature on audit committees and

accountability. It defines the two concepts and provides theories that form the basis of the

study.

2.2.1 Audit committees

The term "audit committee" is used to define a team established by a board to

supervise the financial and accounting processes of the business. As a governing body, the

team is responsible for overseeing an organization's audit and control functions (Bello, 2013).

This, therefore, means that the committee has to examine and review all internal processes to

ensure that they are effective and compliant with requirements. For instance, in the case of

public sector firms, the audit committees should ensure that managers are using resources

effectively and are accountable for their use. Therefore, an audit committee is a “means for

corporate governance” that eliminate the probability of fraud and mismanagement of public

resources (Al-Baidhani, 2016, p.47). The audit committee should include not less than three

members. The majority of members should be independent from the management and should

not refrain from undertaking executive duties in the organization. According to the agency
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theory, having a team of non-executive audit committee members provides a means of

monitoring the activities of the management and f ensuring that the interests of the public are

protected (Qaiser & Abdullah, 2016).

The committee is charged with different roles in relation to corporate governance. For

instance, it is supposed to monitor and evaluate the effectiveness of the internal audit function

(Al-Baidhani, 2016). In doing so, the audit committee team has to enhance and sustain the

independence of the internal audit and ensure that the internal auditors are competent. Thus, it

should recruit a skilled and independent internal audit team and provide oversight to ensure

that all audit work is done properly. The audit committee is also charged with strengthening

internal control mechanisms (Al-Baidhani, 2016). In achieving the role, the committee

reviews the internal controls, ascertains key weakness, and addresses them. The committee is

also supposed to oversee the financial reporting system and processes to ensure quality

financial reporting. Thus, its members are supposed to constantly communicate with

management to ensure that proper accounting principles and standards are implemented (Al-

Baidhani, 2016). The team is also supposed to ensure that the management does not engage

in fraud or earnings management by using wrong accounting estimates.

2.2.2 Accountability in the public sector

The term “accountability” is considered as the obligation for a person to demonstrate

and take responsibility for his or her actions in light of agreed expectations (Bananuka et al.,

2018). In the public sector, the concept refers to the reporting and legal framework, actions,

procedures, and organizational strategy that ensure organizations are held responsible for

their actions. The concept requires public sector managers to account for their actions to the

government and other stakeholders such as citizens and society. This means that

accountability is a duty that arises when one (for instance, a manager) enters into a contract to

manage public resources. Ullmann (1995) developed a three-dimensional framework to help

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explain the correlations among performance, accountability and disclosure. The first

dimension, stakeholder power, suggests that a public sector entity should be responsible for

meeting stakeholder demands. This means that public sector organisations should react or

carry out their activities in a manner that is consistent with the needs of the company

stakeholders. For instance, the managers should use resources effectively and in a way that

stakeholders intend them to be used. The second dimension, strategic posture, suggests that

public sector entities should try to influence their statuses by implementing accountability

programs and disclosing their commitment to accountability to their stakeholders. For

instance, the managers ought to disclose their commitment to their stakeholder needs in the

annual report. Such actions are considered critical to enhancing accountability and trust

between the management and the wide group of public sector stakeholders. The last

dimension suggests that managers should balance the needs of all stakeholders. More

specifically, the third dimension suggests that public sector firms should also be accountable

to society and should not place economic demands above social demands (Freeman, 2015).

2.3 Theoretical framework

This research project uses the agency theory as its main theoretical framework. The

theory focuses on the relationship between shareholders (principal) and management

(agents). It argues that problems surface in firms where there is a clear separation of owners

and managers. The separation between the two often leads to conflicts, especially because

each party has different needs and interests. For instance, managers may be unwilling to

invest in projects whose revenues would be realized in future periods. This happens when the

management is paid based on their current performance. However, the conflicts of interest are

likely to create disagreements between shareholders and management, leading to increased

costs. The agency costs include monitoring costs, business losses incurred due to selfish

decisions by managers, and costs related to the structuring of contracts. However, the agency
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theory assumes that agency problems can be avoided if firms put in place clear agency

contracts that outline the roles of each party (i.e., for managers and shareholders). For

instance, managers are supposed to be accountable to shareholders who include the

government in the case of public sector corporations.

The government is supposed to demand that public sector entities boards constitute

themselves into sub-committees to enhance their monitoring role. Thus, the audit committee

is supposed to act as a monitoring agent in the relationship between public sector managers

and the government. Therefore, the committee is supposed to ensure that managers of public

sector organizations are accountable for using the resources provided by the government. It

should review and supervise internal audit systems and put in place strong internal controls to

enhance accountability in the public sector (Mohamed & Hussain, 2005). Overall, the agency

theory suggests that an audit committee enhances accountability and reduces agency

problems within the public sector.

2.4 Empirical review

2.4.1 Role of audit committees in enhancing accountability

The preceding discussion shows that audit committees are an important component of

any given entity. They provide a means of monitoring the actions of management, which is

critical to enhancing the quality of financial disclosures. Numerous studies have also

examined the importance of committees in the area of accountability. Bello (2013), for

example, explored the audit committee’s role in the improvement of accountancy in

Albania’s public sector.

In particular, the study sought to assess whether organizations in the public sector

need to have audit committees. The author found that the importance of audit committees is

not well known in Albania's public sector. However, the study concluded that there was a
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need to establish such committees in Albania to help enhance accountability and the quality

of public services. This means that having an audit committee ensures that public sector

organizations are more accountable over the use of resources. The study also ascertained that

audit committees enhance the reliability and integrity of financial reporting by acting as

monitoring tools of the internal control systems for public sector organizations. The findings

were based on data collected from mainly semi-structured interviews and a review of

secondary sources. The paper did not provide information relating to the number of

respondents interviewed. Therefore, the findings may be somewhat unreliable as the author

did not exclusively explain how he gathered data for the study.

Bello (2013) is corroborated by a paper issued by IIA (2014). The study explored the

role of independent audit committees in the global public sector. The IIA's study established

that independent audit committees make a substantial difference in most public sector

organizations. It suggested that audit committees help in improving transparency and

accountability. It also found that a high performing audit committee assists in ensuring that

public sector organizations are accountability to the public. This means that the audit

committee should be independent, capable, balanced, and committed to enhancing

accountability. The study was, however, theoretical in nature as it did not test its claims. It

was highly descriptive in the assessment of the importance of public sector audit committees.

Therefore, the results of the report may not be valid or generalizable.

Bananuka et al. (2018) studied the function of the audit committees in statutory

corporations. The main purpose of the investigative paper was to review the contributions

made by the auditing function in enhancing the effectiveness of accountability of the public

sector. Findings from the study indicate that audit committees contribute positively to the

accountability and transparency of the public sector corporations. The results, however,

indicated that the effectiveness of the committees in improving accountability is more

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pronounced for public firms that do not have an internal audit function. This means that an

internal auditing is more important than an audit committee when it comes to enhancing

public sector accountability. The conclusions are highly generalizable since the study used a

large sample size of 73 statutory organizations. However, the researchers used closed-ended

questions which do not encourage respondents to provide their honest opinions. Therefore,

the study is inexhaustive and unreliable as it did not cover all the possible angles of

accountability. For instance, it did not explain how the audit committee enhances

accountability in public institutions.

Badara and Saidin (2012) explored the role of auditing function on accountability.

The study showed that audit committees are important tools for governance. Importantly, the

authors suggested that the audit committee team ensure accountability and transparency of

business operations. The study, however, reviewed previous papers on the subject, and thus

their findings could be of low quality. The findings are nonetheless in line with previous

studies such as Bello (2013) and IIA (2014). Another study by Mebratu (2015) shows that the

audit committee plays a vital role in the governance and accountability processes. The

committee enhances accountability in public sector entities through its assessments of key

governance, organizational controls, and risk management processes (Mebratu, 2015, p.1).

for instance, the implementation of strong corporate governance mechanisms forces the top

managers to carry out their activities in an accountable manner. The study, however, indicates

that the audit committee should be properly constituted for it to ensure enhanced

accountability in the public sector. This means that the team should comprise independent

and highly skilled members in different matters relating to finance and auditing.

2.4.2 Enhancing the role of audit committees in the area of accountability

Several studies have also been carried out to help enhance accountability. For

instance, Hedger & Blick (2008) evaluated the means of improving the effectiveness of audit
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committees. The study established that there are different mechanisms for enhancing

accountability through the improvement of audit committees. For instance, Hedger & Blick

(2008) show that a merger between the finance and audit committees can positively improve

the audit committee. This practice has worked in some jurisdictions, such as New Zealand

and the Solomon Islands. The study adds that training and devising, and implementing a code

of conduct can also help enhance accountability in the public sector. This means that audit

committees should devise and implement a code of conduct to guide managers in their

behaviour. The study uses data from expert reviews and discussions with government

officials. This implies that the findings are not generalizable to the entire population of public

entities. The study is a work in progress that demands a more detailed empirical study to test

its propositions.

Chrisostom & Aloysiuos (2013) explored the relationship between the code of

conduct and administrative accountability in the public sector. The study found that high

usage of codes of conduct enhances accountability in the public sector. This means that

public sector entity audit committees can improve accountability by applying a sound code of

ethics. The study used a large sample size of 300 respondents to gather data. However, the

data was gathered from a developing country, and thus the findings may not apply in the UK

environment. The findings are, however, corroborated by Duh (2017). The study showed that

codes of ethics and their adoption are critical to enhancing corporate government. More

specifically, the study indicates that codes of ethics tend to enhance the development of good

corporate governance practices. This means that implementing a robust code of ethics can

help audit committees enhance the accountability of public sector entities.

Haji & Anifowose (2016) reviews the role of audit committees and integrated

reporting. The study is motivated by recent developments and beliefs that integrated reporting

is a powerful tool for enhancing performance. The authors show that the integrated reporting
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practice increases the effectiveness of audit committees. This means audit committees should

require public sector organizations to implement integrated reporting. The audit committee

team should also oversee the practice to enhance accountability. The study also shows that

audit committees should consist of members with a broad spectrum of skills (governance,

leadership, legal, technology, finance, and auditing) to enhance their efficacy in enhancing

accountability. The study mainly relied on secondary sources of data, such as annual reports.

This means that the data collected was not suitable for the study, and thus the findings are of

low quality. The researchers ought to have complemented the secondary sources with

primary data.

2.5 Chapter summary

This chapter has reviewed previous studies in the area of audit committees’ role. It

has shown that the committees contribute positively to the enhancement of transparency and

accountability of the public sector. For instance, by ensuring strong governance mechanisms,

the committee forces the top managers to carry out their activities in an accountable manner.

However, the review has shown that literature examining the importance of audit committees

in enhancing the accountability of public sector firms is scanty. Most of the few studies

undertaken on the area are from developing nations such as Saudi Arabia. Therefore, the

findings from the countries may not be applicable in developed countries such as the UK. In

addition, the review shows that there is a lack of empirical studies on how the audit

committee’s work in improving accountability can be enhanced. The available studies are

theoretical and cannot be relied upon to make sound judgments. This current study thus seeks

to fill the identified literature gaps and contribute to the current literature. In doing so, the

study will assess whether audit committees enhance accountability in the UK’s public sector.

The study will also explore the ways in which the committee’s role in enhancing

accountability can be improved.

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CHAPTER 3: METHODOLOGY

3.1 Data Sources and Types

To meet the research objectives and the research questions, this study made use of

secondary data. The premise for choosing secondary data is the fact that it is reliable.

According to Castrol et al (2015), an assumption is made that instruments used in secondary

data collection are tested for reliability and validity. In that case, the resulting secondary

information is reliable and valid for the establishing of the research objective. In addition,

primary data collection requires vast financial resources as well as time which are a major

constraint. On the contrary, secondary data requires access to websites of the different entities

where data is available either free of charge or at a small fee hence less expensive compared

to collection of primary data. The secondary data will mainly be acquired from the entities’

annual financial reports which is provided on the various websites. In case the data is not

available on the respective website, the information will be collected from the Financial

Analysis Made Easy (FAME) website. The FAME websites contains a collection of financial

information of firms operating in the UK as well as Ireland.

3.2 Research Methods

According to Power and Gendron (2015), a research method is said to be effective if

the possibility of understanding reality is better despite the technique. Studies either utilise

qualitative, quantitative or a mix of the two approaches. This research will use qualitative

method. The study will use content and thematic analysis to achieve the study objectives

which are; to determine if audit committees enhance accountability for use of resources in

public sector entities in the UK; to assess how audit committees enhance accountability for

use of resources in public entities and to; give recommendations on how to enhance the audit

committees’ role in enhancing accountability for use of resources. The study will use

purposive sampling with the key focus being 18 public entities in the UK that have audit
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committees;- BBC, Brighton & Hove City Council, British Council, Child Maintenance

Service, Civil Service Fast Stream, Defence Science and Technology Laboratory (DSTI),

Crown Prosecution Service (CPS), Financial Conduct Authority (FCA), Government

Actuary’s Department (GAD), Government Legal Service, Government Statistical Service

(GSS), Highways England, HM Revenue and Customs, HM Treasury, Metropolitan Police,

National Audit Office (NAO), National Health Service (NHS) and Office for National

Statistics (ONS). In terms of the research design, the project will make use of descriptive

research design. A descriptive research design reports things as they are.

3.3 Data Analysis

According to Cooper and Schindler (2011), data analysis involves the reduction of the

data collected to a manageable size, development of summaries, checking for patterns as well

as the application of statistical analysis methods. The study will use thematic analysis to

understand the differences and similarities between the different entities. The themes that will

be analyzed are the different functions of audit committees of the public entities in enhancing

accountability. The roles that apply frequently to most of the firms are clustered into themes.

The key five themes will be selected. Content analysis will be applied to the annual reports in

order to determine the role of audit committees in the public sector in the UK with respect to

accountability.

3.4 Ethical Consideration

The ethical considerations in this project include the copyrighted information, use of

information for the intended purposes and publishing of the results. The use of the

copyrighted information will be used subject to receiving permission from the author. On the

other hand, given the fact the acquisition of permissions and approvals from authors may take

a considerable amount of time and delay the project completion, alternative sources of data

will be used as opposed to the copyrighted information. In addition, the information acquired
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from the annual reports for the different entities will be used purely for this study. All the

sources used in data collection will be properly referenced and the authors recognized. The

results will be published upon completion of this research. This way, the information and the

findings of the reach will reach the intended users. The publishing of the results will also be

important in the achievement of the objectives of the study which is adding to extant

literature of the role of audit committees in enhancing accountability of the use of resources

by public entities in the UK.

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CHAPTER FOUR: RESULTS

4.1 Introduction

This chapter presents the research findings of this study. It looks at data analysis,

presentation and discussion of the study results. For the selected research methodology to be

understood, data was analyzed thematically as per the research objectives. To meet each

research objective, qualitative data on the role of audit committees from 18 public sector

entities in the UK were analyzed. The research objectives were, one, to determine whether

audit enhance the accountability for use of resources in public sector entities. Two, to

determine how audit committees enhance accountability for the use of resources by public

sector entities. Three to give recommendation on how the audit committee’s role in ensuring

accountability can be enhanced.

4.2. Accountability for Use of Resources in Public Sector

The research identified eight key themes that relate to accountability and linked them

to the roles identified in the terms of reference for the 18 audit committees. The identified

themes are; review of accounts and annual reports; whistleblowing and antifraud processes;

review of financial plans; compliance to policies; arranging for special investigations;

financial management and budgetary control; anti-money laundering systems and control

and; purchase of external audit and non-audit services. Table 4.2 identifies the themes

relating to accountability and the entities that have it defined in their terms of reference.

Table 4.2. Themes of Audit Committees

Themes Relating Number of firms Percentage Companies

Accountability Frequency

Review of Accounts 18 100% BBC, Brighton & Hove

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and Annual Reports City Council, British

Council, Child

Maintenance Service,

Civil Service Fast

Stream, Defence

Science and Technology

Laboratory (DSTI),

Crown Prosecution

Service (CPS),

Financial Conduct

Authority (FCA),

Government Actuary’s

Department (GAD),

Government Legal

Service, Government

Statistical Service

(GSS), Highways

England, HM Revenue

and Customs, HM

Treasury, Metropolitan

Police, National Audit

Office (NAO), National

Health Service (NHS)

and Office for National

Statistics (ONS).
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Whistleblowing and 13 72% BBC, Brighton & Hove

anti-fraud processes City Council, British

Council, Defence

Science and Technology

Laboratory (DSTI),

Crown Prosecution

Service (CPS),

Financial Conduct

Authority (FCA),

Government Actuary’s

Department (GAD),

HM Revenue and

Customs, HM Treasury,

Metropolitan Police,

National Audit Office

(NAO), National Health

Service (NHS) and

Office for National

Statistics (ONS).

Review of Financial 10 55.6% Brighton & Hove City

Plans Council, BBC, HM

Treasury, National

Health Service, Office

of National Statistics,

Government Statistics
 24

Service, National Audit

Office, Government

Actuary Department,

Highways England

Compliance to 14 77.8% BBC, Brighton & Hove

Policies City Council, British

Council, Defence

Science and Technology

Laboratory (DSTI),

Civil Service Fast

Stream, Crown

Prosecution Service

(CPS), Financial

Conduct Authority

(FCA), Government

Actuary’s Department

(GAD), HM Revenue

and Customs, HM

Treasury, Metropolitan

Police, National Audit

Office (NAO), National

Health Service (NHS)

and Office for National

Statistics (ONS).

Arranging for 2 11% National Health Service,

 25

special investigations Financial Conduct

Authority

Financial 10 55.6% Brighton & Hove City

management and Council, BBC, HM

budgetary control Treasury, National

Health Service, Office

of National Statistics,

Government Statistics

Service, National Audit

Office, Government

Actuary Department,

Highways England

Anti-money 7 38.9% Brighton & Hove City

laundering systems Council, BBC, HM

and controls Treasury, National

Health Service, Office

of National Statistics,

Government Statistics

Service, National Audit

Office

Purchase of external 2 11% National Audit Service,

audit services and National Health Service

purchase of non-

audit services
 26

Per centage Fr equency

120%
100.00%
100%
77.80% 72.00%
80%
60% 55.60% 55.60%
38.90%
40%
20% 11.00% 11.00%
0%

The information on the level of accountability of the audit committees has been

outlined in the audit and risk committee handbooks that are provided by each of the public

entities across the UK. For each of the entities, the handbooks are updated regularly to align

their framework with the emerging issues in governance of public entities (HM Treasury,

n.d.). According to HM Treasury risk and audit committee handbook, the audit committees

play a pivotal role in enhancing accountability in the use of resources. The establishment of

internal financial controls makes it easier to track the financial expenditure for each of the

public entities, which enhances accountability for use of public resources within the public

sector in the UK. In addition, these committees are highly appreciated due to their

contribution in safe guarding the management of the government financial resources, the

parliament as well as the appropriateness and accuracy of public resources expenditure (HM

Treasury, n.d). For example, the Brighton and Hove City Council is charged with the

responsibility being “accountable for the revenue that it gets from ring fenced funding for

schools, housing benefit, council housing, public health and council tax” (Brighton and Hove
 27

City Council, n.d). Over the years, the risk and audit committee at the Brighton and Hove

City Council has ensured that it creates a coherent framework in financial controls that are in

line with the emerging issues in management of the Brighton and Hove City Council to

ensure accountability for use of public resources within the entity. This has also been

supported by the terms of reference defining the roles of audit committees for other public

entities such as the British Council, Crown Prosecution Service, BBC, and British Council.

Looking at the first theme on review of accounts and annual reports, 100% of the 18

audit and risk committees’ handbooks identified this theme. For example, the audit and risk

committee at the Financial Conduct Authority handbook indicates that the entity’s audit

committee “should work hand in hand with the accounting officers and the management in

monitoring the uprightness of the financial statements and any other financial statements that

relate to the financial operations of the authority” (Financial Conduct Authority, 2021). The

National Health Service, in their terms of reference highlight the role of audit committees as

advising the board and the accounting officer on “ the accounting policies, the accounts, and

the annual report of NHS England, including the process for review of the accounts prior to

submission for audit, levels of error identified, and management’s letter of representation to

the external auditors” (National Health Service, 2018). The Office of National Statistics audit

and risk assurance committee handbook identifies with this theme by highlighting the role of

the committee to be offering advice to the Authority Board and Accounting Officer “ the

accounting policies, the Authority’s Annual Report and Accounts (including the process for

review of the Accounts prior to submission for audit), levels of error identified, and the

Accounting Officer’s letter of representation to the Comptroller and Auditor General” (Office

of National Statistics, 2014). Another entity that has identified this theme in their handbook is

the HM Revenue and Customs. According the audit committee terms of reference, the

committee “ advises the Principal Accounting Officer on strategic processes for risk, control
 28

and governance of the accounting policies, the accounts, the Tax Assurance Commissioner’s

annual report and the annual report of the organization, including the Resource Accounts,

Trust Statement and the National Insurance Fund Accounts” (HM Revenues and Customs,

n.d). On the other hand, Highways England identifies one role of the audit committee is

“oversees the acceptability of the Annual report and account” (Highways England, 2018).

These findings indicate that the audit committees play a significant role in reviewing

accounting procedures, accounts, and other annual reports. In addition, the committee advises

the boards of the entities and the accounting officers on the accounting policies and

preparation of financial reports. This implies that the audit committees ensure transparency

and accountability in the public sector by reviewing the financing statements presented by the

accounting officers and ensuring that reporting is done as per the regulatory requirements

The second theme is whistleblowing and anti-fraud processes. The audit and risk

committee handbook of the reviewed public entities has provided information on the role that

the committees play in implementing whistleblowing and anti-fraud processes. This theme

was identified in 13(72%) out of the 18 audit committees’ handbooks and terms of reference.

For example, the audit and risk committee for the HM Revenue and Customs promotes

“policies on data protection, security breaches, or any other flaws within the entity that might

lead to fraud related incidences (HM Revenue and Customs, n.d). Another entity that

identifies with this theme is the Brighton and Hove Council. According to the handbook, the

committee should advise the “Council on its Codes of Conduct and administering related

complaints and dispensation procedures” (Brighton & Hove City Council, n.d).  The Defense

Science and Tech Lab also identifies with this theme by highlighting on the need by the

committee to observe high ethical standards and “the strategic processes for risk, control and

governance, taking into account related ethical standards, and the Governance Statement”

(DSTL, n.d). In relation to this theme, the Financial Conduct Authority states that the
 29

committee should ensure “adequacy, effectiveness and security of the internal whistleblowing

arrangements” (Financial Conduct Authority, 2021). The committees also work to assess the

outcomes of set policies and structures to counter fraud by review arrangements on possible

unseemliness on financial reporting. These findings as outlined in the handbooks of each of

these entities imply that implementing whistleblowing and anti-fraud processes forms a key

role in ensuring efficient and prudent use of public resources as such enhancing

accountability.

Review of financial plans was the third theme identified relating to the role of audit

committees in enhancing accountability in the use public resources in the UK. According to

the findings some of the entities have a financial plan that they have to adhere to in attaining

its goals over a specific period (National Audit Office, n.d; BBC, n.d). The audit and risk

committee handbook of 10 (55.6%) out of the 18 public entities have outlined the roles that

the committees play in evaluating the financial plans based on the goals of the entity and the

funds that have been allocated. For example, the risk and audit committee for the National

Health Service (NHS) “constantly evaluates the expenditure on different programs and the

level of success as they relate to the health and wellness of the UK citizens” (National Health

Service, n.d). The BBC also identifies with this theme by outlining in its handbook by stating

that the committee is “Responsible for reviewing and maintaining oversight of the BBC’s

internal control and risk management processes including those key risks facing the

corporation” (BBC, n.d). The Government Actuary Department also identifies with this

theme by stating that the audit committee meets at least one in every three months to discuss

the financial plans of the organization (Government Actuary Department, n.d). The other

entity that identifies with this theme is the National Audit Service. The handbook by the

entity outlines that one of its audit committee’s role is to “examine the economy, efficiency

and effectiveness with which local authorities and other local public bodies use their
 30

resources” (National Audit Service, n.d). In addition, the handbook by the Office of National

Statistics has also highlighted the role of its audit committee in relation to this theme by

stating that the committee should “ensure that there are levels of assurance in place which are

aligned to the delivery of the Authority’s strategic aims and priorities” (Office of National

Statistics, n.d). HM Treasury also identifies with this theme in its audit and risk committee

handbook by outlining that one of the roles of its audit committee is “scrutinising financial

plans, advising the Board on their adoption, and monitoring financial performance against

approved plans” (HM Treasury, n.d). Notably, the risk and audit committees in these public

entities are required to work closely with the internal and external auditors and evaluate

whether the financial operations are in line with the set financial plans. The implication of

these findings shows the role by the audit committees in ensuring accountability in

management of public resources within the UK public sector.

The other theme highlighted was compliance to policies. There are compliance

policies on the relevant legal, regulatory, and code of conduct requirements (Financial

Conduct Authority, 2021). This theme was identified by 14 out of the 18 entities sampled.

For each of these organizations, the risk and audit committees review the effectiveness and

appropriateness of these policies, annual governance statements alongside other independent

assurances such as the external audit opinion and internal audit opinion before being

endorsed by the board when required. For example, the audit and review committee at the

BBC “reviews the processes of assurance that show the achievement level of the organization

and the related disclosure statements”. The standards are usually set by the government

(BBC, n.d). This theme has also been outlined in the risk and audit committee by the British

Council. According to the handbook, the committee is charged with the responsibility of

“periodically reviewing and advising the Board on the adoption of policies relating to tax,

treasury and banking and investment” (British Council, n.d). A similar role has also been
 31

outlined by the Office of National Statistics that states in its handbook that the committee is

expected to evaluate “the adequacy of financial management and budgetary control,

particularly in relation to compliance with HM Treasury’s control totals regime” (Office of

National Statistics, n.d). According to the handbook by the Government Statistical Services,

the committee is expected to evaluate the “assurances relating to the corporate governance

requirements for the organization” (Government Statistical Services, n.d). These findings

imply that evaluation of these policies and standards ensures that as an independent body, the

audit committee for every public entity is committed to ensuring that accountability has been

maintained, which ensures effective and efficient use of public resources within the UK

public sector.

The risk and audit committees hold the responsibility for the processing and arranging

special investigations in public sector which is one way of ensuring accountability in the use

of resources (National Health Service, 2018). This theme was identified in the terms of

reference of two audit committees (National Health Service and Financial Conduct

Authority) out of the sample of 18. This is made through appointment of highly qualified and

experienced board members in the field of accounting and management of public resources.

According to the terms of reference outlined under the National Health Service, “the board

members require legal, financial and managerial expertise” (National Health Service, 2018).

which provides them with skills and knowledge in conducting special investigations in cases

of fraudulent activities within the organization. Examples of incidences that could require

special investigations include improper accounting for business activities, manipulation of

figures, illegal payments for obtaining contracts and occupational misconduct, embezzlement

of funds, among others (Financial Conduct Authority, 2021). The independent observations

made by the risk and audit committees across all entities are discussed with the external

auditors before the committee makes its recommendations to the board. With such a
 32

framework in processing and arranging for special investigations, these findings imply that

the effectiveness and efficiency of the risk and audit committees across the different public

entities maintain strong internal controls that enhance accountability for the use of resources

in the public sector.

The other theme identified by the study is financial management and budgetary

control. Financial reporting, operational matters, and technology security are some of the

financial and budgetary control aspects that influence the use of public resources within the

public organizations within the UK. According to the Financial Conduct Authority (2021)

audit committee handbook, one of the major roles of the audit committee is to “cooperate

with the internal and external auditors in the audit process and submitting a report to the

board”. This way, the audit committees serve an independent role of overseeing financial

operations that ensure that the mission and vision of each of the public entities has been

maintained. Budgetary allocations and appropriations influence the financial operations of

various public entities. According to the handbook by the National Audit Service, “the audit

committees must ensure that accounting systems are not only effective and efficient but also

reflect the goal and mission of the National Audit Service” (National Audit Office, n.d). As

an entity that is charged with the responsibility of scrutinizing public spending of the

parliament, the audit committee ensures that the proper accounting procedures have been

adhered to in attaining the goals and objectives of the organization. Similar public entities

such as the Metropolitan Police, British Council, and the Office of National Statistics apply a

similar approach in ensuring that financial accountability is attained (London City Hall, 2019;

British Council, 2020; Office of National Statistics, 2014). Due to the changing budgetary

needs by these public entities over the years, the risk and audit committees engage in

comprehensive meetings in evaluating the expenditure of their respective entities and

comparing it with the budgetary allocations. These comprehensive meetings do not only
 33

ensure that the expenditure is in line with the budget but also makes recommendations on the

areas that they feel need to be allocated more funds or allocated less funds (Financial

Conduct Authority, 2021). As per the findings this gives the indication that the audit

committees have been considered as having a part to play in assessing the adequacy of

controls put in place in terms of budgeting as well as financial management of the entities, all

of which enhance accountability for the use of resources in the public sector.

Anti-money laundering systems and controls was also identified as a key theme in

enhancing accountability. According to the risk and audit committee handbook by the

National Health Service, one of the audit committee’s roles is to implement anti money

laundering controls and systems within the entity (National Health Service, 2018). The audit

committee always ensures that an internal control program is implemented to ensure that risk

assessment process has been implemented. This theme was identified by 7 of the 18 entities

such as Brighton & Hove City Council, BBC, HM Treasury, National Health Service, Office

of National Statistics, Government Statistics Service, National Audit Office, the audit

committee must ensure that due diligence policies have been implemented to improve

financial reporting ( Brighton &Hove City Council, n.d; BBC, n.d; HM Treasury n.d).

According to the information outlined in the risk and audit committee handbook by the

Financial Conduct Authority, “the audit committee is expected to enforce anti-money

laundering systems and controls” (Financial Conduct Authority, 2021). One of the strategies

that they apply in completing this role is by working with the internal auditors in ensuring

that the set standards in financial reporting have been attained. In addition, the audit

committees review the existing internal financial controls and their effectiveness in

establishing systems for assessing, identifying and monitoring of financial operations that

could involve money laundering (Financial Conduct Authority, 2021).

 34

The auditing process within the public entities is an important procedure in evaluating

accountability for the use of resources in the public sector. One of the aspects that influence

the success of an external audit is the tendering process for choosing the best external

auditors for the entity. This theme was identified in the terms of reference of 2 entities out of

18; the National Audit Office and the National Health Service. Given the vulnerability of the

external audit process, the risk and committee handbooks by the National Audit Office and

the National Health Service outline some of the roles by the committee members as “

reviewing the tendering proposals for the purchase of external audit services and purchase of

non-audit services from contractors that provide audit services” (National Health Service,

2018). The Local Audit and Accountability Act 2014 make the Controller and Auditor

General (C&AG) “responsible for the preparation, publication and maintenance of the Code

of Audit Practice”. The Code sets out what local auditors are required to do to fulfill their

statutory responsibilities under the Act. The C&AG can also issue guidance to auditors which

may explain or supplement the provisions of the Code (Financial Conduct Authority, 2021).

The findings imply that the audit committees ought to work under these provisions to not

only ensure that these set standards have been adhered to but to also ensure efficiency and

effectiveness within the auditing process.

4.4 Role of Audit Committees in Enhancing the Accountability for Use of Resources in
Public Sector Entities
This study sought to determine the different roles that the audit committee plays in

public sector entities, in enhancing accountability in the use of resources. To determine the

specific roles, the researcher identified the most frequent roles across the 18 entities that

focused on accountability of resources. The roles were acquired from the terms of reference

in the audit committee handbook for the respective entities.

 35

Role of Audit Frequency Percentage Companies

Committee Frequency

Review and oversight of 18 100% BBC, Brighton & Hove City

accounting policies, the Council, British Council, Child

accounts and annual Maintenance Service, Civil

reports Service Fast Stream, Defence

Science and Technology

Laboratory (DSTI), Crown

Prosecution Service (CPS),

Financial Conduct Authority

(FCA), Government Actuary’s

Department (GAD), Government

Legal Service, Government

Statistical Service (GSS),

Highways England, HM Revenue

and Customs, HM Treasury,

Metropolitan Police, National

Audit Office (NAO), National

Health Service (NHS) and Office

for National Statistics (ONS).

Implementing 13 72% BBC, Brighton & Hove City

whistleblowing and anti- Council, British Council,

fraud processes Defence Science and Technology

Laboratory (DSTI), Crown

Prosecution Service (CPS),

 36

Financial Conduct Authority

(FCA), Government Actuary’s

Department (GAD), HM

Revenue and Customs, HM

Treasury, Metropolitan Police,

National Audit Office (NAO),

National Health Service (NHS)

and Office for National Statistics

(ONS).

Reviewing Financial 10 55.6% Brighton & Hove City Council,

plans and advising on BBC, HM Treasury, National

implementation Health Service, Office of

National Statistics, Government

Statistics Service, National Audit

Office, Government Actuary

Department, Highways England

Overseeing the 14 77.8% BBC, Brighton & Hove City

effectiveness of Council, British Council,

frameworks put in place Defence Science and Technology

to ensure compliance with Laboratory (DSTI), Civil Service

statutory requirements Fast Stream, Crown Prosecution

Service (CPS), Financial Conduct

Authority (FCA), Government

Actuary’s Department (GAD),

HM Revenue and Customs, HM

 37

Treasury, Metropolitan Police,

National Audit Office (NAO),

National Health Service (NHS)

and Office for National Statistics

(ONS).

Processing and arranging 2 11% National Health Service,

for special investigations Financial Conduct Authority

Assessing the adequacy 10 55.6% Brighton & Hove City Council,

of financial management BBC, HM Treasury, National

and budgetary control Health Service, Office of

National Statistics, Government

Statistics Service, National Audit

Office, Government Actuary

Department, Highways England

Implementing anti-money 7 38.9% Brighton & Hove City Council,

laundering systems and BBC, HM Treasury, National

controls Health Service, Office of

National Statistics, Government

Statistics Service, National Audit

Office

Reviewing tendering 2 11% National Audit Service, National

proposals for purchase of Health Service

external audit services

and purchase of non-audit

services from contractors

 38

providing audit services

The results show the prevalence of the different roles and responsibilities of audit

committees that enhance accountability across the selected 18 public sector entities. The

frequency is based on the number of entities that have identified the specific role under their

terms of references. The results also show that the review of accounting audits and policies is

the main goal for an audit committee. To determine the percentage frequency, the frequency

value obtained per each audit role was divided by 18 then multiplied by 100%.

Roles of Audit Committees

Reviewing tendering proposals for purchase of external audit services and purchase of non-audit services from contractors providing audit services 11%

Implementing anti-money laundering systems and controls 39%

Assessing the adequacy of financial management and budgetary control 56%

Processing and arranging for special investigations 11%

Overseeing the effectiveness of frameworks put in place to ensure compliance with statutory requirements 78%

Reviewing Financial plans and advising on implementation 56%

Implementing whistleblowing and anti fraud processes 72%

Review and oversight of accounting policies, the accounts and annual reports 100%

0% 20% 40% 60% 80% 100% 120%

Figure 4.1: Percentage Frequency for Audit Committee Roles that Enhance

Accountability

The most prevalent role of the audit committees was found to be the review and

oversight of the accounting policies, accounts and the annual reports with 100% of the

committees identifying this function in their terms of reference. This is an indicator that
 39

reviews of the financial statements and oversight on compliance to the existing accounting

policies is key for the audit committees in ensuring that there is accountability in the use of

public resources. According to the United Kingdom Code on Corporate Governance, “an

audit committee has the role and responsibility of monitoring the integrity of financial reports

of an entity, any announcements that relate to the entity’s financial performance as well as the

review of key financial reporting judgments that are contained in the financial

statements”(Financial Conduct Authority, 2021).

Oversight of the effectiveness of frameworks put in place to ensure compliance to the

statutory requirements was found to be the second most prominent role of audit committees

with about 77.8% of the entities highlighting it as one of the committee’s responsibility.

Within the public entities, audit committee are charged with the responsibility of overseeing

an entity’s risk management process, compliance with the applicable regulations and laws as

well as evaluating and improving the internal controls (Financial Conduct Authority, 2021). It

is the internal controls that influence the effectiveness with which financial reporting is made

within these entities.

According to the data collected, the implementation of whistleblowing and antifraud

processes was identified by 72% of the entities in terms. According to the risk and audit

committee by the National Health Service, the role of the audit committee is to ensure

sufficient investigations, actions and any complains related to the financial operations of the

entity have been followed up. This is achieved through improved accounting controls,

auditing matters and questionable accounting roles that improve the control of accounting

policies (National Health Service, 2018). The implementation of whistleblowing and

antifraud policies has also been found in other entities such as National Audit committee, HM

Treasury, and British Council, which are some of the major entities that take up considerable

percentage of the national income in management of public resources.

 40

Reviewing financial plans and advising the board of directors on their implementation

was the fourth most prominent role of the audit committees relating to accountability of

financial in the public sector. About 55.6% of the entities identified this role in their terms of

reference. Indeed one of the roles the audit committee has is the responsibility of ensuring

accurate data is provided to the top management in case they notice that it is not thorough

(Financial Conduct Authority, 2021). Often times, top management are provided with large

amounts of raw and bureaucratic information given the structure of most public sector entities

instead of being provided with the data that only contains the key information. The

responsibility of audit committees, which is constituted by members from varied backgrounds

offering expertise, is to examine information provided to the board and top level

management, to ensure its reliability and accuracy in decision making based on a well-

informed basis (Financial Conduct Authority, 2021).

55.6% of the entities also identified the assessment of the adequacy of the financial

management systems and budgetary control as a key role relating to accountability. Audit

committees are responsible for actions by reflecting the financial information as well as the

physical outputs. According to the risk and audit committee handbook by the National

Health Service, “the audit committees are expected to assess and evaluate the financial

management systems and determine whether they are in line with the standards that have

been set up by the government” (National Health Service, 2018). Notably, this role has not

been outlined in all of the public entities identified in this study due to the difference in the

goals and objectives for each of the respective public organizations.

With only 11% of the entities identifying this role in their handbooks, audit

committees are charged with the responsibility of processing and arranging for special

investigations. The least common role was identified as the reviewing of tender proposals for

purchase of external audit services and purchase of non-audit services from contractors with
 41

11% of the audit committees identifying it as key responsibility. This observation is based on

the fact that the conduct of special investigations falls under the general category of oversight

of the effectiveness of frameworks put in place to ensure compliance to the statutory

requirements by the audit committees. Notably also, the public entities tend to differ in terms

of their financial operations due to the budgetary allocations and expected standards of

financial operations, which also explains to the low percentage identified.

UK HM Treasury developed a practice guide with key principles that are applicable

across different organizations. As per HM Treasury (2007), the Audit Committee handbook is

a guide that offers support to audit committees in the achievement of principles and

provisions of corporate governance. The Audit Committee Handbook is written based on IIA

principles and covers the roles of an audit committee as a body that advices the Chief

Executive Officer on matters relating to internal control and risk management by reviewing

the mechanisms of risk management, internal and external audit responses as well as

management responses adequacy and corporate governance assurance (HM Treasury, n.d).

In this regard, Audit Committees should offer support to the Board of Directors and

the Accounting officer, through the review of the comprehensiveness of the audit assurances

in terms of meeting the needs of the board and the accounting officer needs in addition to the

review of the integrity and reliability (HM Treasury, n.d). The handbook further emphasizes

on the role the audit committee as a facilitator amongst senior managers, external auditors as

well as the central agencies. The role of the audit committee is presented as one involving

advising the board on audit strategies and plans, the results of internal audits works, the

response by management and the internal audit resources that facilitate the head of internal

audit in providing an opinion on the effectiveness and adequacy of control, governance and

risk management processes.

 42

4.5 Recommendations
Research into the various public entities chosen for this study provides insightful

information on the role of the audit committees in improving accountability for use of

resources in public sector entities in the UK. The risk and audit committee handbooks for the

respective public organizations outline the expectations of the committee in helping the

organization attain its goals and objectives. Despite the frameworks that the handbooks

provide on the role of audit committees in improving accountability for the use of resources

in public sector entities, there are still some grey areas that need to be addressed to fully

optimize their relevance in the public sector. There are a number of recommendations based

on the data presented in regard to the role of audit committees within the public sector.

The first recommendation is on audit committee transparency. The risk and audit

handbooks provide insightful information on the roles that are dispensed to the audit

committee members and other relevant authorities in regard to the use of public funds. To

improve on the efficiency of these committees, there is need for increased level of

transparency on how the duties of each committee member have been dispensed and the

milestones that have been attained over time (Financial Conduct Authority, 2021). Notably,

the expectations of the public and government on each of these public entities are evolving,

which implies on the need for improved level of transparency within these audit committees.

Improved transparency could also be improved through strong and outspoken disclosure of

the work by the committee and the pivotal areas of their discussions and agenda. The

disclosure should also deliver insights on relevant issues that were discussed by the

committee in relation to financial reporting and the framework applied in addressing these

issues. Improving audit committee disclosure creates a better environment in addressing

issues on the limelight in regard to the use of public funds within the public organizations

within the UK.

 43

The second recommendation is effective and efficient communication. The information

that the audit committees receive and dispenses is invaluable. To ensure that the audit

committees are fully committed to their role in overseeing the financial reporting process,

internal financial controls, and the audit process, the committees need to ensure efficient and

effective communication that flows in and out of the committee. The communication includes

communication with the higher management, internal and external auditors, CFO, financial

department, and the board either formal or informal to ensure that any rising issues have been

addressed (Financial Conduct Authority, 2021). In addition, audit committees need to

communicate with the board on the recommendations that it has made based on their agendas

and discussions and the framework that has been applied in discharging the responsibilities.

The third recommendation is on training and development of committee members.

According to the risk and audit committee handbooks, the members of the audit committee

ought to have the expertise in finance to enable them make informed decisions within the

committee. However, the emerging trends in cyber security, advanced accounting systems,

and new technological devices are creating new areas of expertise that maybe overlooked by

the individuals tasked with appointing the members of the audit committees. In addition, the

mandate of the audit committees is past overseeing financial reporting standards, which

requires the diversity in expertise, perspectives, and experience (Financial Conduct

Authority, 2021). Due to such, there is need for training and development of the audit

committee members to ensure that their skills and knowledge match with the evolving needs

of the public sector to ensure that they maintain and improve their role in enhancing

accountability for use of resources in public sector entities.

 44

Chapter 5: SUMMARY AND CONCLUSION

5.1 Summary

The aim of this study was to determine the role played by audit committees in enhancing

the accountability for use of resources in public sector entities in the UK. To attain the

objectives of the study, the study analyzed 18 public entities across the UK. The information

from the handbooks of each of the entities provided insightful information on the roles played

by the audit committees. The study utilized qualitative data and used a thematic approach to

analysis of the data. The study found eight key responsibilities and roles that audit

committees play that enhance accountability of resources use in public sector entities that

include:

 Review and oversight of accounting policies, the accounts and annual reports

 Implementing whistleblowing and anti-fraud processes

 Reviewing Financial plans and advising on implementation

 Overseeing the effectiveness of frameworks put in place to ensure compliance with

statutory requirements

 Processing and arranging for special investigations

 Assessing the adequacy of financial management and budgetary control

 Implementing anti-money laundering systems and controls

 Reviewing tendering proposals for purchase of external audit services and purchase of

non-audit services from contractors providing audit services

 45

This study will help to change the role of audit committees in enhancing accountability

for the use of resources in public sector entities in the UK. This study has clearly proven that

an audits role is to protect organizational value through provision of risk based insights and

advice. The audit committees in the public sector across the UK are created by independent

board members to help conduct investigations and give opinions on financial audits and

transactions that occur within each entity. The study has affirmed that the audit committees

are effective and efficient in creating coherent frameworks that ensure transparent and

accountable financial reporting. The audit committees provide a report on any cases and

issues related to antitrust violations that affect the use of public resources within the entities.

In addition, they provide recommendations on how to improve the internal controls that

ensure accountability during the internal and external auditing processes.

The studies have also affirmed of the effectiveness of the audit committees on matters

related to fraud investigations and whistleblowing. The audit committee members to provide

recommendations to the board based on the investigations report provided, which has been

found efficient in providing new guidelines on improving transparency and accountability on

the use of public resources within the entities. This has improved the process of decision

making while enhancing compliance of the set rules and regulations by the government.

The findings further indicate that the audit committee is responsible for the

enhancement of risk oversight in the business environment. The audit committee is expected

to always ensure that there is critical understanding of financial reporting and auditing

processes while monitoring risks such as fraud, embezzlement, or manipulation of figures.

The boards must always ensure that these risks have been monitored effectively while the

governance structure has been identified with an aim of improving and maintaining

transparency and accountability.

 46

The studies show that the audit committees play an important role in providing

oversight on the audit process, financial reporting process, and internal controls. The audit

committee also serves the role of ensuring that all these processes are in line with the set rules

and regulations. The audit committees work closely with the board and senior management in

ensuring that risk management processes have been implemented in ensuring that the goals

and objectives of the entity that they represent has been attained. The public organizations in

the UK are charged with the responsibility of maintaining and improving the welfare of the

UK citizens. With the effectiveness and efficiency with which these audit committees

operate, the public can be certain of that the taxpayers’ money is being used efficiently.

Overall, this study has a significant implication for policymakers as well as

academics. For academics the study findings suggest that the audit committee has a

significant role in ensuring accountability in the use of public resource. The committees also

play a key role or reducing agency problems facing the public sector entities. For

policymakers the findings are important in terms of the appointing authorities and the lines of

reporting of the audit committees

5.2 Limitations of this Study

Like any other study, this study has limitations. First, the study is limited in terms of

location. The main focus was public sector entities located in the UK. Second, the study

focused on the public sector which could be that the results might be different if the private

sector is considered. Additionally, the sample size was limited due to a time constraint which

means that there is a likelihood of having differing findings with a larger sample. However,

the results of this study can be considered to provide the initial evidence of the roles played

by the audit committees in enhancing accountability in the public sector in the UK context.
 47

5.3 Suggestions for Further Research

Future research will need to delve more in understanding the influence of the audit

committee in decision making process on the use of public resources within the UK. From

these findings, the audit committees play a major role in making recommendations to the

board. However, the information on whether these committees engage in the decision making

process on the use of public resources is scanty. Additionally, there is a need for a similar

study with a focus on the internal audit function.

5.4 Conclusion
To sum it up, audit committees make up the three pillars of the Board Committee

system while at the same time forming an indispensable role in corporate governance.

According to the UK’s financial code’s the role of auditing committee is to monitor the

integrity of the organizations financial statements by making formal statements in regard to

the financial performance of an organization. The committee’s other function is to ensure that

the internal audit functions have been carried out effectively in light with the current trends of

the market (Duh, 2017). The committee usually examines the financial health of a

corporation with a view of identifying current risks and providing sufficient controls to

prevent such risks from affecting a business. In addition, a committee has the responsibility to

make recommendations to boards in relation to the appointment and removal of both internal

and external auditors of an organization (Mebratu, 2015). Both external and internal auditors

in an organization are required to improve on their independence to ensure that the committee

can provide audit services without any bias.

The audit committee should always examine the internal and external audit with a

view of providing an independent assurance on the organizations risk, the internal control

processes and the management. This would help to detect any existing fraud by the

employees including the management. Both detective and preventive controls should be used

by an audit committee to improve the manner in which investigations are conducted in an

 48

organization. This would help to improve processes and enhance controls to risk while at the

same time encouraging members of an organization to work in an efficient manner.

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