PUBLIC SECTOR AUDIT

BY
ROCKE ALEX

PUBLIC SECTOR AUDIT 02/20/2022

 Learning objective;
2

Public sector institutions

Legislations governing public sector audits
The Controller and Auditor General
Value for money audits in the public sector
International standards on auditing and public
sector auditing

PUBLIC SECTOR AUDIT 02/20/2022

 Introduction
3

What is public sector?

What is public sector institutions?
Whose resources are they utilizing?
What is auditing?
What is public sector auditing?

PUBLIC SECTOR AUDIT 02/20/2022

 6.1
4

Public sector institutions

PUBLIC SECTOR AUDIT 02/20/2022

 Introduction

Where to start!
 Big picture; the state
State have four elements ; population, territory,
Government and sovereignty.
Public sector!!!
 Is a noun
 It means part of the economy controlled by the state
Part of the state!
 The economy is generally comprised of two sectors – private and
public
 The economy can be watched by the government
 Introduction cont.

Government is an agent of the State. That is why in a

democracy, it is considered as servant and the State as
master.
The State is more or less permanent and continues from
time immemorial. But the government is temporary.
The State is generally composed of all citizens but all of
them are not members of the government.
The government consists of only a few selected citizens.
The organs of the government are executive, legislature
and judiciary.
 So what?

Introduce public sector!

We don’t have that much time!!
 Introduction to Public Sector.

We have said, it is a noun and means part of the

economy controlled by the state
It is very difficulty to have exact definition of public
sector, the main difficulty is that the public sector is
not a homogeneous group of organizations and that
are characterized by diversified objectives and
activities see Henley et al (1992) and Jones and
Pendlebury (1996).

 Introduction to Public Sector cont.

Therefore,
 public sector is owned and controlled by the government
 They use public resources to provide services
 There steward and accountable to the whole society
 At the end of the day they have to report to
president/king/queen etc. (head of state).
 Why public sector?.

Used as government machinery in provisions of

goods or services.
To preserve law and order minimum interference in
social affair.
Regulating aspects of industry and economy.
More specifically;
 Makes economic and social policies
 Design and implant public programs
 Raise revenue
 Manage accountability
 Public sector diversity

The diversity of the public sector is complex, it may

depend with the extent of it.
However, may be enough to categorise public sector
organisations into;
 Central Governments;
 Local governments;
 Nationalized industries and public corporations
 Charities;
 Other NGO's
 Co-operatives
 Trade unions
 etc
 Public sector diversity cont.

Study carefully the above examples!

 Some of public sector organizations obtain their financial
resources entirely or almost entirely from revenues resulted
from the sale of goods and services e.g.…..
 But some, receives the bulk of its finance from taxes, grants,
borrowings e.g.…
 Public sector diversity cont.

 Some organizations have their objectives set direct by the

parliament. E.g.…
 Some not e.g.….

Therefore, it is difficult to have a clear-cut meaning

of the phrase ‘public sector’.
However, in common these are organizations where
control lies in the hands of the public.
 COMMON Public sector features.

Public sector features

 The nature of public sector is to provide services, not products,
and many of these are personal services.
 The purpose is to serve the common good, the good of the
public as a whole.
 During service provision there no direct relation between cost
and benefits
 Government Spending

What is the role of Government?

 To maintain and improve the welfare of the people
 To protect the people from harm
 To provide the institutions that allow market to function (e.g.
protection of property rights)
 To provide the essential goods and services that markets fail to
adequately provide
 6.2
16

Legislations governing public sector audits

PUBLIC SECTOR AUDIT 02/20/2022

 Legislations

17
Legislation governing the conduct of public
sector audit differ from one country to another.
The constitution of the United Republic of
Tanzania (URT), article 143, requires among
other things,
 the controller and Auditor general (CAG) to audit and
report on public accounts of all officers and authorities of
URT, and the accounts of;
 the government of the URT and
 the accounts of the National Assembly.

PUBLIC SECTOR AUDIT 02/20/2022

 Legislations cont…
18

 The Public Finance Act (PFA) of 2001 which replaced the

Exchequer Ordinance Act of 1966.
 Requires the audit of government accounts to be done by suitably
qualified persons, with proven experience and ability to discharge the
role without fear, favour or prejudice and that no person or authority is
to interfere with or exert undue influence on him in the exercise of the
powers or in the performance of his professional functions.

PUBLIC SECTOR AUDIT 02/20/2022

 Legislations cont…
19
 The Public Procurement Act (PPA) no 21 of 2004 govern
the conduct of public sector audit in Tanzania.
 Section 44(2) of this Act requires the CAG to provide an opinion on
the extent to which Ministries, Departments and Agencies comply
with PPA 2004.
 Local Government Finance Act No. 9 of 1982, section 45
and 48 sets out audit matters in local government
accounts which the CAG must consider.

PUBLIC SECTOR AUDIT 02/20/2022

 Legislations cont…
20
 At the international level, National Audit Offices have
formed an international organization called International
Organization of Supreme Audit Institutions (INTOSAI).
 Thus the CAG conducts the audit in the line with INTOSAI
requirements because he is a member of this association.

PUBLIC SECTOR AUDIT 02/20/2022

 Legislations cont…
21

Government auditors, like other professional auditors,

they observe professional norms such as;
 exercising independence,
 due care and other general standards,
 field standards of planning, supervision and review,
 internal control,
 compliance with laws and regulations,
 evidence and analysis of statements and reporting standards
which include form and content,
 the report should include such features as completeness, subject
matter, legal basis, compliance with laws and regulations and
timeliness.

PUBLIC SECTOR AUDIT 02/20/2022

 6.3
22

The Controller and Auditor General

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 CAG
23
• CAG Appointment
• The controller and auditor general is a presidential appointee under
• Articles 143 and 144 of the constitution of the URT of 1977
• To achieve these constitutional objectives, as spelt by the
Public Finance Act No.6 of 2001, as revised in 2004,
public Procurement Act No. 21 of 2004, local government
finance act no.9 of 1982 and other relevant statutes,
• the controller and auditor general audits the accounts of all
ministries, independent departments, executive agencies, local
government authorities, donor-funded projects, all public bodies and
entities, whose operations create a liability to the Government of the
URT or who receive public monies for a public purpose.

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG

24
 Under article 143 (2) of the Constitution of the United
Republic of Tanzania, the Controller and Auditor General
has mandate and responsibility over the following
matters;
 To ensure that the use of any monies proposed to be paid out of the
Consolidated Fund has been authorized and that the funds shall be
paid in accordance with provisions authorize payment of such monies.
 To ensure that all monies, the payment of which has been authorized
to be charged on the Consolidated Fund of the Government of the
URT, or their use, which has been authorized by law enacted by
parliament, have been applied to purposes connected with the use of
such monies such that expenditure has been incurred in accordance
with the authorization for such expenditure; and

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…

25
 At least once every year, to audit and give a report in respect of
accounts of the government of the URT of those managed by all its
officers, and accounts managed by the clerk of the national assembly.
 Furthermore, article 143 (3) of the constitution states that “the
controller and auditor general and any government employee
authorized by him, shall have the right to examine books, records,
statements of account, reports and all other documents concerning the
type of account referred to in sub-article (2).

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…
26

Under the PFA 2001 (as revised in 2004)

 Section 31 of the public finance act requires the controller and
auditor general to satisfy himself whether;
1. All accounts prepared and submitted under section 25(1) and
(2) of the act have been kept in accordance with generally
accepted accounting practice as required by section 25 (4) of
the Act.
2. All reasonable precautions have been taken to safeguard:
 The collection of revenue
 The receipt, custody, disposal, issue and proper use of
public property, and that the law, directions and
instructions and applicable thereto have been duly
observed.

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…
27
3. All expenditure of public monies has been properly
authorized and applied for the purpose which they were
appropriated and that the law, directions and
instructions and applicable thereto have been dully
observed and provide an effective check of the
assessment and collection of revenue
4. Economy, efficiency and effectiveness have been
achieved in the use of public monies and resources

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…
28
Under the local government finance act no.9 of
1982
• Section 45 and 48 of the local government act empowers
the controller and auditor general to audit and report on
the accounts of local government authorities.
• Section 48 of the act requires the controller and auditor
general to;
• Draw attention to every item of expenditure charged in accounts,
which is not authorized by law, or not sanctioned by the local
government authority.
• Draw attention to any deficiency or loss incurred by the negligence or
misconduct of any person.

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…
29

• Draw attention to any sum which ought to have been, but

not has been, brought to account by any person; and
• To make any sign a report thereof for submission to the
minister, regional commissioner, and to the respective
director.
• The role of CAG as the head of the national audit
office is to report to parliament on the spending of
audited entities.

PUBLIC SECTOR AUDIT 02/20/2022

 Functions of CAG CONT…
30
• In the process, the CAG conducts financial audits of all
ministries, departments, agencies, authorities and many
other public bodies.
• He reports to parliament and is required to give an account on value for
money with which public bodies have spent public money.
• The relations between the National Audit Office and
Parliaments are central to the work of National Audit Office.
• The National Audit Office works closely with public accounts
committee, local authorities’ accounts and other standing
committees of parliament.
• The national audit office also works closely with other public
institutions, which have a role in other areas of public
expenditure and revenue

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 6.4
31

Value for money audits in the public sector

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 VFM AUDIT
32
 Value for money (VFM) is concerned with obtaining the
best possible combination of services from the least
resources.
 In other words, VFM can be described as ‘getting the best
possible combination of services from the least resources’
i.e. to maximize the benefits available at the lower cost.
 It is the pursuit of economy, efficiency and effectiveness.
 These are termed as 3Es

PUBLIC SECTOR AUDIT 02/20/2022

 VFM AUDIT cont…
33

 The three Es are briefly explained below as;

 Economy which ensures that input costs are minimized
 Efficiency that ensures maximum output is achieved at
the minimum level of input cost.
 Effectiveness is a more complex idea. It means that a
service provided properly caters for a real need.

PUBLIC SECTOR AUDIT 02/20/2022

 VFM AUDIT cont…
34
 In private sector, VFM is exercised as part of internal
audit function, the operational internal auditing.
 Operational internal auditing covers the examination of the control
procedures and whether or not they are adhered to.
 This examination seeks to identify areas for improvements in
efficiency as well as weaknesses in internal control and internal check.
 The internal auditor assists the management in identifying
opportunities for increased performance in each operational sector by
improving operational economy, efficiency and effectiveness.

PUBLIC SECTOR AUDIT 02/20/2022

 VFM AUDIT cont…
35

Section 33 of PFA 2001 requires that audit of VFM be

undertaken.
The CAG conducts an audit reports on;
 The expenditure of public monies and use of resources by such
ministries, departments and all such public authorities and
other bodies.
 The conduct and the performance of their functions by
accounting officers, heads of departments, and chief executives
of all such departments and public authorities and other
bodies.
 Any other activity undertaken by such ministries, departments,
public authorities and other bodies

PUBLIC SECTOR AUDIT 02/20/2022

 VFM AUDIT cont…
36

CAG’s report as per section 33 of PFA 2001 will be

laid by the minister before the national assembly.

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 Usefulness of VFM in public sector
37
1. VFM audit provides checks on mismanagement, misuse
and under-utilization of resources, both financial, non
financial and human resources.
2. VFM audit provides assurance that the financial, human
and physical resources entrusted to the government by
the parliament, and to operating officers by the
government are being managed in due regards to
economy, efficiency and effectiveness.
3. VFM audit can assists to minimize the abuse of power
and misuse of authority by government officers.

PUBLIC SECTOR AUDIT 02/20/2022

 Usefulness cont…

38
4. VFM audit improves accountability in public
sector and so it reduces fraud and
embezzlement of funds.
5. VFM audit assists in controlling expenditure in
public sectors.
6. It can assist in establishing appropriate controls
which will ensure that public properties are
safeguarded against misuse and fraud.

PUBLIC SECTOR AUDIT 02/20/2022

 Differences between VFM in public and private sector
Public sector 39 Private sector
It is a statutory It is not statutory
requirement to perform requirement to perform a
VFM (as per PFA 2001, VFM audit
s.33) No responsibility for post
Post audit review is done audit review by the
to evaluate the extent of auditor. The auditor
performing VFM at
implementation of
management’s request has
recommendations for
his duty discharged on
improving economy, after submission on an
efficiency and acceptable report as per
effectiveness. letter of engagement.

PUBLIC SECTOR AUDIT 02/20/2022

 Public sector Private sector
Profitability is not 40 • In a profit oriented
usually the objective but organization, the operating
to provide satisfaction on objectives are expressed in
the use public property, monetary terms. The
organization and its profit
resource or facility.
centres are said to have
operated effectively if they
have achieved a targeted level
of profit within a given period.
VFM audit can be seen
• There is a strict control
as an attempt to environment with clear
establish control over reporting lines hence cases of
waste, unnecessary or wastage, misuse and losses
excessive spending are usually monitored and
actions taken on time.

PUBLIC SECTOR AUDIT 02/20/2022

 6.5
41

International Standards on Auditing

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 Introduction
42

 Auditing standards provide a measure of audit

quality and the objectives to be achieved in an audit.
Generally Accepted Auditing Standards (GAAS)
Two standards are available ;
 The International Standards on Auditing (ISA)
 The International Standards of Supreme Audit
Institutions(ISSAI)

PUBLIC SECTOR AUDIT 02/20/2022

 GAAS
43

Refers to a set of systematic guidelines used by auditors

while performing audits on companies’ financial
statements, thus ensuring the consistency, accuracy, and
verifiability of the actions and reports produced by an
auditor.
GAAS are categorized into;
 General Standards
 The auditor must have adequate technical training and proficiency to
perform the audit.
 The auditor must maintain independence in mental attitude in all matters
relating to the audit.
 The auditor must exercise due professional care in the performance of the
audit and the preparation of the report.

PUBLIC SECTOR AUDIT 02/20/2022

 GAAS cont….
44

Standard of field work

Standards of reporting

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 ISSAI
45

The ISSAIs are the authoritative international standards on

public sector auditing.
The purpose of the ISSAIs is to:
 ensure the quality of the audits conducted
 strengthen the credibility of the audit reports for users
 enhance transparency of the audit process
 specify the auditor’s responsibility in relation to the other parties
involved
 define the different types of audit engagements and the related set of
concepts that provides a common language for public sector auditing.
 The full set of ISSAIs is based on a basic set of concepts and principles
that defines public sector auditing and the different types of
engagements supported by the ISSAIs.

PUBLIC SECTOR AUDIT 02/20/2022

 ISSAI Cont…
46

See the attachment for the INTOSAI Framework of

Professional Pronouncements

PUBLIC SECTOR AUDIT 02/20/2022

 ISAs
47

Please read the following key standards issued by

ISA;
Objective of the independent auditor (ISA 200)
Audit planning (ISA 300, 320)
Quality control (ISA 220)
Audit evidence (IAS 500 , IAS 501)
Using work of other experts (IAS 610, 620)
Specialized areas(IAS 800.805)
ISA 810.

PUBLIC SECTOR AUDIT 02/20/2022

 ISAs cont….
48

Read and write short notes on the above ISAs , make

sure to include in each the following;
 The introduction
 The objective,
 Requirements,
 And its application

PUBLIC SECTOR AUDIT 02/20/2022

 THANK YOU VERY MUCH
49

END OF THE
TOPIC

PUBLIC SECTOR AUDIT 02/20/2022