Statutory functions of the Auditor-General

The Auditor-General has two statutory functions - that of Auditor-General (the audit function) and that of Controller.

The audit function

The audit function involves both non-discretionary and discretionary work. We carry out annual audits (non-discretionary work), performance audits, inquiries, and other assurance services (discretionary work).

Annual audits

The majority of our work (about 85%) relates to carrying out annual audits of the financial and service performance information of public entities.

Annual audits involve auditing the financial statements and other information (for example, service performance information) that a public entity is required by Parliament to have audited.

In an annual audit, the auditor:

• examines a public entity's financial statements, service performance information, and other information that must be audited;
• assesses the results of that examination against a recognised framework (usually generally accepted accounting practice); and
• forms and reports an audit opinion.

An audit of the annual financial statements and other information of a public entity results in two kinds of report. One is the audit report (including the audit opinion) that is included in the public entity's published annual report. The other is a report to the public entity's governing body and/or management on matters arising from the audit.

The published audit report on a public entity's annual financial statements and other information provides readers with assurance about the fairness of those statements.

An annual audit provides a high, but not absolute, level of assurance about whether a public entity’s financial statements comply with generally accepted accounting practice and fairly reflect its financial position and its financial performance for the period audited. The auditor also evaluates the overall adequacy of the presentation of information.

Performance audits and good practice guides

The Auditor-General also gives Parliament independent assurance of the performance and accountability of public entities by carrying out performance audits. Under section 16 of the Public Audit Act 2001, the Auditor-General may at any time examine:

• the extent to which a public entity is carrying out its activities effectively and efficiently;
• a public entity's compliance with its statutory obligations;
• any act or omission of a public entity, to determine whether waste has resulted, may have resulted, or may result; and
• any act or omission showing or appearing to show a lack of probity or financial prudence by a public entity or one or more of its members, office holders, and employees.

We aim to provide Parliament and the public with assurance that public entities are delivering what they have been asked to and that they have operated lawfully and honestly. We report both good performance and bad.

Benefits for the public entities that we audit include:

• independent assurance of their operations; and
• guidance to improve their effectiveness and efficiency.

Performance audits usually result in a report that is presented to Parliament. We offer a briefing on a performance audit report to the relevant Minister(s) just before presentation. Under Standing Orders, a performance audit report will be referred to the FEC. If the FEC refers the report to another select committee, we will offer a briefing on the report to the relevant select committee(s).

We also produce good practice guides to help public entities develop effective systems, policies, and procedures. Recent good practice guides have covered the areas of procurement, audit committees, sensitive expenditure, and managing conflicts of interest.

Every year, we consult with Parliament, through the FEC, on our proposed discretionary work programme. We outline our core areas of focus and proposed performance audits, and invite individual MPs and select committees to provide feedback on these areas and proposed audits (and on any other matters that may be of interest and/or concern to Parliament).

Inquiries

An inquiry may involve looking into financial, accountability, governance, or conduct issues in a public entity. The concerns may have been raised by a member of the public, an MP or a select committee, another organisation, or the Auditor-General. The final decision on whether to carry out an inquiry into any particular issue rests with the Auditor-General.

An inquiry will usually question whether the public entity:

• applied its resources effectively and efficiently and without waste;
• complied with its legal obligations;
• acted honestly and with integrity in its dealings; and
• managed its finances prudently.

The Auditor-General has broad powers when carrying out an inquiry, including:

• requiring a public entity or any person to provide documents, information, or explanations;
• requiring any person to give evidence;
• examining a private bank account in some circumstances; and
• entering premises to obtain evidence.

When a matter is referred to her, the Auditor-General decides whether to carry out an inquiry and also determines its scope. We may decide not to look into it (for example, because we are not the appropriate authority to do so), we might refer it to our appointed auditor to consider during the next annual audit of the public entity, or we may consider the matter when we plan our performance audits.

We decide what information to report, based on its relevance and subject to our principles of fairness and natural justice.

Other advice and assurance work

We provide reports and assistance to the Department of the Prime Minister and Cabinet, the State Services Commission, and the Treasury on matters of financial management and accountability.

We also provide advice and assurance to public entities on a range of matters – for example, to government departments about government advertising and publicity.

We can also perform other auditing or assurance services at the request of a public entity, such as auditing financial information in a prospectus or giving assurance to a public entity about its purchasing or contracting procedures.

We assist other stakeholders, such as professional and sector organisations, and overseas audit offices, on auditing, financial management, and accountability matters.

The Controller function

The Controller function supports the constitutional principle that the Government cannot incur expenses or capital expenditure without the consent of Parliament.

Under this function, the Auditor-General provides independent assurance to Parliament that the expenses and capital expenditure of government departments and officers of Parliament have been incurred for purposes that are lawful and within the scope, amount, and period of the appropriation or other statutory authority given by Parliament.

The main features of the Controller function are:

• The Treasury must supply monthly statements to the Auditor-General, to enable the Auditor-General to examine whether expenses and capital expenditure have been incurred in keeping with appropriations or other authority.
• Appointed auditors check compliance with appropriations alongside their annual audit work.
• The Auditor-General can direct a Minister to report to the House of Representatives if the Auditor-General has reason to believe that any expenses or capital expenditure that have been incurred are unlawful or have been applied for a purpose that is not within the scope, amount, or period of an appropriation or other statutory authority.
• The Auditor-General can stop payments from a Crown bank account or a departmental bank account, to prevent money being paid out of the account that may be applied for a purpose that is unlawful or that is inconsistent with any appropriation or other statutory authority.

Further information about the Controller function can be found in our recent years’ reports on Central Government: Results of audits.