The Auditor-General has a statutory duty to conduct an annual audit of the financial reports of about 4000 public entities. This work accounts for about 80% of our total budgeted expenditure and is non-discretionary.

Allocating audits

The Auditor-General uses an “audit resourcing model” for selecting auditors to carry out annual audits of public entities, other than of school boards of trustees.

The Auditor-General established this approach in 2002-03, after a review of procedures to appoint auditors. The changes resulted in most audit contracts continuing to be reviewed every three years, and audit arrangements continuing to be made by direct allocation, with limited recourse to tendering.

In allocating annual audits to auditors, the Auditor-General chooses from a pool of audit service providers – which includes Audit New Zealand, the four major chartered accountancy firms, and a range of medium-sized and smaller audit firms. The Auditor-General uses competitive tendering for the audits of some entities that have a strong commercial focus.

Since the establishment of the audit resourcing model in 2002-03, we have developed a range of techniques to monitor audit fees at the point of negotiation, and to provide a comparative analysis to help resolve concerns about proposed audit fees. Our overall objective is to ensure that audit fees are fair to the public entities subject to audit, and provide a level of return to the auditors commensurate with the auditing standards that public entities, the Auditor-General, and Parliament expect.

Page last updated: 15 January 2007