analysis of audit reports objectives and techniques 2 december 2014 - southern sun, or tambo airport
TRANSCRIPT
Analysis of Audit ReportsOBJECTIVES AND TECHNIQUES
2 DECEMBER 2014 - SOUTHERN SUN, OR TAMBO AIRPORT
Public Sector OverviewPAC and governance – PAC as the ultimate audit committee for the public sector
Central government (public sector accounting - IPSASs) vs. parastatals (International Financial Reporting Standards (IFRS))
Methods of analysis, therefore, differ
Financial statements vs. appropriation accounts vs. value for money
Report to management – controls
Controls and impact on financial reports – modification of an audit opinion
The public sector is a significant part of the economy.
Therefore, any improvement in public sector performance would have an effect on economic growth and reduce stress on fiscal policy.
Roles and responsibilities From your understanding and your jurisdiction, define the roles of the following in the audit process:
Role of the ministry, parastatal finance function
Role of the auditor general
Role of the PAC
Role of the “Accounting Officer” To prepare financial statements in accordance with the set accounting standards.
Role of the Auditor To express an opinion on the financial statements.
Raise control weaknesses, risks and implications and make remedial recommendations.
Role of the PAC To analyse the audit reports and make recommendations for monitoring and implementation.
Prepare reports for tabling in the House.
Enforce public participation in the accountability process.
How does the PAC discharge the analytical role?
Performance can be evaluated from three perspectives:
compared internally over time (prior periods to current period),
compared to similar processes in other organisations or jurisdictions (benchmarking),
and compared to external sources of information (standard empirical data).
And using various financial analysis methods:
Ratio analysis
Cash flow analysis
Comparative financial statements
Trend analysis
Variance analysis
Ratio Analysis Definition
- analysis of the interrelationship between two financial figures.
Examples
- liquidity ratios
- solvency ratios
- profitability ratios
- etc
Cash flow analysisComparative financial statementsTrend analysis
Cash flow analysis
- analysis of the change in the cash position during a period.
Comparative financial statements
- analysis of financial statements of the entity for two years or of the two entities of similar type.
Trend analysis
- analysis of the trend of the financial ratios of the company over a number of years greater than two.
Trends to analyse-Expenditure trends-Vote trend analysis-Project development rate-Resource utilisation rate-Etc
Variance Analysis Comparison of the actual expenditure incurred or income raised to budgeted income or expenditure.
Can be a positive (favourable) or negative (unfavourable) variances depending on the objectives
Analysis Toolkit Overview1. Overview of the Analysis Toolkit
1. Separate worksheet for appropriation accounts and SE&P2. Drop down menus3. Recommended generic follow up questions on findings4. Category analysis per key AG findings5. Category score and final score6. Fail or pass result (sub-classified for action points)7. Summary of results8. Action points
2. Analysis Rules1. Complete each question – answer and rating2. 2 or 3 score requires follow up question3. Only drop down cells should be completed4. Overall summary and action plans
Analysis Toolkit Focal Areas Corporate Governance
Management of Assets
- Property, plant and equipment
- Receivables and revenue
- Inventories
- Cash and bank, investments, investment property
Policies and procedures
Procurement procedures
Supporting documentation and fraud
Regulatory compliance
Audit opinion
Financial analysis
Value for Money
Citizen Feedback Model
Presenter Details
Clive M. Munemo CA(Z), RPA(Z)
Managing Consultant
Clive and Associates (Zimbabwe)
+263 773 022 673
clive.munemo1