Public sector auditing is an of import facet in keeping the answerability of the public sector. It provides an independency confidence on the proper usage of public fund by the authorities to the legislative assembly ( parliament ) . Through auditing, the populace as the subscriber of financess can keep those responsible for pull offing public money accountable. The populace could guarantee that there is no embezzlement of public financess ( by and large through fiscal audit, guarantee fiscal stewardship ) and that the financess are used in an economic system, effectual and efficient manner ( by and large through public presentation audit, guarantee answerability ) .
In Malaysia, National Audit Department ( NAD ) carries out the scrutinizing map in the populace sector. Different states may hold different bureaus playing the function of scrutinizing the populace sector, but they all serve the same intent, that is to keep the public office and officer accountable in utilizing the public money. For illustration, in Australia, the function is played by Australian National Audit Office ( ANAO ) while in United Kingdom, National Audit Office ( NAO ) would scrutinize the public sectors.
All these national audit offices are headed by Auditor General who has important duties in scrutinizing public sector and authorities organisations. As in Malaysia, the Auditor General chiefly responsible in scrutinizing and attesting the appropriation and others account of authorities and describe the consequence of scrutiny to the Yang diPertuan Agong and State Rulers, who will do it to be laid in either Parliament or State Legislatures. He is besides responsible in heightening public answerability by supplying an confidence to the Parliament through a timely and accurate coverage of the Public Accounts and direction of resources ( Fatimah et al, 2008 ) . In order to transport out his responsibilities, Auditor General is supported by the audit commission, internal hearer, and the populace sector comptroller.
Extend of Auditing Process at Public Office
In the populace sector, hearers were traditionally concerned with regularity of outgo and conformity with Torahs, regulations and ordinances. They besides report to the Parliament on the sufficiency in gross aggregations and any wastage of public financess. However, since the debut of new public direction ( NPM ) , the usage of auditing has been spread due to the accent of NPM to utilize audit as a mechanism to command ( Power, 1997 ) . The range of audit has been expanded from a strictly fiscal audit to besides measuring whether public services are provided Value for Money ( Munro, 2004 ) . Value for Money auditing is a recent enlargement in the range of scrutinizing. It is an independent audit to measure the effectivity and efficiency of use of public financess. It can besides be defined as public presentation audit which includes economic system, efficiency and plan audits. In Malayan context, as stated in Section 6 ( vitamin D ) of Act 62 in Audit Act 1957, Auditor General has to execute audit to determine public financess have been applied to the intents for which they were appropriated or authorized and the activities related to such intents were carried out or managed in an efficient mode with due respect for economic system and the turning away of waste or extravagancy. This means that alternatively of simply being a “ waste-watcher ” , Auditor General has been required to play a function as “ quality constabulary ” to attest the public presentation of public services ( Hood et al, 1999 ) .
Additionally, Tudor ( 2007 ) contended that public presentation audit has evolved to run into the demand for greater information by the taxpayer and its representative, Parliament, chiefly sing the efficiency and economic system in the usage of resources by the populace directors moving on behalf of the executive. In other words, citizens as consumers ( i.e. citizens are the supplier of fund and user of services ) have the right to supervise and demand certain minimal criterion of public presentation to guarantee that their money is spent economically, expeditiously and efficaciously ( Lewis, 1993 ) . Therefore, the individual or organisation audited has to demo that they are moving decently to outside party, therefore bettering answerability ( Stanyer, 1974 ) . Concisely, all these writers had presented the cardinal statement for hearers to attest the public presentation of public office and officers.
How Auditing Hold Public Officers Accountable: In Malaysian Context
National Audit Department ( NAD ) is responsible for guaranting public sectors ‘ answerability in Malaysia. The section is responsible to publish national audit study which includes accounts and feedbacks from auditees on issues raised alternatively of study by exclusion. The study besides includes inventions, betterment and good patterns introduced by the auditees. The impact of audit study to 3rd parties such as the media, the Parliamentarians and the populace is of import because it contributed in guaranting authorities answerability since the parties are going more of import in raising issues on authorities fiscal direction and public presentation. They play an of import function as whistle blowers by supplying information to NAD for farther probe. Third parties can easy entree audit study from the NAD ‘s web site one time the study has been tabled in the Parliament. The medias are besides allowed to raise issues in the audit study. The Public Audit Committee has authorization to name up ministries/agencies for account of the issues raised ( NAD,2006 ) . All of these are of import to lend towards better transparence and answerability of the authorities.
Besides, National Audit Department has besides involved in direction audit which include scrutinizing of organisational direction, budget controls, outgo and gross controls, loan and investings controls, every bit good as assets and shop controls of authorities bureaus. The result is reported straight to the Minister who in charge of the several bureaus to give them first-hand feedback on the overall public presentation of the bureaus ( NAD,2006 ) . This can assist to advance answerability because the authorities bureaus will be questioned if lacks are found in their direction and control. If the bureaus want to protect themselves from unfavorable judgment, they would wish to keep a strong internal control in order to avoid the state of affairs that will do questions in the direction audit.
Furthermore, National Audit Department emphasize and study on measuring of consequences achieved against marks set by transporting out public presentation audit. Cardinal public presentation indexs ( KPIs ) are introduced to all ministries/department/agencies to help in placing answerabilities at all degree of the organisation. In order to guarantee public answerability, ministries/departments/agencies are required to clearly specify the results through KPIs. Monitoring and public presentation reappraisals are conducted on a regular basis to guarantee that marks set are achieved and enhance answerability. This attack helps to observe mistakes so that disciplinary actions can be taken. Performance is measured sporadically in an nonsubjective and crystalline mode to keep all those entities who entrusted with resources accountable to the populace.
On top of that, National Audit Department besides promotes the pattern of prudence hazard direction. National Audit Department assists the organisation in placing possible hazards and its likeliness to happen. They besides anticipate its effects to the organisation and take disciplinary actions. This helps to place parties who are accountable to the populace.
Challenges of Public Sector Auditing
Since the debut of public presentation audit in public sector, assorted sentiments emerged. Some bookmans argued that it is rational to hold hearers attest the public presentation of the public sectors. However, some bookmans were against the thought of public presentation audit due the negative facets that it might convey. These negative facets pose challenges for scrutinizing the populace sector.
Furthermore, the evolvement of modern fiscal direction in public sector has direct people ‘s focal point to the importance of scrutinizing and control. The passage to accrual accounting and public presentation auditing has increased the demand of different type of control and audit every bit compared to the yesteryear. These have resulted in figure of challenges in scrutinizing the populace sector organisations.
Based on the survey from assorted diaries and articles, we found that public sector auditing is confronting six major challenges, which will be explained in the undermentioned subdivision.
Auditor General Audit Mandate
Audit authorization is really important for Auditor General to carry on the public presentation auditing. This audit authorization give a power to the Auditor General to travel through all the information which required by the auditing in order to look into public sector resources and operation. The enlargement of this authorization is really of import to maximise the benefits of public presentation auditing and to keep auditor independency. However, it is non easy to do an enlargement on audit authorization. This propose to spread out the audit authorization could be hazardous because it might pull the hearers into political contention as the policy preparation is under the duty of the curates. ( Zaidi Mat Daud, 2006 )
Sufficiency Of Professional And Qualified Audit Personnel
The modernizing of fiscal direction in public sector has brought alterations in the populace sector audit landscape. Therefore, it requires a wide scope of different technique and accomplishments from the practician. The sufficiency of professional and qualified audit forces is important and undoubtedly might present great challenge to the National Audit Department. The deficit of professional hearer might give consequence to their attempt to concentrate on public presentation audit. The demand on different technique and accomplishments besides increases the troubles in happening and retain the experient skilled staff. ( Zaidi Mat Daud, 2006 )
Let alone the issue of fiscal direction modernisation, carry oning public presentation audit had already post some troubles in term of staff resources. A research undertaken by Nosworthy ( 1990 ) shows that there is deficiency of staff resources within the New South Wales office of Auditor General due to increased extend of scrutinizing to include efficiency audit into public sector audit. In other words, the increased duties have placed important force per unit area upon the hearers. This could be seen as a challenge for scrutinizing. Dittenhofer ( 2001 ) besides argued that due to the nature of public presentation audit that differs from traditional fiscal audits of authoritiess, the hearers should possess extra competences. Two specific countries of concerns are making and independency. In term of making, the hearers should hold a complete apprehension of the map, operations and accounting processs of the authorities bureau. The hearers should besides be free from personal damage ( e.g. prejudices or biass ) , organisational damage ( topographic point of the audit organisation within the authorities construction ) and external damage ( e.g. restriction on audit range ) .
Independence Of National Audit Office
There are some questions arises on the issue that national audit offices are subjected to restrictions such as influence from interested parties, peculiarly the authorities. This concern is perchance based on remarks reported in local newspapers ( Zaidi Mat Daud, 2006 ) . For illustrations, in Malaysia, New Sunday Times 2005 has reported that Prime Minister, Tun Dr Mahathir Mohamad had questioned the Auditor General for concealing some information to do the authorities public presentation appeared good in the populace ‘s position. So, it can be disputing to the hearers to demo their degree of independence to public.
Cost and Time Limit
Thiel and Leeuw ( 2002 ) argued that scrutinizing would increase the monitoring costs. Furthermore, current range of auditing has been broaden from fiscal and conformity audit to include public presentation scrutinizing. Therefore, due to the cost and clip bound, merely a sample of the activities can be examined. Therefore, hearers will hold to make up one’s mind the nature and extent of audit by sing the clip and cost restraints, which will so find how thorough the audit probe can be. It can be disputing to the hearers to print moderately ample audit studies in a timely mode.
Develop valid and dependable public presentation indexs
If an invalid and undependable public presentation index is used, it might do unwanted consequences. For case, Thiel and Leeuw ( 2002 ) wrote that public presentation paradox decrease the value of public presentation audit. The public presentation paradox refers to a weak correlativity between public presentation indexs and public presentation itself ( Meyer & A ; Gupta, 1994 ; Meyer & A ; O’Shaughnessy, 1993 ) . As a affair of fact, if a public presentation index does non resemble or capture the existent public presentation, scrutinizing the accomplishment of the public presentation index is non tantamount to scrutinizing the public presentation ( 3Es ) of a plan. For illustration, if the figure of ambulances is used as the public presentation index of a infirmary, scrutinizing the figure of ambulances would non demo the infirmary has performed good because there is no or less correlativity between the index and the existent public presentation. In other words, hearer could non truly attest the public presentation of public office and officers.
Challenges in covering with unintended effects of public presentation audit
Many writers contended that scrutinizing public presentation of the public sector consequences in some unfavorable results. Smith ( 1995 ) argued that there are eight unintended effects of monitoring and scrutinizing public presentation. For illustration, the usage of public presentation indexs can suppress invention and lead to ossification or organisation palsy. In position of this, scrutinizing public presentation would stunt the development in the public office, which is non favorable. Besides, Thiel and Leeuw ( 2002 ) argued increased step force per unit area might take to dysfunctional effects such as tunnel vision and suboptimization. These unintended effects can endanger the effectivity and efficiency of policy execution. In that instance, the auditing public presentation would in fact impair the public presentation of the public sectors.
Undoubtedly, scrutinizing has important part in keeping and guaranting those responsible for pull offing public money accountable. However, there are some writers who were doubting about its efficaciousness due to the ensuing unfavorable effects. Therefore, this remains as a challenge that the authorities, public organisation and bookmans must get the better of to make accountable public sector.