Parliamentary Audits

Financial auditing is traditionally the focus of public sector auditing. Audits are critical to sound industry management, and can provide legislators and the general public with useful information on problem areas, as well as recommendations for reform. During the audit and evaluation stage, an independent audit institution, such as an audit court or auditor general, analyses government accounts and financial statements. In most countries, the audit of accounts is followed by the consideration of audit findings by the legislature. If the process is effective, any recommendations based on audit findings are reflected in future budgets, which allows for continuous improvements in public spending and generally public financial management. Accounting rules and procedures for EI operations and regular audits that meet international standards are critical, particularly to assess production and export volumes, prices, and capital and operating costs, as well as to monitor compliance with procurement procedures, local content obligations, and social compensation requirements.

Typically, a nation’s supreme audit agency (sometimes called the Auditor General – AG) reviews government accounts and prepares a yearly report for parliament. Auditors independent of the executive are freer to conduct independent investigations of executive spending and programs. Audit agencies need sufficient funds and adequate staff if they are to conduct their work effectively. In the Auditor General model, financial audit focuses on the accounts of government departments in order to present a judgment about the accuracy and fairness of an organization’s financial statements. Because it is impossible to check every single transaction, auditors use strategies such as sampling techniques or the examination of the auditee’s financial system to arrive at their judgment. The main skill needed for financial audit in the auditor general tradition is knowledge of accountancy.

In the audit court model, the emphasis of financial audit is on certifying the legality of spending, to see whether government revenue and spending have been authorized and used for approved purposes, and whether departments and agencies have conformed to all pertinent laws and regulations. This means that financial audit in the court model requires mainly legal skills (www.parliamentarystrengthening.org / Budget Module).

A few legislatures do not consider audit findings in detail, but to ensure effective scrutiny most parliaments use committees to examine the reports of the public auditor on the accounts of government departments. There are different options for establishing committee capacity to consider audit findings. In some legislatures the same committee that is responsible for approving the budget is also tasked with considering audit reports.

The majority of Westminster parliaments use Public Accounts Committees (PACs) to follow-up on findings of public audits, to investigate irregularities reported, and to recommend changes to rectify any problems discovered. PACs invite ministers and other ministry officials to testify before the committee, and, in some systems, have the power to subpoena witnesses. Both government and opposition MPs serve on PACs, which more often than not are chaired by a key member of the opposition. AG staff members sometime assist members and staff of PACs in carrying out their investigations. The public accounts committee process has its starting point with a report from the auditor general. After receiving an audit report, hearings are the principal mechanism by which officials from departments, agencies or other relevant bodies answer to the committee. The summoned officials appear in front of the committee during the hearing. In most public accounts committees, interrogation focuses not on the relevant minister but on the accounting officer. The accounting officer is the civil servant in a department who is accountable to the legislature for financial management, usually the administrative head of a department. A draft report on the hearing is prepared and debated in the committee. While it is not normally required that reports have to be adopted unanimously by the committee, some committees have found it useful to hold back reports until consensus has been established (www.parliamentarystrengthening.org / Budget Module).