The Evolving Role of Supreme Audit Institutions

By Goolsarran, Swatantra A. | The Journal of Government Financial Management, Fall 2007 | Go to article overview

The Evolving Role of Supreme Audit Institutions


Goolsarran, Swatantra A., The Journal of Government Financial Management


What is government accountability? Michel1 argues that every system of public accountability should embrace the following basic elements:

* Every act or action is done openly according to law and prudent judgment.

* Every actor is responsible for his or her action.

* Every act is documented and reported publicly.

* Every act or action is subject to independent, professional, nonpartisan audit review and public report of results.

* Where the review shows that purposeful error has been made, prompt corrective action, including punishment where appropriate, is taken.

An independent, effective and credible appraisal of the stewardship of those who are required to give an account is indispensable to any system of accountability. For example, the accounts of a company cannot be submitted to shareholders without being duly certified by an independent auditor. Similarly the national accounts of a country cannot be presented in the legislature without being reported on by the Supreme Audit Institution (SAI).

SAIs therefore assist legislators in exercising control over public expenditures by conducting audits of government operations and reporting to the legislature. Geist2 argues that it is difficult to imagine a well-functioning, satisfactory system of state administration without the type of rigorous public accountability that state audit ensures.

Regularity and Compliance Audit

The SAI carries out essentially two broad categories of audit: regularity and compliance audit, and value-for-money (VFM) or performance audit. Reviewing government activities for regularity and compliance has been the traditional responsibility of the SAI. Regularity involves determining whether transactions have been executed in keeping with norms, generally accepted practice or sound financial management and are within the bounds of the approved allocations. The SAI also must ensure compliance with applicable laws and regulations and whether the persons involved in the transactions under review have a legal right to do so.

The traditional approach appears inadequate unless transactions are examined against stated objectives, the manner in which inputs are acquired, used and disposed of, and an evaluation of outputs, outcomes and impacts. Geist and Mizrahi3 view the traditional approach as outdated while Stewart and Ranson4 believe that it limits accountability because it focuses on accounting for probity and propriety rather than policy and performance.

A complementary framework is therefore needed to determine not only the extent to which organizations use their resources to achieve stated objectives but also whether the objectives have been achieved efficiently and effectively - in short a performance or VFM audit. While this approach appears highly desirable, it should not compromise the quality of the regularity and compliance audit.

Performance or VFM Auditing

Performance auditing is not a new concept in that SAIs were (and still are in some of the developing countries) required to check that expenditures are incurred "with due regard to the avoidance of waste and extravagance." While some element of economy and efficiency review is implicit, it does not go far enough. A specific legal mandate is required to carry out performance audits.

The National Audit Act 1983, confers on the United Kingdom comptroller and auditor-general the right to carry out examinations into the economy, efficiency and effectiveness with which any department, authority or other body has used its resources in discharging its functions. In the United States, performance auditing began as early as 1945 with the passage of the Government Corporations Control Act. Compared with the traditional approach, performance auditing is far more complex, time-consuming and requires a multi-disciplinary approach and a high degree of skill and judgment.

In the U.K., VFM examinations cannot address the merits of policy because they are considered the preserve of the political process. …

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